Compaq posted a smaller than expected drop in fourth quarter earnings despite profits plunging more than 50 per cent due to pricing pressure on its PC and server lines.
The hardware supplier's income was also adversely affected by the cost of providing replacements to its third party channel for a family of Alpha based machines running Windows NT that it intends to discontinue. Last month, Compaq said the replacements would hit profits by as much as $150 million.
For its fourth quarter, which ended on 31 December, 1999, Compaq saw revenue decline by four per cent to $10.5 billion as the effect of translating foreign currency into US dollars shaved three percentage points off its figures.
Profits fell by 56 per cent to $332 million or earnings per share of $0.19 compared with income of $758 million or earnings per share of $0.43 in the year ago quarter. The First Call analysts' consensus estimate had expected earnings of $0.16, but Compaq logged an investment gain of $50 million, adding $0.03 to its bottom line.
But Michael Capellas, Compaq's president and chief executive, said that although he expected the firm's first quarter revenues to decline compared with a seasonally strong fourth quarter, the outlook would improve after that and he was "confident of the year ahead."
He added that he anticipated revenue for 2000 would grow by 15 per cent over 1999's total of $38.5 billion.
The firm's Enterprise Solutions and Services group, which comprises its Digital Equipment acquisition, saw sales drop by three per cent year on year to $5.3 billion, while Enterprise Product revenue dropped five per cent year on year to $3.5 billion.
Sales from the company's Commercial Personal Computing Group declined by 19 per cent to $3.1 billion, but the bright spots were Services, which grew three per cent to $1.8 billion, and the Consumer Group, which saw turnover increase by 24 per cent to $2 billion.
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