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Compaq offers crumbs of comfort with small Q3 profit

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PC giant Compaq managed to turn in a profit of $140 million on turnover of $9.21 billion as its CEO Michael Capellas reported the company's third quarter earnings. That was a result better than analysts on Wall Street had expected but only represents a growth rate of two per cent in the European and US geographies. As market research over the weekend showed, Compaq suffered in the PC sector, losing market share to its chief rival Dell. Capellas blamed competition and the earthquake in Taiwan for this, showing how much Compaq relies on the island manufacturers to OEM its products. Capellas announced himself satisfied with the small profit, which he attributed to the changes, including cost cutting, that Compaq has undertaken over the last three months. He said: "We began to articulate a clear strategy to enable the next-generation Internet infrastructure, a key to accelerating profitable growth for Compaq. We do face some significant challenges, but are confident we will continue to make good progress on our core business objectives and drive increased value for our shareholders." Compaq's share price stood at $19.25 dollars on Wall Street at close of play. Changes Capellas has wrought included a restructuring of the company into enterprise solutions and services, consumer and commercial groups, which Capellas broke out separately. The company has not yet made all the job cuts it promised. He said the enterprise and services group turned over $4.9 billion, representing 54 per cent of Compaq's total turnover for the quarter. Services revenues only grew by seven percent. The consumer group turnover was $1.5 billion, rising 15 per cent from Q3 last year. The group "significantly" grew year on year in Europe, Latin America, Asia Pacific and China, but equally significantly Compaq did not give figures for growth in its home market. But in the lucrative and formerly strong commercial PC group, turnover for Q's Q3 at $2.7 billion was a drop of 12 per cent, year and year and turned in an operating loss of $169 million, compared to a profit of $116 million this time last year. The commercial group represents a third of Compaq's turnover in the quarter. Capellas said that its Alpha and Himalaya (Tandem) division saw a good 27 per cent growth compared to this time last year, amounting to turnover of $3.3 billion. He was cautious about how Compaq will perform in the fourth quarter. ®

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