SCIENCE

HOUSTON, TEXAS -- Compaq Computer Corporation (NYSE: CPQ), a leading provider of enterprise technology and solutions, today reported net income from operations of $67 million, or $0.04 per diluted common share, for the second quarter ended June 30, 2001. Second quarter 2001 revenues totaled $8.5 billion. "I am pleased with the company's solid execution in this challenging environment," said Michael Capellas, chairman and chief executive officer. "We delivered on our commitments to improve the company's business model and built momentum behind our services and solutions-led strategy. A good example is Compaq Global Services which grew 7 percent year over year, or 13 percent in constant currency." "We successfully balanced the need for stringent cost control -- operating expenses are at their lowest level in three years -- with continued investments in product innovation and creative go-to-market approaches, such as the recently announced Computing On Demand program," Capellas continued. "In addition, we met consensus EPS even as inventory levels were dramatically reduced across the entire supply chain. During the first half, inventory levels were reduced by nearly $1 billion, including more than $500 million of channel inventory -- while we also improved on-time delivery." Second quarter gross margin, as a percentage of revenue, was 21.5 percent, down one point sequentially and two points on a year-over-year basis. This was due to an aggressive pricing environment and decreased volume, offset by savings from improved inventory management and revenue mix. Second quarter 2001 operating expenses were $1.7 billion, a decrease of $102 million from the first quarter of 2001 and $120 million from the same period last year. The company's operational results exclude a restructuring charge of $493 million. Including this charge, the company reported a net loss of $279 million, or $(0.17) per diluted common share. In the same quarter last year, Compaq reported revenue of $10.1 billion and net income of $388 million, or $0.22 per diluted common share. Adjusted for a net after-tax gain of $25 million related to Compaq's investment portfolio, earnings per diluted common share were $0.21.