Compaq cuts record quarter

Despite taking a $44 million charge to acquire Tandem Computers Inc., Compaq Computer Corp. beat analysts estimates for the third quarter, posting net income of $517 million.
Written by Martin Veitch, Contributor

Worldwide sales hit $6.5 billion, a 31 percent jump from a year ago, and unit sales rose 56 percent during the same period. Discounting the Tandem charge, net income was up 54 percent to $562 million, or 71 cents per share, above the First Call consensus of 68 cents per share.

"These results reflect record performance for Compaq, our customers and shareholders," CEO Eckhard Pfeiffer said in a release. "Our new distribution focus has enabled Compaq's volume to grow more than three times the industry's rate while increasing profitability."

Pfeiffer added that the company is expecting a strong fourth quarter, and has a "healthy outlook" for 1998.

Compaq, based in Houston, recently revamped its distribution method to include a configure-to-order model that lets the reseller channel get more involved in putting together systems to customers' specifications. The model was launched to help Compaq compete with direct sellers like Dell Computer Corp. and Gateway 2000 Inc. Compaq officials had predicted that the model would enable them to trim costs.

Inventory turns increased to 10.1, and days sales outstanding dropped to 40 days, Chief Financial Officer Earl Mason said in the release. Those figures helped boost the company's cash balance to $6 billion, up 83 percent from a year ago.

Also today, Compaq announced that its board of directors had approved a quarterly dividend of three cents per share, and a two-for-one stock split.

The dividend is payable on January 20, 1998, to shareholders of record on December 31.

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