Compaq's solid figures for its second quarter were tarnished by its performance in Europe, which has remained sluggish.
While five out of its six regions recorded double-digit growth for the period ended 30 June, Europe grew by a paltry five per cent.
From a loss of $184m for the same period last year, Compaq's profit soared to $387m. Turnover was also up to $10.1bn from $9.4bn a year ago.
Compaq's commercial computer group, which had made a $19m loss in the first quarter and had been haemorrhaging cash for over a year, also turned in a profit in every region, thanks to increased direct sales and the use of distribution assets from its purchase of Inacom.
Andy Brown, an analyst at market watcher IDC, said Compaq's performance in Europe was not as bad as it could have been and was bolstered by consumer and notebook sales, which did well. He said Compaq was not alone in suffering from slow demand for hardware in Europe during the second quarter.
"Large businesses spent a great deal on renewing and upgrading hardware last year. There is still a hangover from this spend because there is no need to renew equipment. Budget this year is being spent on ebusiness and supply-chain management," he said.
"Other factors, such as the dollar's strength in Europe, slow take-up of Windows 2000 and component supply problems, have meant that it has been harder to shift products and harder to lower prices," added Brown.
Michael Capellas, Compaq's president, said he was pleased with the firm's performance. While aiming to slash $2bn of its operating expenses, Compaq had boosted profits by more than $1m year on year, he said.
According to Brown, Compaq has done a lot to repair the damage done to its relationship with the channel, which had seen it lose business chiefly in the small to medium sized enterprise sector.
"Compaq realised it had alienated part of its channel and has moved very quickly to rectify that, especially with its agency model for partners," he said.
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