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Compaq Lowers Q3 Revenue Guidance

Houston – Citing a decline in business following the Sept. 11 terrorist attacks, Compaq Computer said it expects third-quarter revenue and earnings will be below prior expectations.

Revenue for the third quarter is expected to be in the range of $7.4 billion to $7.5 billion, down 12 percent from the previous quarter. Compaq also expects to post a loss in the third quarter.

In July, Compaq said it expected revenue in the range of $8 billion to $8.4 billion for the third quarter, while analysts had predicted the company would post earnings, not a loss. In the third quarter of 2000, Compaq reported revenue of $11.2 billion.

Due to changing market conditions affecting certain of Compaq’s strategic investments, the company said is making downward adjustments in the valuation of some of its holdings. It now plans to take a non-operating, non-cash charge of about $500 million in the third quarter, primarily related to the company’s investment in Internet holding company CMGI.

Despite increased speed of economic deterioration – namely slowing market demand and disruption in transportation and logistics, exacerbated by the events of Sept. 11, and its disproportionate affect on Compaq’s financial health in the three months – the company said it has made progress in executing cost control and go-to-market plans.

At the same time Compaq lowered quarterly estimates, Hewlett-Packard warned it may make more job cuts than it had previously announced as part of its merger with Compaq. The two companies have already said 10 percent of the combined workforce, or about 15,000 employees, would be let go in the two years following the merger.