Compaq Posts Third-Quarter LossCompaq Posts Third-Quarter Loss

Compaq blamed a litany of ills, including the slumping IT economy, a disruptive typhoon in Taiwan, and the aftermath of the Sept. 11 attacks on the United States, for a third quarter in which it posted its second consecutive quarterly loss and saw revenue decline by one-third from the previous year. "The third quarter was one of the most challenging ever for Compaq," chairman and CEO Michael Capellas said in a statement released after the close of regular-hours trading Tuesday.

For the period ended Sept. 30, Compaq reported a loss of $120 million, or 7 cents per share. Revenue fell 33% from a year ago, to $7.46 billion. Capellas said IT demand continues to be weak across the globe, forcing Compaq and other vendors to aggressively cut prices. Capellas also said he sees no quick turnaround in the offing. "We do not anticipate dramatic changes in corporate IT spending, particularly through the first half of 2001," he said.

Compaq said its enterprise computing group, which sells servers and storage products, posted a loss of $104 million on revenue of $2.37 billion. Meanwhile, the Access unit, which includes PCs, notebooks, and handheld devices, saw revenue decline 42% year over year to $3.25 billion. The group posted a loss of $248 million.

Observers say Compaq's proposed merger with Hewlett-Packard, expected to be complete early next year, is also hurting sales. "A lot of customers are fence sitters right now; they don't want to be stuck with a product that doesn't survive the merger," says Lindy Lesperance, a Technology Business Research analyst.

On the upside, Compaq said it reduced supply-chain inventory by $600 million while trimming more than $100 million in operating expenses since the second quarter. It also said services revenue increased 2% to $1.88 billion.