Compaq expects break-even Q1
Compaq Computer announces that its first-quarter revenues will be roughly flat from a year ago--below Wall Street's expectations.
The company also warned it would break even on earnings. The shortfall is being attributed to slower-than-expected sales, pricing pressures, and increasing inventories in the North American market.
"We are putting in place price reductions and aggressive promotions in the first and second quarter to reduce these channel inventories," Compaq chief executive Eckhard Pfeiffer said in a statement.
This week alone, Intel (INTC), and Motorola (MOT) have reported that their quarterly earnings will fall below Wall Street's expectations, announcements that have hurt their stock prices as well as the technology sector as a whole, at least on some days.
AMD (AMD), for its part, warned on Wednesday that its first-quarter results would "decline significantly."
While the first quarter typically is soft for computer companies, a return to 1997 sales could be interpreted as a substantial deflation for Compaq. The company has racked up significant market share gains over the past 12 months.
The earnings surprise comes as the PC giant is trying to digest a big merger partner. In January, Compaq agreed to buy Digital Equipment (DEC) for about $9.6 billion in cash and stock.
Today's announcement of a shortfall came after the markets closed, with its stock ending up a half a point at 27-5/8 with 32,565,000 shares trading hands.
According to First Call, the mean estimate of Compaq's first-quarter earnings for this year was 35 cents per share, up from 27 cents during the previous year. The range of estimates for the current quarter was between 30 cents and 37 cents per share.
For the first quarter of 1997, Compaq reported earnings of $387 million and revenues of $4.8 billion.
The company ended 1997 with a quarter of record revenue, posting earnings of $667 million, up 84 percent from the year before on sales of $7.3 billion, and up 23 percent from the previous year.