Compaq Reports First Quarter Results

Meets Revenue and EPS Guidance;

Outlines Aggressive Go-To-Market Program



Apr 23, 2001, 01:00 ET from Compaq Computer Corporation

    HOUSTON, April 23 /PRNewswire Interactive News Release/ -- Compaq Computer
 Corporation (NYSE:   CPQ), a leading global provider of enterprise technology
 and solutions, today reported revenue of $9.2 billion for the first quarter
 ended March 31, 2001.
     Net income from operations for the quarter was $200 million, or $0.12 per
 diluted common share.  Results exclude a one-time $249 million charge for
 restructuring actions, net investment income of $75 million, and related tax
 effects.  Including the special items, the company reported net income of
 $78 million, or $0.05 per diluted common share.
     "Given the difficulties in this market environment, our first quarter
 performance reflects solid global execution," said Michael Capellas, chairman
 and chief executive officer.  "Total revenue was down three percent, or up one
 percent in constant currency.  Outside the U.S., revenue grew 17 percent,
 offsetting weakness in U.S. markets -- most notably consumer PCs."
     In the same quarter last year, Compaq reported revenue of $9.5 billion and
 net income of $296 million, or $0.17 per diluted common share.  Adjusted for a
 net after-tax gain of $44 million related to Compaq's investment portfolio,
 earnings per diluted common share were $0.14.
     Global services revenue was up 4 percent from a year ago.  Compaq's
 enterprise business was down 2 percent from the same period last year, but saw
 particularly strong growth of 26 percent in enterprise storage.  Outside the
 U.S., the company grew 17 percent year-over-year in constant currency, driven
 by enterprise growth of 29 percent, access growth of 15 percent and services
 growth of 8 percent.  International sales accounted for 61 percent of the
 quarter's revenue.  Revenue in the company's access business -- which includes
 consumer and commercial personal computers -- was down 7 percent.
     "The relative strength of our enterprise products and services reflects
 the fact that customers are looking for partners that can provide integrated
 solutions and put the pieces together to add real business value beyond the
 box," Capellas continued.
     Adjusted for currency, Europe, Middle East and Africa grew 14 percent,
 Japan grew 31 percent, Asia Pacific grew 29 percent, Latin America grew
 17 percent and China grew 6 percent.  North America revenue was down
 17 percent.
     First quarter results include a $249 million charge, which expands
 previously announced restructuring.  The restructuring activities will yield
 an annualized savings of approximately $500 million.
     Operating expense of $1.8 billion was essentially unchanged from a year
 ago, and was down 9 percent from the previous quarter.  First quarter gross
 margin, as a percentage of revenue, was 22.7 percent, down slightly from a
 year ago.  The decline was largely the result of pricing pressure in the U.S.
     "While we believe the second quarter will continue to be challenging, it
 also provides an opportunity to make significant improvements in our business
 model," Capellas said.  "We are aggressively focusing on five key improvement
 initiatives including additional reductions in our structural costs, permanent
 inventory reductions, aggressive pricing, increased investments in innovation
 and broadening our global services.
     "We are confident that these actions will strongly position us for
 improved results in the second half of this year and beyond," Capellas
 concluded.
 
     Company Background
     Compaq Computer Corporation, a Fortune Global 100 company, is a leading
 global provider of technology and solutions.  Compaq designs, develops,
 manufactures, and markets hardware, software, solutions, and services,
 including industry-leading enterprise computing solutions, fault-tolerant
 business-critical solutions, communication products, and desktop and portable
 personal computers that are sold in more than 200 countries.  Information on
 Compaq and its products and services is available at www.compaq.com.
     Compaq and the Compaq logo Registered U.S. Patent and Trademark Office.
 This press release may contain forward-looking statements based on current
 expectations that involve a number of risks and uncertainties.  The potential
 risks and uncertainties that could cause actual results to differ materially
 include:  market conditions, particularly in North America, increased
 competitive environment and pricing pressures, disruptions related to
 restructuring actions, and delays in the implementation of changes in delivery
 models.  Further information on these factors and other factors that could
 affect Compaq's financial results will be included in Compaq's Securities and
 Exchange Commission (SEC) filings, including the latest Annual Report on Form
 10-K and the Quarterly Report on Form 10-Q, which will be filed shortly.
 
