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Compaq: Bad Sales Wiped Out Profits

March 7, 1998

NEW YORK (AP) _ Compaq Computer Corp. has sent the latest jolt through the technology industry.

Compaq, the world’s largest maker of personal computers, warned Friday that flat computer sales and price wars would wipe out its profit in the current quarter.

The company said it had cut prices of its business desktops more steeply than expected due to intense competition for corporate customers.

Its warning came after Intel Corp. and Motorola Inc. this week said that their quarterly results also would fall below expectations and further raised the possibility of a slowdown in the technology industry.

Compaq chief executive Eckhard Pfeiffer said the company has resorted to aggressive price cuts to trim bloated inventories. Like other PC makers, Compaq is trying to dramatically reduce warehouse stocks so that it can bring new products to market faster and avoid the costs of cleaning out old inventories.

Before Compaq’s warning that it would just about break even in the current quarter, analysts had expected Compaq to report a $525 million profit, according to a survey by First Call Corp. A year ago, the Houston-based company earned $387 million on sales of $4.81 billion.

The disappointing outlook was released after the stock market closed. Compaq’s shares had gained 50 cents to $27.62 1/2 on the New York Stock Exchange.

But in after-hours trading, Compaq fell $2.50 to $25.12 1/2 and led other big high-tech names lower. Dell Computer Corp. was down $6.75 from its close to $131.75, Microsoft Corp. was down $2.56 1/4 to $80, and Intel was down $1.37 1/2 to $76.75, according to Dow Jones Newswires.

Compaq said it was viewing the April-June quarter with caution as well.

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