Low-cost PC sales battle halves profits at Compaq
Thursday 22 April 1999
The Houston-based PC maker, whose two top directors resigned on Sunday, reported net income of $281m (pounds 175m), or 16 cents a share. Before a profits warning 10 days ago, analysts had expected 31 cents.
Benjamin Rosen, the chairman who is stepping in as chief executive, called the results "disappointing and unacceptable". He blamed the group's performance on the price war and slackening demand.
Profit margins were cut as the group was forced to slash its prices and go for volume. Sales jumped by 66 per cent to $9.4bn, but costs rose by 52 per cent and expenses almost doubled.
Like its rivals Hewlett Packard, IBM and Dell, Compaq has been devastated by the sudden popularity in the US of PCs costing less than $1,000 (pounds 600).
"There are few other areas of technology where there's such an enormous price war going on. All the big brand names have totally underestimated the appeal of the sub-$1,000 PC. I think they are going to seriously suffer," said Ali Mortazavi, IT analyst at Credit Lyonnais.
Joe McNally, Compaq's UK managing director, said the price war had forced the group to slash its prices by 15 to 20 per cent, cutting the price of a standard PC from pounds 1,000 to pounds 850.
Mr McNally admitted that the group had failed to execute its corporate strategy fast enough. The group's stated aim is to become a "one-stop shop" for PCs, software and service.
Compaq reported its results after Microsoft, the software behemoth valued at $450bn, posted a 43 per cent jump in earnings, powered by sales of its Windows NT and Windows 98 operating systems.
Shares in Microsoft slipped slightly in early trading when the corporation warned of a slow-down in the software market ahead of the year 2000. Compaq shares were steady.
- 1 Forget 'The Dress': Here are five of the biggest news stories you might have missed
- 2 The black and blue dress: Makers considering a white and gold version
- 3 PornHub turns masturbation into energy in bid to save the planet
- 4 The remarkable archaeological underwater discovery that could open up a new chapter in the study of European and British prehistory
- 5 Saudi Muslim cleric claims the Earth is 'stationary' and the sun rotates around it
Boris Nemtsov shot dead: Outspoken Putin critic who had expressed fears for his life is killed near the Kremlin
PornHub turns masturbation into energy in bid to save the planet
Ukraine crisis: Top Chinese diplomat backs Putin and says West should 'abandon zero-sum mentality'
White and gold or blue and black – what colour is the dress? An eyewitness gives a definitive answer
Saudi Muslim cleric claims the Earth is 'stationary' and the sun rotates around it
New theory could prove how life began and disprove God
Half of Ukip voters say they are prejudiced against people of other races
This is what it's like to be dead, according to a guy who died for a bit
'Cash for access' scandal: Sir Malcolm Rifkind says 'unrealistic' for MPs to live on £67,000 salary
'Jihadi John': CAGE representative storms off Sky News accusing Kay Burley of Islamophobia
Ukip would cut billions from Scottish budget to fund English tax cuts
iJobs Money & Business
£40000 - £50000 per annum + pro rata: SThree: SThree Group have been well esta...
£30000 - £37000 per annum: Recruitment Genius: Established in 1999, a highly r...
£250-£300 Day Rate: Jemma Gent: Are you a qualified accountant with strong exp...
£230 - £260 Day Rate: Jemma Gent: Do you want to stamp your footprint in histo...