Compaq Sales Down 3%, 2,000 More Jobs Cut

HOUSTON — Personal computer and server manufacturer Compaq Computer reported total revenues of $9.2 billion in the first quarter, about 3 percent less than the $9.5 billion recorded in the same three months last year.

Compaq said it will eliminate 2,000 more jobs, in addition to the 5,000 announced in March. The 7,000 total cuts are about 10 percent of the company's work force. About 4,500 employees will be laid off, while the remaining cuts will come from attrition.

Compaq, which took a one-time $249 million charge in the first quarter to write off excess inventory, reported earnings of $200 million, excluding the special charge, compared with $296 million in the year-ago three months. Including special items, the company reported net income of $78 million in the first quarter ended March 31. The company said it would take a similar $300 million charge in the second quarter.

Revenue in Compaq's Access segment, which includes consumer PCs, dropped about 7 percent to $4.4 billion in the first quarter, down from $4.7 billion in the same period last year. The company recorded an operating loss of $82 million in Access, its largest business segment, compared with operating income of $15 million in the year-ago period.

"Given the difficulties in this market environment, our first-quarter performance reflects solid global execution," said Michael Capellas, chairman/CEO.

First-quarter gross margin, as a percentage of revenue, hit 22.7 percent, down slightly from a year ago, said Compaq. Operating expense of $1.8 billion was essentially unchanged from a year ago.

Looking for improved results in the second half, Capellas said the company is aggressively focusing on five key improvement initiatives. These include reductions in structural costs, permanent inventory reductions, aggressive pricing, increased investments in innovation and broadening of global services.