Compaq lowers fourth-quarter earnings estimate – Compaq Computer Corp. announced yesterday that its revenue in the fourth quarter will be 8% to 10% below market expectations and earnings will be 8 cents per share below analyst consensus predictions.

Revenue for the fourth quarter ending Dec. 31, is expected to be between $11.2 billion and $11.4 billion, about 7% above the same quarter last year but less than market expectations of $12.31 billion.

Earnings from operations, excluding one-time charges, will be between 28 cents and 30 cents per diluted common share, a 50% gain on the same quarter last year but about 8 cents below the consensus expectation of 36 cents as reported by analysts polled by First Call/Thomson Financial. Compaq is due to announce its fourth-quarter results Jan. 23.

Compaq executives blamed the company's earnings warning on a general softness in consumer confidence in the North American market, a weak euro and the dot-com meltdown on financial markets.

"We're pulling back on expectations," Michael Capellas, Compaq chairman and CEO, said during an analyst briefing yesterday to discuss the profit warning. "But you should look at the adjustment against really aggressive baselines."

Compaq executives said they have a positive outlook for fiscal 2001 but noted that they expect the second half of next year to be stronger than the first -- a concession to continuing market weakness that won't let up until after the middle of the year. Compaq reduced its earnings outlook for the coming year to 10% revenue growth and 25% growth in earnings per share over revised estimates for fiscal 2000.

Some of Compaq's strategic investments, such as those in Internet investment company CMGI Inc. and its related assets, have also suffered in the market downturn, the company said. Compaq plans to make downward adjustments in the valuations of some holdings and anticipates taking a nonoperating, noncash charge in the fourth quarter. "The market mentality can be a very powerful thing," said Jesse Greene, Compaq's chief financial officer.

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