Poor Compaq result bodes ill for IBM

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The Independent Online
A DISAPPOINTING earnings report at arch-rival Compaq has cast a long shadow over IBM's third- quarter results, which are to be announced today.

While personal computer profits were up sharply at Compaq, the industry leader, the computer maker's gross margins fell to 23 per cent in the third quarter from 26.5 per cent earlier in the year. Compaq said it had anticipated the decline, but the result would reflect its performance for the rest of this year and next.

The Texas-based computer maker almost doubled its profit over the same period last year, earning dollars 201m ( pounds 128m), or about 75 cents a share, compared with dollars 107m. While the profits corresponded to Wall Street's expectations, the lower margins did not and Compaq's shares were trading off dollars 3 8 at dollars 357 8 .

The disappointment with Compaq spilled over into other computer shares, driving down IBM, for example, by dollars 1 8 to dollars 741 2 . The computer giant, which has slipped to fourth place among PC makers, was expected to report a third-quarter profit of 94 cents a share today, turning around a 12- cents-a-share loss for the 1993 summer quarter.

But analysts said lower-than- expected profit margins would strip several cents off that figure.

There was one surprise among computer shares yesterday as Digital Equipment reported a considerably smaller loss than many analysts has expected.

It lost dollars 130m, or about 98 cents a share, in its fiscal first quarter after a dollars 64m accounting gain. Last year it lost dollars 154m, or dollars 1.14 a share.

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