Compaq?s shares crashed in after hours trading on Friday following an announcement that its first quarter earnings would fall short of analysts? expectations due to a slowdown in demand for business PCs.
The PC giant had previously warned of slower than expected demand, especially in the US and Europe, but said it now expects to post earnings of $0.15 per share, on revenues of $9.4 billion. The First Call analysts? consensus estimate had previously put profits at $0.31.
Compaq?s shares had risen $1.3125 or four per cent to close at $30.9375, but plummeted to $27 in after hours trading.
Analysts were taken by surprise by the announcement because they had thought Compaq would benefit from its higher margin server business, following the acquisitions of Tandem and Digital Equipment. They were also annoyed that the firm had not made a general announcement in February rather than issue a profits warning - particularly of this size - over a week after the close of its March quarter.
Compaq expects to release its results on 21 April and plans to announce a new strategy for the business computer market next week. Eckhard Pfeiffer, the company?s president and chief executive, said: "While market conditions will continue to be competitive, we fully intend to expand our business and grow market share profitably in 1999. We will roll out our enterprise strategy next week at Innovate 99 and the company will continue its aggressive drive of reduction of cost and operating expenses in the face of a very competitive market." Such a statement is likely to spark concern, however, that the consumer PC price war will move to the business sector.
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