SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): January 27, 1999
COMPAQ COMPUTER CORPORATION
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 1-9026 76-0011617
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(State or Other Jurisdiction (Commission File Number) (IRS Employer
of Incorporation) Identification No.)
20555 SH 249
HOUSTON, TEXAS 77070
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(Address of Principal Executive Offices) (Zip Code)
(281) 370-0670
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(Registrant's telephone number, including area code)
(Former Name or Former Address, if Changed Since Last Report)
<PAGE>
ITEM 5. OTHER EVENTS.
In a release dated January 27, 1999, Compaq Computer Corporation (NYSE:
CPQ) announced its financial results for the quarter ended December 31, 1998,
including an unaudited consolidated balance sheet as of December 31, 1998, and
an unaudited consolidated statement of income for the quarter ended December
31, 1998. The news release is attached as Exhibit 99.
ITEM 7. EXHIBITS.
Exhibit 99 News Release dated January 27, 1999 is attached.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: January 27, 1999
COMPAQ COMPUTER CORPORATION
By: /s/ Earl L. Mason
------------------------
Earl L. Mason
Senior Vice President and
Chief Financial Officer
EXHIBIT 99
COMPAQ COMPUTER CORPORATION P.O. BOX 692000 NEWS RELEASE
PUBLIC RELATIONS HOUSTON, TEXAS 77269-2000
TEL 281-514-0484
FAX 281-514-4583
HTTP://WWW.COMPAQ.COM
[LOGO OF COMPAQ COMPUTER CORPORATION APPEARS HERE]
FOR IMMEDIATE RELEASE
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COMPAQ REPORTS RECORD FOURTH QUARTER
REVENUE AND EARNINGS
GROWTH AT GREATER THAN THREE TIMES THE MARKET
DIGITAL ACQUISITION ACCRETIVE
HOUSTON, January 27, 1999 - Compaq Computer Corporation (NYSE: CPQ) today
announced worldwide sales of $10.9 billion for the fourth quarter ended
December 31, 1998, an increase of 48 percent compared to sales reported for
the fourth quarter of 1997. The Company reported a profit after tax for the
quarter of $758 million, or $.43 per share.
"The fourth quarter revenue and earnings results represent new records for
Compaq and a key milestone in our successful integration of Digital Equipment
Corporation. Sales out of the distribution channels grew 43% over the fourth
quarter of 1997, a growth rate estimated at over three times the market," said
Eckhard Pfeiffer, Compaq's President and Chief Executive Officer. "1998 was a
year of significant transformation for Compaq, and with our strong fourth
quarter results, we enter the new year with a great deal of momentum and
optimism."
"Achieving our goal of earnings accretion for the combined companies of
Digital and Compaq in the fourth quarter is a significant achievement and
reflects tremendous execution of our integration plans to date," said Earl
Mason, Compaq's Senior Vice President and Chief Financial Officer. "The
synergies from the Digital acquisition are becoming more and more evident in
our financial performance. Sequential revenue growth in products was
exceptionally strong, and we continue to gain momentum in our service
businesses. Gross margins improved by a point and a half from the third
quarter to 26.4 percent. Operating expenses declined sequentially both in
absolute dollars and as a percent of revenue, ending the quarter at 18% versus
23% for the third quarter. On the balance sheet, cash remained strong at $4.1
billion while inventory turns increased to 15.9 versus the 12.4 reported in the
third quarter, and days sales outstanding improved by 2 days to 56. Return on
invested capital grew significantly, from 7.5% reported in the third quarter to
38.6 %. Our fourth quarter results and the successful integration of Digital
over the last six months represent major steps along the way to truly becoming
a 'New Breed' computing company."
OUTLOOK
"We continue to see strong demand for Compaq products and services and
the opportunity for continued market share gains and revenue growth," said
Pfeiffer. "With the majority of the Digital integration now successfully
behind us, we enter the new year ready to completely unfold and deploy the
strategy we have been working towards for the past year and a half. From
continued leadership in the personal computer market to complete enterprise
solutions and services to an aggressive Internet focus led by our new
AltaVista Company, we are completely engaged as a full line Global IT provider
and strategic partner to our customers."
"As we enter the first quarter of 1999, we will maintain our focus on the
basics looking to improve both income statement and balance sheet performance
in support of continued growth in return on invested capital," said Mason.
COMPANY BACKGROUND
Compaq Computer Corporation, a Fortune Global 100 company, is the second
largest computer company in the world and the largest global supplier of
computer systems. Compaq develops and markets hardware, software, solutions, and
services, including industry-leading enterprise computing solutions,
fault-tolerant business-critical solutions, networking and communication
products, commercial desktop and portable products and consumer PCs. The
Company is an industry leader in environmentally friendly programs and
business practices.
Compaq products are sold and supported in more than 100 countries through
a network of authorized Compaq marketing partners. Customer support and
information about Compaq and its products are available at
http://www.compaq.com or by calling 1-800-OK-COMPAQ. Product information and
reseller locations are available by calling 1-800-345-1518.
(Attached is Consolidated Balance Sheet and Statement of Income.)
# # #
Compaq, Registered U.S. Patent and Trademark Office. Product names mentioned
herein may be trademarks and/or registered trademarks of their respective
companies.
