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Compaq Lowers Q2 Forecast, Increases Layoffs

Houston – Faced with a steeper-than-expected decline in its European business, Compaq Computer said its foresees lower sales and earnings in its fiscal second quarter than it previously projected. The company said the decline in its worldwide sales in the second quarter, hitting about $8.4 billion, would be about 9 percent below the $9.2 billion recorded in the first quarter.

As a result of the economic slowdown, Compaq said it is going to further reduce the size of its workforce by 1,500 employees, to a total of 8,500, or 13 percent of its workforce. Last April, the company said it would eliminate 7,000 jobs, or 10 percent of its workforce. The new layoffs will affect both workers in the United States and internationally.

‘It is now clear that the economic slowdown is spreading overseas,’ said Michael D. Capellas, CEO. ‘We will therefore move more swiftly and go even deeper in our structural cost reduction programs.’

Compaq said it would take a restructuring charge for the second quarter ended June 30 of $490 million to cover the severance packages and to close semi-conductor plants. The company plans to announce complete second-quarter results on July 25.