Compaq beats earnings estimates

The PC giant's second-quarter sales grow 25 percent, and per share earnings beat analyst estimates by nearly 10 cents.

2 min read
Computing juggernaut
Compaq Computer (CPQ) continues to beat Wall Street expectations, announcing second-quarter earnings today that exceeded estimates by more than 5 percent.

The Houston, Texas-based giant, who recently made news with the $3 billion acquisition of Tandem Computers (TDM), announced sales of $5 billion and income of $422 million for the quarter. Earnings per share beat estimates by nearly 10 cents, coming in at $1.48 per share excluding a one-time charge of 75 cents related to the acquisition of remote access player Microcom.

A consensus analyst estimate compiled by First Call pegged Compaq's earnings per share at $1.39 for the quarter.

Compaq is the worldwide leader in sales of PC and server systems based on Intel microprocessors. The company has also made forays into the networking hardware market, recently augmenting its line of workgroup hubs, switches, and routers by purchasing Microcom. Compaq shored up its enterprise business through the Tandem deal, a company that specializes in high-end systems for "mission-critical" environments.

Compared to the company's fiscal performance the previous year, Compaq's sales increased 25 percent and net income increased 58 percent.

Compaq is planning to announce a new personal computer line and manufacturing strategy today in New York. The latest PCs will be the first line offered by the company that are build-to-order, similar to the system used by fast-growing PC monoliths Dell Computer and Gateway 2000.

"Our outlook continues to call for a strong second half," said Eckhard Pfeiffer, president and CEO of Compaq in a statement. "We're confident that Compaq's new business model will accelerate market share gains and improve profitability."

Framed by the continued troubles facing alternatives like Apple Computer (AAPL), Compaq's success can only add more ammunition to supporters of the so-called Wintel camp, the name given to Intel and Microsoft's close collaboration and near-monopoly on the base software and hardware sold in the PC marketplace.

The latest news follows a prodigious performance by Compaq in the first quarter, when it posted profits of 66 percent on income of $387 million. At the time, Compaq officials pointed to efficient asset management techniques that reduced inventory and a high demand for Compaq products as reasons for the jump. Worldwide sales were up over 14 percent to $4.8 billion for the quarter.