Compaq wants to cut $200m in costs and overhaul its strategy of offering packages of computers, services and software instead of standalone hardware, in the face of a PC price war.
Michael Capellas, Compaq chief executive, has outlined the strategy in a memo to employees, according to the Wall Street Journal(WSJ) Compaq has confirmed the memo's existence, the paper reported.
The WSJ reports that Compaq will make additional cost cuts to the measures detailed in April when the firm said 7000 jobs would go, including 700 jobs at its Erskine computer assembly plant in Scotland.
Another $200m of cuts will be made on top of the $600m already scheduled.
The firm will expand software development and also spend up to $500m acquiring IT services businesses targeting the financial services, telecomms, health care and manufacturing industries.
Capellas wrote that within four years "our goal is to increase services from about one-fifth of Compaq's revenue today to one-third".
However, the company is still looking to increase its share of PC and server sales by one to two points in the remainder of the year.
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