 
                          COMPAQ COMPUTER CORPORATION
                      CONDENSED CONSOLIDATED BALANCE SHEET
 
      (In millions, except par value)                March 31,    December 31,
                                                       2001           2000
                                                    (Unaudited)
 
     ASSETS
 
     Current assets:
       Cash and cash equivalents                       $2,642         $2,569
       Trade accounts receivable, net                   5,873          6,715
       Leases and other accounts receivable             1,913          1,677
       Inventories                                      2,023          2,161
       Other assets                                     2,034          1,989
         Total current assets                          14,485         15,111
 
     Property, plant and equipment, net                 3,453          3,431
     Other assets, net                                  5,939          6,314
           Total assets                               $23,877        $24,856
 
     LIABILITIES AND STOCKHOLDERS' EQUITY
 
     Current liabilities:
       Short-term borrowings                             $650           $711
       Accounts payable                                 3,845          4,233
       Deferred income                                  1,193          1,089
       Other liabilities                                5,008          5,516
         Total current liabilities                     10,696         11,549
 
     Long-term debt                                       575            575
     Postretirement and other postemployment benefits     647            652
     Commitments and contingencies
     Stockholders' equity:
       Preferred stock, $.01 par value
         Shares authorized:  10 million; shares
          issued:  none                                   ---            ---
       Common stock and capital in excess of $.01
        par value
         Shares authorized:  3 billion
         Shares issued:  March 31, 2001 -
          1,746 million; December 31, 2000 -
          1,742 million                                 8,085          8,039
       Retained earnings                                5,383          5,347
       Accumulated other comprehensive income (loss)      (88)            27
       Treasury stock (shares:  March 31, 2001 -
        59 million; December 31, 2000 - 53 million)    (1,421)        (1,333)
         Total stockholders' equity                    11,959         12,080
           Total liabilities and stockholders'
            equity                                    $23,877        $24,856
 
 
                          COMPAQ COMPUTER CORPORATION
                   CONDENSED CONSOLIDATED STATEMENT OF INCOME
                                  (Unaudited)
 
                                                  Three months ended March 31,
      (In millions, except per share amounts)          2001            2000
 
     Revenue:
       Products                                        $7,496         $7,812
       Services                                         1,701          1,693
         Total revenue                                  9,197          9,505
 
     Cost of sales:
       Products                                         5,893          6,108
       Services                                         1,212          1,213
         Total cost of sales                            7,105          7,321
 
     Selling, general and administrative                1,438          1,401
     Research and development                             364            356
     Restructuring and related charges                    249            ---
     Other (income) expense, net                          (70)           (46)
                                                        1,981          1,711
 
     Income before income taxes                           111            473
     Provision for income taxes                            33            151
     Income before cumulative effect of accounting
      change                                               78            322
     Cumulative effect of accounting change,
      net of tax                                          ---            (26)
     Net income                                           $78           $296
 
     Earnings per common share:
     Basic:
       Before cumulative effect of accounting change    $0.05          $0.19
       Cumulative effect of accounting change,
        net of tax                                        ---           0.02
                                                        $0.05          $0.17
 
     Diluted:
       Before cumulative effect of accounting change    $0.05          $0.19
       Cumulative effect of accounting change,
        net of tax                                        ---           0.02
                                                        $0.05          $0.17
 
     Shares used in computing earnings per common share:
       Basic                                            1,685          1,697
       Diluted                                          1,712          1,740
 
 
                          COMPAQ COMPUTER CORPORATION
                              SEGMENT INFORMATION
                                  (Unaudited)
 
                                                  Three months ended March 31,
      (In millions)                                     2001           2000
 
     Enterprise Computing
       Revenue                                         $2,908         $2,953
       Operating income                                   132            262
     Access
       Revenue                                          4,374          4,704
       Operating income (loss)                            (82)            15
     Compaq Global Services
       Revenue                                          1,935          1,863
       Operating income                                   254            212
     Segment Eliminations and Other
       Revenue                                            (20)           (15)
       Operating income                                    20              3
     Consolidated Segment Totals
       Revenue                                         $9,197         $9,505
       Operating income                                  $324           $492
 
     A reconciliation of Compaq's consolidated segment operating income to
 consolidated income before provision for income taxes follows:
 
                                                  Three months ended March 31,
      (In millions)                                      2001           2000
 
     Consolidated segment operating income               $324           $492
     Unallocated corporate expenses                       (34)           (65)
     Restructuring and related charges                   (249)           ---
     Other income (expense)                                70             46
     Income before provision for income taxes            $111           $473
 
