Compaq shows signs of recovery

Compaq has announced fourth quarter results that provide evidence of recovery in its business, even though sales are well down on the same period last year.

The IT giant reported Q4 revenue of $8.5 billion, an improvement of $1 billion - or 14 percent - on Q3, but down 26 percent on revenues of $11.5 billion recorded in the same quarter last year. Net income for this quarter was $92 million, beating analysts' expectations.

Compaq's income for the year ending December 31 2001 was $33.6 billion, down 21 percent on revenues for 2000. Reported net income for the full year was a loss of $785 million.

Europe, where revenue was up 31 per cent sequentially, was a high point for the firm during Q4. Gross margin, as a percentage of revenue, was up 1.2 per cent to 20.6 percent for the quarter. Operating expenses during the quarter fell to $1.54 billion, down $500 million from the same period last year, and helped to improve Compaq's bottom line.

Compaq's services business now comprises 24 percent of its revenue, at approximately $2 billion, showing 8 per cent sequential growth and 4 percent growth over the prior year period. Revenue from the Enterprise Computing segment was up 15 percent from the third quarter to $2.7 billion.

Losses in Compaq's PC business were down from $186 million in Q4 to $69 million this quarter, as volumes increased and revenues rose to $3.8 billion, up 16 percent sequentially, but down 31 percent year over year. During the quarter Compaq completed its plan for the worldwide outsourcing of portable computers and desktops for the indirect channel.

Compaq is looking forward to stronger recovery over the next six months. It forecasts Q1 revenue of $7.6 billion, which is "consistent with normal seasonal trends", says Compaq CEO Michael Capellas.

"While we did see some strengthening of the IT market in the fourth quarter, first half growth will be moderate and pent-up demand should drive a stronger recovery in the second half of the year." ®