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Compaq, Apple Results Are Upbeat

Technology: Shares of the computer makers rise after hours on quarterly profit news.

January 17, 2002|JOSEPH MENN | TIMES STAFF WRITER

Compaq Computer Corp. and Apple Computer Inc. reported quarterly profits Wednesday that met or exceeded Wall Street expectations, sending shares of both companies higher in after-hours trading.

Houston-based Compaq, the second-biggest personal computer maker behind Dell Computer Corp., said it earned $92 million in the fourth quarter, or 5 cents a share, compared with a year-earlier loss on higher revenue. Analysts were expecting a profit of 1 cent a share.

Sales rose from the third quarter to $8.5 billion, above last week's guidance of at least $8 billion, as buying surged in Europe and Latin America.

Compaq Chief Executive Michael Capellas also raised projections for this year, predicting first-quarter revenue of $7.6 billion and profit of 1 cent per share. Analysts had been expecting the company to break even.

"Our ability to exceed expectations in a tough business environment demonstrates Compaq's strong focus on execution and our solid market momentum," Capellas said.

Compaq is trying to complete a deal to be acquired by Hewlett-Packard Co., and Capellas said the company is committed to helping HP woo shareholders and regulators for approval. But he stressed that Compaq hasn't put any of its objectives on hold while it waits for a decision.

One weak spot in the results was a slide in profit from the company's services operation, touted by HP as one of the prizes in the planned merger. Capellas said Compaq needs to do a better job on focusing on a handful of core services offerings, instead of trying to do everything. Compaq shares fell 30 cents, to $11.10, in regular trading on the New York Stock Exchange, then rose to $11.40 after the earnings announcement.

At Cupertino-based Apple, fiscal first-quarter profit of $38 million, or 11 cents a share, reversed a year-earlier loss of $195 million, or 58 cents. The per-share profit figure met analyst expectations.

Sales of $1.38 billion narrowly missed the company's projections, but Apple predicted that the next quarter will be better than analysts had been anticipating, with profit holding steady from the last three months of 2001.

"The company is guiding expectations up for the first time in five quarters," said Bear, Stearns & Co. analyst Andrew Neff.

Apple Chief Financial Officer Fred Anderson said early demand for the company's new line of thin-panel iMacs was better than expected and may well outstrip supply in the next three months.

He cautioned that profit margins at Apple will fall from past levels because component costs are high, the new iMac is priced aggressively, and the firm must spend to change the production methods used to make the old iMacs.

Anderson said Apple would be happy to trade away profit margins to get annual revenue back to its peak of $8 billion in 2000.

The old margins were "pretty lofty," Anderson said in an investors' conference call. "I don't think that should be your expectation."

The two computer makers' results are good news for the volatile technology sector.

But Anderson said he didn't see a turnaround in the economy yet, and Capellas said he didn't anticipate a real resurgence in sales and profit until the second half of the year.

Apple fell 92 cents to $20.78 in regular trading on Nasdaq, but rose to $21.32 after hours.

In other technology earnings Wednesday:

* Newport Beach communications chip maker Conexant Systems Inc. posted its eighth consecutive quarterly loss, this one widening to $204.5 million, or 80 cents a share in the fiscal first quarter, from a deficit of $199.6 million, or 85 cents, a year earlier. Sales fell 44%, to $229.5 million from $410.4 million.

The company said revenue this quarter will rise "modestly" from the previous period and that it will reduce its work force in the current quarter by 150 to 200 people. Conexant employs 6,900 people. Its shares fell 14 cents to $12.58 on Nasdaq and rose as high as $13.95 after the report.

* Sunnyvale chip maker Advanced Micro Devices Inc. reported a smaller fourth-quarter loss--$15.8 million, or 5 cents a share--than analysts expected as holiday shoppers bought more personal computers. The loss compared with a profit of $177.9 million, or 53 cents, a year ago. Analysts expected AMD to lose 18 cents a share.

Sales fell 19%, to $951.9 million. Advanced Micro raised its sales forecast last month on strong demand for its new Athlon XP processor. The company forecast a "small net loss" this quarter and said sales will be about $900 million in the period ending in March. AMD shares fell $1.24 to $17.91 in regular trading on the NYSE before the announcement.

*

Bloomberg News was used in compiling this report.

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