                     MAKE YOUR OPINION COUNT -  Click Here
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SOURCE Compaq Computer Corporation
    HOUSTON, April 23 /PRNewswire Interactive News Release/ -- Compaq Computer
 Corporation (NYSE:   CPQ), a leading global provider of enterprise technology
 and solutions, today reported revenue of $9.2 billion for the first quarter
 ended March 31, 2001.
     Net income from operations for the quarter was $200 million, or $0.12 per
 diluted common share.  Results exclude a one-time $249 million charge for
 restructuring actions, net investment income of $75 million, and related tax
 effects.  Including the special items, the company reported net income of
 $78 million, or $0.05 per diluted common share.
     "Given the difficulties in this market environment, our first quarter
 performance reflects solid global execution," said Michael Capellas, chairman
 and chief executive officer.  "Total revenue was down three percent, or up one
 percent in constant currency.  Outside the U.S., revenue grew 17 percent,
 offsetting weakness in U.S. markets -- most notably consumer PCs."
     In the same quarter last year, Compaq reported revenue of $9.5 billion and
 net income of $296 million, or $0.17 per diluted common share.  Adjusted for a
 net after-tax gain of $44 million related to Compaq's investment portfolio,
 earnings per diluted common share were $0.14.
     Global services revenue was up 4 percent from a year ago.  Compaq's
 enterprise business was down 2 percent from the same period last year, but saw
 particularly strong growth of 26 percent in enterprise storage.  Outside the
 U.S., the company grew 17 percent year-over-year in constant currency, driven
 by enterprise growth of 29 percent, access growth of 15 percent and services
 growth of 8 percent.  International sales accounted for 61 percent of the
 quarter's revenue.  Revenue in the company's access business -- which includes
 consumer and commercial personal computers -- was down 7 percent.
     "The relative strength of our enterprise products and services reflects
 the fact that customers are looking for partners that can provide integrated
 solutions and put the pieces together to add real business value beyond the
 box," Capellas continued.
     Adjusted for currency, Europe, Middle East and Africa grew 14 percent,
 Japan grew 31 percent, Asia Pacific grew 29 percent, Latin America grew
 17 percent and China grew 6 percent.  North America revenue was down
 17 percent.
     First quarter results include a $249 million charge, which expands
 previously announced restructuring.  The restructuring activities will yield
 an annualized savings of approximately $500 million.
     Operating expense of $1.8 billion was essentially unchanged from a year
 ago, and was down 9 percent from the previous quarter.  First quarter gross
 margin, as a percentage of revenue, was 22.7 percent, down slightly from a
 year ago.  The decline was largely the result of pricing pressure in the U.S.
     "While we believe the second quarter will continue to be challenging, it
 also provides an opportunity to make significant improvements in our business
 model," Capellas said.  "We are aggressively focusing on five key improvement
 initiatives including additional reductions in our structural costs, permanent
 inventory reductions, aggressive pricing, increased investments in innovation
 and broadening our global services.
     "We are confident that these actions will strongly position us for
 improved results in the second half of this year and beyond," Capellas
 concluded.
 
     Company Background
     Compaq Computer Corporation, a Fortune Global 100 company, is a leading
 global provider of technology and solutions.  Compaq designs, develops,
 manufactures, and markets hardware, software, solutions, and services,
 including industry-leading enterprise computing solutions, fault-tolerant
 business-critical solutions, communication products, and desktop and portable
 personal computers that are sold in more than 200 countries.  Information on
 Compaq and its products and services is available at www.compaq.com.
     Compaq and the Compaq logo Registered U.S. Patent and Trademark Office.
 This press release may contain forward-looking statements based on current
 expectations that involve a number of risks and uncertainties.  The potential
 risks and uncertainties that could cause actual results to differ materially
 include:  market conditions, particularly in North America, increased
 competitive environment and pricing pressures, disruptions related to
 restructuring actions, and delays in the implementation of changes in delivery
 models.  Further information on these factors and other factors that could
 affect Compaq's financial results will be included in Compaq's Securities and
 Exchange Commission (SEC) filings, including the latest Annual Report on Form
 10-K and the Quarterly Report on Form 10-Q, which will be filed shortly.
 
