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Compaq has been hit with a hefty Q3 loss - worse than the market expected, and the market wasn't expecting much - in the first results the company has posted since announcing its takeover by Hewlett-Packard.

Compaq says Q4 will be equally bad.

The computer giant has posted a net loss of $499 million, compared with a profit of $557 million in Q3 2000. It took a $379 million spanking on its investment in Internet incubator CMGI, so lost $120 million by itself.

Sales fell 33 per cent to $7.48 billion, below analysts' expectations of $7.53 billion.

Chief exec Michael Capellas said: "We do not anticipate dramatic changes in corporate IT spending, particularly through the first half of 2002. As for the fourth quarter of 2001, we expect revenue to be in the range of $7.6 to $7.8 billion and a loss of about $0.03 per share.

September 11 was top of the blame list for Q3. "The third quarter was one of the most challenging ever for Compaq and for our industry," according to Capellas.

He was pleased with services and enterprise technology sectors which "performed well given overall market conditions." Revenue in Compaq Global Services was $1.9 billion, two per cent year-on-year, with operating profit improved to $284 million. The services business accounts for 25 per cent of Compaq's revenue, up from 23 per cent in Q2.

The company's enterprise computing segment reported a loss of $104 million on revenue of $2.4 billion - 32 percent of third quarter revenues

But as for PCs. Oh dear. Compaq's PC business lost $248 million for the quarter. Sales of $3.26 billion were down 42 per cent from $5.6 billion a year earlier, when the business was profitable. The company says it will sort this out by doing a bit of a Dell and increasing direct sales, reducing operating costs and improving product lines. But it concedes it's not going to be profitable for the next few quarters. ®

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