Compaq axes 8000 jobs
New CEO slashes costs as company announces $184m Q2 loss
A decidedly bruised Compaq yesterday revealed it lost $184 million in its second quarter, and told everyone to expect further major losses. Driving those losses will be the cost of cutting 8000 staff -- 11 per cent of the workforce -- from the company payroll, part of a restructuring programme being put in place by newly-joined CEO Michael Capellas. The restructuring charge is likely to fall between $700 and $900 million, Compaq said. That's on a par with the massive losses Apple suffered three-odd years ago as then CEO Gil Amelio struggled to turn the company into a solid business. Gil, of course, was ultimately booted out through the return of Apple's prodigal son, Steve Jobs. So might we expect Rod Canion to make a sudden reappearance in the very near future? Capellas' motivation in the current round of job cuts is, he said, to eliminate $2 billion in costs. It's not clear precisely where the cuts will be made, but certain unnamed manufacturing facilities will be closed. The Q2 loss of $184 million compares with the $3.6 billion the company lost in the same period last year, all of it down to the acquisition of Digital. Compaq reported revenues of $9.4 billion for the quarter, the same as it recorded in the previous three-month period, though then it made a profit of $281 million. Contributing to the downturn was a massive $1.9 billion increase in operating expenses -- Eckhard Pfeiffer's golden handshake, perhaps? -- quarter on quarter. Gross margins fell from 24.7 per cent to 20.5 per cent quarter on quarter. Europe was singled out for special attention by Capellas, who described the territory's growth as "disappointing" -- sales here rose just six per cent compared to 32 per cent in the US. Restructuring programmes in France and Germany were to blame, he said, as was increased competition in the UK. Sources suggest at least 1000 of the upcoming job cuts will be made in these territories. ®
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