Compaq adds to price war fears after Apple head goes

Still digesting the sudden ousting late on Wednesday of Apple's chief executive, Gil Amelio, the US computer sector was yesterday pondering additional turmoil with signs gathering of a new and possibly bloody price- cutting war.

Most importantly, Compaq Computer, the largest manufacturer of PCs in America, announced price cuts of up to 22 per cent on many of its personal computers for corporate customers. The move came one day after Hewlett- Packard slashed prices by up to 24 per cent.

Compaq, which is struggling to stave off strong new competition from Dell, also said yesterday that its second-quarter earnings had slipped by 20 per cent. The poor figures were largely attributed to a one-off charge related to the company's recent acquisition of Microcom.

Even though the Compaq figures were roughly in line with Wall Street expectations, worries about the company led to a sell-off of its stocks. Shares in Compaq were off by $2.50 to $118.50 in early trading in New York.

Shares of Apple computer were also under pressure, dropping to a dismal $13, as investors pondered whether the dismissal of Mr Amelio by the board implied that the troubled PC pioneer may be doomed in the longer run. Its latest figures will be published next week and are expected to be grim.

Apple's co-founder, Steve Wozniak, was among a chorus of voices yesterday urging the company to replace Mr Amelio, who took the helm in February 1996, with a figure more focused on customer relations. "I just hope we get somebody that's really good at judging customers and where they are now and in the future," Mr Wozniak remarked.

Mr Amelio is the third Apple chief executive to be forced out in just four years. Similar fates were visited upon John Sculley in 1993 and Michael Spindler in 1996. The company has seen its market share shrink rapidly while losses in the last 18 months have grown to $1.5bn (pounds 888m).

Compaq, meanwhile, is increasingly threatened by Dell and also Gateway 2000 because both these rivals rely on direct sales to customers, thus cutting out distributors and retailers.