Compaq's slow ship warns of industry dip

Compaq has issued a profit warning for the first quarter, blaming competitive conditions in North America as it adds its name to the list of major corporations forced to revise their forecasts.

The PC giant issued the warning after the stock market closed on 6 March, a move close on the heels of Intel and Motorola which gave their own warnings on 5 and 6 March respectively. Compaq's warning comes despite claims that it has made efficiency gains from its recently implemented build-to-order manufacturing model.

Previously, computer-related shares dipped on 3 March after Compaq stock was downgraded by broker Merrill Lynch to a near-term accumulate stock from a buy stock (see page 8).

In a statement issued by the company, Compaq CEO Eckhard Pfeiffer confirmed the downturn. 'We looked closely at our market and business plan once it became clear that sales out of our North American commercial channels were not meeting expectations,' he said. He confirmed that Compaq's outlook for the second quarter would remain cautious.

Analysts are speculating that for the world's largest PC vendor to give a profit warning, the industry as a whole must be bracing itself for decline.

IBM has previously issued a warning in respect of first quarter revenue as a result of the South East Asian crisis, after its hardware sales fell in the fourth quarter to 31 December 1997.

Compaq's surprise revelation comes at a time when it is openly diversifying into other, higher margin-generating areas of the market.

In a timely agreement within the UK, the vendor has just signed up networking distributor Logitek to sell Compaq communication products.

OTHER CASUALTIES

Companies which have issued profit warnings in the last month:

Motorola

Intel - second one since January

IBM

Microgen - second since July 1997

Azlan

Cabletron

Toys 'R' Us

Thorn

JBA Holdings

Alphameric

VLSI Technology.