Compaq Announces Restructuring After Forecasting Q2 Loss

NEW YORK: Compaq Computer Corp. said June 17 that it expects a loss for the second quarter of up to 15 cents per share. Pricing pressures in the PC market, inadequate revenue growth, and a noncompetitive cost structure contributed to the expected shortfall, according to the company. For the second quarter, the company expects both revenues and gross margins to be flat or to be down from the first quarter. Operating expenses will increase from the first quarter as a result of incremental goodwill amortization from Compaq's recent Internet acquisitions and the expenditures that are needed to support its longer-term goals. The company also announced a significant restructuring that will establish three global business groups: Enterprise Solutions and Services, Personal Computer, and Consumer. Each group will have a separate, market-driven, profit-and-loss accountability. The realignment is designed to eliminate $2 billion in ongoing operating costs. Compaq also will form a dedicated organization to manage all of its e-commerce activities and also create a customer advocacy organization, combining Compaq's quality and customer satisfaction organization with its customer advocacy initiatives. In April, after announcing news of less-than-expected profits, Compaq's board ousted CEO Eckhard Pfeiffer. CFO Earl Mason also resigned.