Compaq lays off another 1,500 as Europe slows down

Compaq, the personal computer group, has piled on the agony for technology investors with the news that a sharp slowdown in Europe would lead to an additional 1,500 jobs cuts.

This took the lay-offs announced so far this year to 8,500. Compaq said it was no longer relying on attrition to account for 2,500 of the overall job cuts. Now the entire workforce reduction will come from sackings. So far 3,500 positions have gone this year. A further 4,000 will be sacked, resulting in a charge of about $490m (£347m). The 8,500 lay-offs are expected to save the company some $900m a year.

Compaq's statement, released late Tuesday night, said that revenues for the second quarter would be about $8.4bn, down 9 per cent from the first quarter, primarily due to weaker sales in Europe. The warning hit hi-tech shares yesterday in London and elsewhere in Europe.

The company now expects second-quarter earnings of 4 cents per share. That was down from the 5 cents a share that Compaq had estimated in April but analysts had subsequently already reduced forecasts to 4 cents a share. Earlier this year, Wall Street had hoped for 17 cents a share for the quarter.

Michael Capellas, Compaq's chairman and chief executive officer, said: "It is now clear that the economic slowdown is spreading overseas, and we will move more swiftly and go even deeper in our structural cost reduction programmes."

Earlier this year, Compaq lost its position as the number one PC-maker to Dell, as Dell slashed computer prices and dragged the rest of the PC industry into a price war.

Jeff Clarke, Compaq's chief financial officer said: "We still see a very tough and price competitive market. Probably the big change is it has spread into Europe and the rest of the world."