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Compaq earnings, explanations due

The melodrama that is Compaq Computer will continue tomorrow when the company announces its first-quarter earnings before the market opens.

The melodrama that is Compaq Computer will continue tomorrow when the company announces its first-quarter earnings before the market opens.

Compaq is expected to report earnings of 15 cents per share, according to a poll of analysts from First Call issued at 3 p.m. PT. Predictions range from 15 to 17 cents a share.

The estimate represents approximately half the earnings analysts expected prior to Compaq's April 9 warning that both earnings and revenues would be lower than predictions.

Eckhard Pfeiffer, who was chief executive at the time, blamed the unexpected shortfall in profits on industrywide pricing pressure and slow demand. But disappointment and anger among investors over Pfeiffer's perceived intransigence--and his willingness to write off Compaq's problems as symptoms of industrial malaise--helped exacerbate a simmering conflict inside the company that lead to his involuntary resignation Saturday night. It was announced Sunday.

The company reported earnings of 1 cent per share for the first quarter of 1998, a 96 percent decline from first quarter earnings of 1997, due to an excess of inventory.

The results for the quarter will be posted at 4 a.m. PT. Chairman Ben Rosen, along with vice-chairmen Ted Enloe and Frank Doyle, will lead a conference call on the results at 7 a.m. PT. Rosen, Enloe, and Doyle have taken over responsibility for overseeing operations at the company and together will maintain what Compaq calls "The Office of the Chief Executive" until a replacement for Pfeiffer can be found.

The company will carry a live Webcast of the proceedings on its Web site, according to Compaq press representatives.

While it is difficult to predict what topics will be discussed, Rosen and others will likely shed light on Compaq's future strategic direction. In an interview yesterday with CNET, Rosen said that Compaq had not done enough to coordinate its assets and intellectual property into a cohesive whole. Going forward, he said, a major goal for the company will be to integrate the different divisions more tightly.

"We have a wealth of assets. We have one of the broadest product portfolios out there," he said. "We have a large share of the Web services market. We have the AltaVista search engine, which is one of the most popular search engines on the Web. We have the largest consumer Internet computer operation in the world."

Nonetheless, the parts don't fit together well. "We haven't done as much as we could have in putting all of the elements together. It takes a while to get the synergies going," he said.

So far, many on Wall Street are taking a wait-and-see approach to the company. The change in management is seen as a positive first step, but Compaq still has yet to resolve some of the difficult tasks facing it, including completing the integration of Digital Equipment and streamlining its operations to better compete with Dell Computer.

"We believe this management change will prove positive for Compaq," wrote Steve Milunovich of Merrill Lynch in a report earlier this week.

"However, leadership uncertainty, particularly in such a fast-moving industry, will likely put pressure on Compaq's ability to execute on current business and the remaining pieces of the Digital integration."