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July 15, 1998

COMPAQ REPORTS HUGE LOSSES ON DEC ACQUISITION CHARGES

By CBR Staff Writer

Compaq Computer Corp, the world’s biggest manufacturer of PCs, has reported losses of $3.6bn for its second quarter, after charging asset write downs of $3.2bn for its acquisition of Digital Equipment Corp. Compaq has also pushed a further $1.5bn of charges through DEC’s closing accounts to provide for the mass lay offs expected at the company, a charge which will not be set against Compaq’s earnings (see Barbed Wire). Revenues for the second quarter rose by 5.7% to $5.83bn and the company claims to have made a profit before charges of $32m, down from last years second quarter profit of $257m. Additional charges totaling $430m were made for Compaq employee separations and other operating adjustments. Compaq’s chief financial officer, Earl Mason, repeated his prediction that the upcoming third quarter would be a transitional period for the company, although Compaq still expects to make a small profit in the period. Chief executive Eckhard Pfeiffer said in a prepared statement that Compaq had succeeded in bringing its problematical inventory levels under control. Previously, Compaq has blamed its worsening results on a slowing demand for PCs combined with excess channel inventory levels.

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