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Compaq Q1 profit down 50 per cent on predictions

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Compaq today posted "unacceptable" first quarter profits of $281 million. That's roughly half what Wall Street was expecting until the company admitted recently that things were not going too well, financially. Still, revenue for the period totalled $9.4 billion, up 64 per cent from the $5.7 billion it recorded last year. Sales of kit for the quarter were $7.8 billion, up roughly 40 per cent from the $2.2 reported in Q1 1998. Service sales increased considerably, totaling $1.6 billion, up almost sixteenfold on the $113 million Compaq made in this area last year. And most of the company's major outlays -- a $215 million restructuring charge, $126 million spent on buying back Digital stock and Shopping.com's $219 million price tag -- came out of its huge, $3.6 billion cash reserve. Chairman and acting CEO Ben Rosen said the results were "disappointing and unacceptable. We will aggressively pursue the actions necessary to realise our enormous potential, achieve our traditional levels of profitable growth, and build long-term shareholder value." Some people just aren't satisfied, it seems. Yet the company blamed its performance on "less than anticipated market demand", "increased competitive pricing" and "growth below plan". Rosen added that there had been "considerable moderation of commercial PC demand as compared to years past", and it's telling that on the same day Microsoft warned software sales would be hit as corporates put off buying new products in order to get their current systems to full Y2k compatibility. Presumably, that has had the same effect on Compaq, and it would go some way to explaining Dell's profit downturn, too. ®

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