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): April 21, 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)
ITEM 5. OTHER EVENTS.
In a release dated April 21, 1999, Compaq Computer Corporation (NYSE:CPQ)
announced its financial results for the period ended March 31, 1999, including
an unaudited consolidated balance sheet as of March 31, 1999 and an unaudited
consolidated statement of income for the period ended March 31, 1999. The news
release is attached as Exhibit 99.
ITEM 7. EXHIBITS.
Exhibit 99 News Release dated April 21, 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: April 21, 1999
COMPAQ COMPUTER CORPORATION
By: /s/ Linda S. Auwers
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Linda S. Auwers
Vice President,
Associate General Counsel
and Assistant Secretary
EXHIBIT 99
COMPAQ COMPUTER CORPORATION P.O. BOX 692000 NEWS RELEASE
PUBLIC RELATIONS DEPARTMENT 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
- ---------------------
COMPAQ REPORTS FIRST QUARTER EARNINGS
HOUSTON, April 21, 1999 - Compaq Computer Corporation (NYSE: CPQ) today
announced worldwide sales of $9.4 billion for the first quarter ended March
31, 1999, an increase of almost 66 percent over the first quarter of 1998.
Net income for the quarter was $281 million, or $0.16 per share.
"Compaq has a tremendous depth and breadth of information technology and a
fundamentally sound strategy," said Benjamin M. Rosen, Compaq Chairman and
acting Chief Executive Officer. "Despite our overall corporate strength, our
first-quarter results are disappointing and unacceptable. We will aggressively
pursue the actions necessary to realize our enormous potential, achieve our
traditional levels of profitable growth, and build long-term shareholder
value."
Product sales for the quarter were $7.8 billion, an increase of $2.2
bllion or approximately 40 percent above the reported first quarter of 1998.
The Company continues to maintain worldwide channel inventories just under four
weeks.
The Company's sales performance was offset by a number of factors. The
first quarter performance for the commercial PC business was below internal
expectations. Less than anticipated market demand, increased competitive
pricing and growth below plan all contributed to a revenue shortfall in this
business.
The Company said it did not achieve the revenue performance needed in
higher-end enterprise systems to meet its expected levels of product revenue
and gross margin for the quarter.
Service sales for the quarter were $1.6 billion. The total services
business performance met Company expectations for the quarter and the Company
continues to expect accelerated and profitable growth going forward.
Total gross margin for the quarter was 24.7 percent versus 18 percent in
the first quarter of 1998, and 26.4 percent in the fourth quarter. The
sequential decrease in gross margin was the result of lower than expected margin
performance in both the commercial PC and enterprise businesses, driven by the
product revenue shortfall, more intense price competition than expected, and a
less favorable mix of higher margin products and options versus both
expectations and the prior quarter.
Among positive developments during the quarter:
- - The Company's consumer business continued to be robust, with unit growth
at more than two times the market.
- - In commercial PCs, the Company maintained its number-one worldwide share
position, and continued to exceed its plans with its small and medium business
direct sales Prosignia products.
- - The Company launched a new class of servers for small and medium
businesses, with its NeoServer. Initial acceptance and sales exceeded the
Company's expectations.
- - The Company's storage business continued to gain momentum, and grew
sequentially from the fourth quarter to the first quarter.
- - In services, the Company launched its Next Generation Networks service
offering. It also continued to see synergies between its service and product
businesses.
- - The Company's Internet business thrived during the quarter, highlighted
by reaching a 34 percent market share in Web servers.
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.
This release contains forward-looking statements based on current
expectations that involve a number of risks and uncertainties. The potential
risks and uncertainties that could cause actual results to differ materially
include the implementation of operations and systems improvements, particularly
those associated with the Optimized Distribution Model; the operational
integration associated with the acquisition of Digital Equipment Corporation;
inventory risks due to shifts in market demand; timely development, production,
continued competitive factors and pricing pressures; market responses to
pricing actions and promotional programs; acceptance of the products; and
changes in product mix. Further information on the factors that could affect
the Company's financial results are included in its SEC filings, including the
Form 10-K for the year ended December 31, 1998.
(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]
Compaq Computer Corporation Investor Relations 281-514-9549
[email protected]
More financial information on Compaq is available at
http://www.compaq.com/corporate/ir.
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<CAPTION>
COMPAQ COMPUTER CORPORATION
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
MARCH 31, DECEMBER 31,
(In millions, except par value) 1999 1998
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<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,609 $ 4,091
Accounts receivable, net. . . . . . . . . . . . . . . . . . . . . . . . . . 6,989 6,998
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,149 2,005
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,556 1,602
Other current assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . 483 471
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Total current assets. . . . . . . . . . . . . . . . . . . . . . . . . . . 14,786 15,167
Property, plant and equipment, less accumulated depreciation . . . . . . . . 2,948 2,902
Deferred income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,640 1,341
Intangible and other assets. . . . . . . . . . . . . . . . . . . . . . . . . 3,626 3,641
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$ 23,000 $ 23,051
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,106 $ 4,237
Income taxes payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . 469 282
Accrued restructuring costs . . . . . . . . . . . . . . . . . . . . . . . . 895 1,110
Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 4,908 5,104
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Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . 10,378 10,733
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Postretirement and other postemployment benefits . . . . . . . . . . . . . . 542 545
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Minority interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 422 422
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Stockholders' equity:
Preferred stock, $.01 par value
(authorized: 10 million shares; issued: none) . . . . . . . . . . . . . . - -
Common stock and capital in excess of $.01 par value
(authorized: 3 billion shares; issued and outstanding: 1,706 million and
1,691 million shares at March 31, 1999 and
1,698 and 1,687 million shares, respectively, at December 31, 1998) . . . 7,469 7,270
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,699 4,465
Treasury stock (at cost). . . . . . . . . . . . . . . . . . . . . . . . . . (510) (384)
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Total stockholders' equity. . . . . . . . . . . . . . . . . . . . . . . . 11,658 11,351
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$ 23,000 $ 23,051
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<PAGE>
<TABLE>
<CAPTION>
COMPAQ COMPUTER CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
QUARTER ENDED
MARCH 31,
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(In millions, except per share amounts) 1999 1998
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<S> <C> <C>
Revenue:
Products. . . . . . . . . . . . . . . . 7,819 5,574
Services. . . . . . . . . . . . . . . . 1,600 113
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Total revenue . . . . . . . . . . $ 9,419 $ 5,687
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Cost of sales:
Products. . . . . . . . . . . . . . . . 6,007 4,601
Services. . . . . . . . . . . . . . . . 1,085 63
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Total cost of sales . . . . . . . $ 7,092 $ 4,664
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Selling, general and administrative expense. 1,477 785
Research and development costs . . . . . . . 404 245
Other income and expense, net. . . . . . . . 34 (30)
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1,915 1,000
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Income before provision for income taxes . . 412 23
Provision for income taxes. . . . . . . . . 131 7
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Net income . . . . . . . . . . . . . . . . . $ 281 $ 16
======== ========
Earnings per common share:
Basic . . . . . . . . . . . . . . . . . . . $ 0.17 $ 0.01
======== ========
Diluted . . . . . . . . . . . . . . . . . . $ 0.16 $ 0.01
======== ========
Shares used in computing earnings per
common share:
Basic . . . . . . . . . . . . . . . . . . . 1,689 1,523
======== ========
Diluted . . . . . . . . . . . . . . . . . . 1,750 1,584
======== ========
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