Compaq Lost $700 Million In Sales After Attacks
Compaq Computer said it lost about $700 million in business in September because of the terrorist attacks against the U.S., causing the already beleaguered computer maker to warn that it will post third-quarter revenue as much as $1 billion below previous expectations.
On Monday, Oct. 1, Houston-based Compaq said it expects revenue for the third quarter, which ended Sept. 30, to be $7.4 billion to $7.5 billion. Previously, the company expected revenue of $8 billion to $8.4 billion for the quarter.
Compaq executives said a confluence of three significant factors came into play to put a damper on sales. The Sept. 11 terrorist attacks created logistical and supply chain problems, caused market uncertainty and reduced demand, said Jeff Clarke, Compaqs chief financial officer. Next, a typhoon in the Pacific the week of Sept. 17 affected shipments from suppliers in Taiwan.
Finally, the announcement Sept. 4 that Hewlett-Packard will acquire Compaq resulted in a "temporary pause" by employees and customers as they assessed the merger implications.
"The only way to describe this is a perfect storm," Michael Capellas, Compaq chairman and CEO, said in a conference call with analysts.
Compaq normally closes about 50 percent of its sales in the last month of a quarter. In September, Clarke said, it lost about a weeks worth of business, amounting to roughly $700 million on lost sales.
Clarke said Compaq remains "confident in the strategic actions we are taking, and our proposed merger with HP, both of which address the fundamental shifts in the IT marketplaces."
The company also announced on Monday that it will write down the value of some of its investment holdings for the third quarter. Compaq plans to take a charge of about $500 million for the quarter, primarily related to its investment in CMGI, an Internet incubator company.
Compaq said it will announce complete third-quarter results in mid-October.
Capellas noted that Compaq is attempting to boost morale by meeting with employees in groups of 300 to 400 to talk through issues related to the Sept. 11 attacks, as well as the merger with HP.
"Ive personally done dozens of them," Capellas said. "Theres been an opportunity to emotionally connect with people. Its a very emotional time."