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Compaq CEO's memo tries to ease employee fears

In a memo obtained by CNET News.com, Michael Capellas attempts to allay employee worries about the jittery PC sales and the ugly stock market.

Compaq chief executive Michael Capellas attempted Thursday to calm employee worries about the jittery PC market, which has been rocked by falling stock prices.

In a memo obtained by CNET News.com, Capellas told employees: "There is continued volatility in the market today, particularly in technology stocks?I know this creates a lot of uncertainty for employees."

Capellas responded to Thursday's market shakeout spurred by Gateway's unexpected profit warning Wednesday and reports that retail PC sales at the start of the holiday season are down 25 percent from last year. The stock shakeout knocked the Nasdaq to a 15-month low of 2,597.93.

"We do see softness in some markets and an overall slowing in the rate of growth in the North American economy," Capellas said. "One result of these conditions is likely to be increased price competition. This means that during the next few weeks, superior execution is even more important."

In fact, analysts warn that a price war is likely, given the unexpectedly slow PC sales, as inventory builds on dealer shelves.

But Capellas said Compaq believes "these are short-term issues. We do not expect customer spending on technology to slow down over the long term."

Even with the softening economy, the Internet will continue to drive sales and "businesses will continue to invest more heavily on Internet infrastructure than in other areas."

That more than 50 percent of the Houston-based company's revenue comes from outside the United States should also insulate Compaq from local economic issues, Capellas said. "In fact, we see opportunities for global expansion in 2001, and we expect the European market to continue to strengthen."

Capellas played up the company's $100 million deal with Disney announced Thursday. He also emphasized that customer and employee satisfaction is up, as is Compaq's market share.

"As difficult as things may appear, we have every reason to be confident in our future," he said.

Capellas isn't the only chief executive trying to quell fears about the fourth quarter. Hewlett-Packard CEO Carly Fiorina said in a statement Thursday the company is on track to meet earnings estimates for the current quarter.

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