 
                          COMPAQ COMPUTER CORPORATION
                      CONDENSED CONSOLIDATED BALANCE SHEET
 
      (In millions, except par value)                March 31,    December 31,
                                                       2001           2000
                                                    (Unaudited)
 
     ASSETS
 
     Current assets:
       Cash and cash equivalents                       $2,642         $2,569
       Trade accounts receivable, net                   5,873          6,715
       Leases and other accounts receivable             1,913          1,677
       Inventories                                      2,023          2,161
       Other assets                                     2,034          1,989
         Total current assets                          14,485         15,111
 
     Property, plant and equipment, net                 3,453          3,431
     Other assets, net                                  5,939          6,314
           Total assets                               $23,877        $24,856
 
     LIABILITIES AND STOCKHOLDERS' EQUITY
 
     Current liabilities:
       Short-term borrowings                             $650           $711
       Accounts payable                                 3,845          4,233
       Deferred income                                  1,193          1,089
       Other liabilities                                5,008          5,516
         Total current liabilities                     10,696         11,549
 
     Long-term debt                                       575            575
     Postretirement and other postemployment benefits     647            652
     Commitments and contingencies
     Stockholders' equity:
       Preferred stock, $.01 par value
         Shares authorized:  10 million; shares
          issued:  none                                   ---            ---
       Common stock and capital in excess of $.01
        par value
         Shares authorized:  3 billion
         Shares issued:  March 31, 2001 -
          1,746 million; December 31, 2000 -
          1,742 million                                 8,085          8,039
       Retained earnings                                5,383          5,347
       Accumulated other comprehensive income (loss)      (88)            27
       Treasury stock (shares:  March 31, 2001 -
        59 million; December 31, 2000 - 53 million)    (1,421)        (1,333)
         Total stockholders' equity                    11,959         12,080
           Total liabilities and stockholders'
            equity                                    $23,877        $24,856
 
 
                          COMPAQ COMPUTER CORPORATION
                   CONDENSED CONSOLIDATED STATEMENT OF INCOME
                                  (Unaudited)
 
                                                  Three months ended March 31,
      (In millions, except per share amounts)          2001            2000
 
     Revenue:
       Products                                        $7,496         $7,812
       Services                                         1,701          1,693
         Total revenue                                  9,197          9,505
 
     Cost of sales:
       Products                                         5,893          6,108
       Services                                         1,212          1,213
         Total cost of sales                            7,105          7,321
 
     Selling, general and administrative                1,438          1,401
     Research and development                             364            356
     Restructuring and related charges                    249            ---
     Other (income) expense, net                          (70)           (46)
                                                        1,981          1,711
 
     Income before income taxes                           111            473
     Provision for income taxes                            33            151
     Income before cumulative effect of accounting
      change                                               78            322
     Cumulative effect of accounting change,
      net of tax                                          ---            (26)
     Net income                                           $78           $296
 
     Earnings per common share:
     Basic:
       Before cumulative effect of accounting change    $0.05          $0.19
       Cumulative effect of accounting change,
        net of tax                                        ---           0.02
                                                        $0.05          $0.17
 
     Diluted:
       Before cumulative effect of accounting change    $0.05          $0.19
       Cumulative effect of accounting change,
        net of tax                                        ---           0.02
                                                        $0.05          $0.17
 
     Shares used in computing earnings per common share:
       Basic                                            1,685          1,697
       Diluted                                          1,712          1,740
 
 
                          COMPAQ COMPUTER CORPORATION
                              SEGMENT INFORMATION
                                  (Unaudited)
 
                                                  Three months ended March 31,
      (In millions)                                     2001           2000
 
     Enterprise Computing
       Revenue                                         $2,908         $2,953
       Operating income                                   132            262
     Access
       Revenue                                          4,374          4,704
       Operating income (loss)                            (82)            15
     Compaq Global Services
       Revenue                                          1,935          1,863
       Operating income                                   254            212
     Segment Eliminations and Other
       Revenue                                            (20)           (15)
       Operating income                                    20              3
     Consolidated Segment Totals
       Revenue                                         $9,197         $9,505
       Operating income                                  $324           $492
 
     A reconciliation of Compaq's consolidated segment operating income to
 consolidated income before provision for income taxes follows:
 
                                                  Three months ended March 31,
      (In millions)                                      2001           2000
 
     Consolidated segment operating income               $324           $492
     Unallocated corporate expenses                       (34)           (65)
     Restructuring and related charges                   (249)           ---
     Other income (expense)                                70             46
     Income before provision for income taxes            $111           $473
 
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                http://tbutton.prnewswire.com/prn/11690X83780415
 
 SOURCE  Compaq Computer Corporation