Compaq and AT&T feel the bite

Compaq revenues are a third down on last year for the three months to the end of September, the firm has admitted. While, US telco AT&T saw third-quarter profits drop sharply and said it expects to suffer all through next year thanks to increasing competition and a soft market.

Compaq, planning to merge with Hewlett Packard, made a loss of $499m for the period on sales of $7.5bn, compared with a profit of $557m on revenues totalling $11.2bn for the same period last year.

Chief executive Michael Capellas called the quarter "one of the most challenging ever".

Worst performing was Compaq's PC business, which lost $248m for the quarter. Sales of $3.26bn were down 42 per cent from $5.6bn a year earlier, when the business was profitable.

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

The only bright spot for Compaq was its global services revenue which grew to $1.9bn, a two per cent increase year-on-year and now providing a quarter of all Compaq revenues.

AT&T reported improvements in its Broadband cable TV unit, which it may sell for around $50bn, and higher sales of data and internet services to businesses. But it forecast lower long-distance voice revenues.

US unions said that the telco plans to shed 2400 staff, slightly less than two per cent of its workforce, in a new round of job cuts.

During the third quarter, AT&T's profits from continuing operations, excluding one-time items, dropped to four cents a share, from 35 cents a share in the year-ago period.

Wall Street analysts expected AT&T to earn two to five cents a share, with a mean forecast of four cents a share, according to research firm Thomson Financial/First Call.

Including charges to dissolve its Concert international joint venture with BT, AT&T lost $2.2bn. Pro forma revenues dropped 5.8 per cent.

C. Michael Armstrong, chairman at AT&T, said: "Every part of our company felt the impact of the slowing economy."