For further information, contact:
Compaq Computer Corporation Jim Finlaw 281-514-6137
[email protected]
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Compaq Computer Corporation Alan Hodel 281-518-8932
[email protected]
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Compaq Computer Corporation Investor Relations 281-514-9549
Compaq Computer Corporation Investor Relations Fax 800-433-2391
More financial information on Compaq is available at
http://www.compaq.com/corporate/ir.
<PAGE>
<TABLE>
<CAPTION>
COMPAQ COMPUTER CORPORATION
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
ASSETS
DECEMBER 31, DECEMBER 31,
1998 1997
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(IN MILLIONS)
<S> <C> <C>
Current assets:
Cash and cash equivalents. . . . . . . . . . . . . . . . . . $ 4,091 $ 6,418
Short-term investments . . . . . . . . . . . . . . . . . . . -- 344
Accounts receivable, net . . . . . . . . . . . . . . . . . . 6,998 2,891
Inventories. . . . . . . . . . . . . . . . . . . . . . . . . 2,005 1,570
Deferred income taxes. . . . . . . . . . . . . . . . . . . . 1,602 595
Other current assets . . . . . . . . . . . . . . . . . . . . 471 199
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Total current assets . . . . . . . . . . . . . . . . . . . 15,167 12,017
Property, plant and equipment, less accumulated depreciation. 2,902 1,985
Deferred income taxes . . . . . . . . . . . . . . . . . . . . 1,341 --
Intangible and other assets . . . . . . . . . . . . . . . . . 3,641 629
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$ 23,051 $ 14,631
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . $ 4,237 $ 2,837
Income taxes payable . . . . . . . . . . . . . . . . . . . . 282 195
Accrued restructuring costs. . . . . . . . . . . . . . . . . 1,110 --
Other current liabilities. . . . . . . . . . . . . . . . . . 5,104 2,170
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Total current liabilities. . . . . . . . . . . . . . . . . 10,733 5,202
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Postretirement and other postemployment benefits. . . . . . . 545 --
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Minority interest . . . . . . . . . . . . . . . . . . . . . . 422 --
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Stockholders' equity:
Preferred stock, $.01 par value
(authorized: 10 million shares; issued: none) . . . . . . -- --
Common stock and capital in excess of $.01 par value
(authorized: 3 billion shares; issued:
1,698 million shares at December 31, 1998 and
1,519 million shares at December 31, 1997) . . . . 7,270 2,096
Retained earnings. . . . . . . . . . . . . . . . . . . . . . 4,465 7,333
Treasury stock (at cost). . . . . . . . . . . . . . . . . . (384) --
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Total stockholders' equity. . . . . . . . . . . . . . . . 11,351 9,429
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$ 23,051 $ 14,631
============== =============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
COMPAQ COMPUTER CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
YEAR ENDED QUARTER ENDED
DECEMBER 31, DECEMBER 31,
------------------------ ------------------------
1998 1997 1998 1997
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(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Revenue:
Products. . . . . . . . . . . . . . . . . . . . $ 27,372 $ 24,122 $ 9,145 $ 7,196
Services. . . . . . . . . . . . . . . . . . . . 3,797 462 1,714 127
---------- ---------- ---------- ----------
Total revenue. . . . . . . . . . . . . 31,169 24,584 10,859 7,323
---------- ---------- ---------- ----------
Cost of sales:
Products. . . . . . . . . . . . . . . . . . . . 21,383 17,500 6,807 5,215
Services. . . . . . . . . . . . . . . . . . . . 2,597 333 1,181 88
---------- ---------- ---------- ----------
Total cost of sales . . . . . . . . . . 23,980 17,833 7,988 5,303
---------- ---------- ---------- ----------
Selling, general, and administrative expense . . 4,978 2,947 1,561 850
Research and development costs . . . . . . . . . 1,353 817 429 217
Purchased in-process technology. . . . . . . . . 3,196 208 (38) --
Restructuring and asset impairment charges . . . 393 -- -- --
Merger-related costs . . . . . . . . . . . . . . -- 44 -- --
Other income and expense, net. . . . . . . . . . (69) (23) (13) --
---------- ---------- ---------- ----------
9,851 3,993 1,939 1,067
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Income (loss) before provision for income taxes. (2,662) 2,758 932 953
Provision for income taxes . . . . . . . . . . . 81 903 174 286
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Net income (loss). . . . . . . . . . . . . . . . $ (2,743) $ 1,855 $ 758 $ 667
========== ========== ========== ==========
Earnings (loss) per common share:
Basic . . . . . . . . . . . . . . . . . . . . $ (1.71) $ 1.23 $ 0.45 $ 0.44
========== ========== ========== ==========
Diluted . . . . . . . . . . . . . . . . . . . $ (1.71) $ 1.19 $ 0.43 $ 0.42
========== ========== ========== ==========
Shares used in computing earnings (loss) per
common share:
Basic . . . . . . . . . . . . . . . . . . . . 1,608 1,505 1,682 1,517
========== ========== ========== ==========
Diluted . . . . . . . . . . . . . . . . . . . 1,608 1,564 1,742 1,585
========== ========== ========== ==========
</TABLE>
