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April 17, 1997updated 05 Sep 2016 1:04pm

COMPAQ CAN PROSPER EVEN IN LEAN TIMES

By CBR Staff Writer

Compaq Computer Corp’s first quarter earnings were a bit better than Wall Street’s consensus estimate, but analysts said revenue came in below some expectations. The first quarter earnings of $1.36 a share compared with First Call consensus of $1.31, although no doubt there was a whisper number going around that was much closer to what was reported. But a 14.3% rise in revenue means that the period was very hard going for a company used to such fast growth as Compaq. My estimate was $4.9bn in revenues, Daniel Ries, a Nomura Research analyst told Reuter – Compaq actually reported $4.8bn so You can make the case that it was somewhat light. He said the shortfall appears to have come from the consumer business in North America. But It’s a good solid quarter. The asset management is phenomenal. It’s amazing the influence the new chief financial officer has had on operations, he added, referring to Earl Mason, who joined Compaq one year ago. The company said first quarter gross margins rose to 24.5% from 24.4% in the 1996 fourth quarter, and its cash resources grew to $4.7bn. It added that continuing focus on asset management reduced its inventory by $666m compared with the 1996 first quarter, leading to increased inventory turns and decreased sales outstanding, all of which helped to lift its cash balance. We’re very pleased with the consistency of our financial progress, especially with the improvements in earnings and the growth of gross margins to 24.5%, Eckhard Pfeiffer, president and chief executive said. We expect strong growth throughout 1997. Compaq is positioned to gain market share and increase profits, Pfeiffer added. We are clearly focused on what customers are looking for. Compaq increased its inventory turns to 12.0 in the first quarter from 6.5 a year earlier, and cut its days of sales outstanding to 51 from 65. It is still working with its reseller partners to implement its new manufacturing and delivery model fully, saying it will create the most efficient fulfillment process for the lowest delivered cost in the industry.

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