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Also slashing costs by buying more Taiwanese kit

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Compaq is to can 5,000 workers because sales have dropped off.

The company is going to earn less than expected in the first quarter, and Compaq Chairman Michael Capellas has said server demand is down, especially in telecommunications. "We do remain concerned about future deterioration," he said.

In January, Compaq forecast first-quarter sales of $9.6 billion. This has now been cut to $9 billion. For Q1 2000 Compaq made profits of $325 million on a turnover of $9.5 billion.

As well as shedding seven per cent of its staff Compaq intends to increase its part spend in Taiwan to cut costs. It spent $9.5 billion in 2000.

Capellas expects demand in Europe and Japan to weaken, following the slump in the US market. He said the company was doing OK with larger storage systems and high-end Unix boxes. Mobile and Net devices are also doing well according to Capellas.

A further cost cutting measure is to get the same factories to churn out both consumer and corporate PCs. The company is also slashing marketing costs, and will not replace Douglas Fox, senior vice president of marketing and strategy, who has left the company. ®

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