Compaq Reports First-Quarter Profit

The Houston-based company said Thursday it earned $44 million, or 3 cents a share, compared with a loss of $131 million, or 8 cents per share, in the first quarter of 2001. The year-ago quarter was adjusted to reflect a $222 million charge required by a change in accounting standards.

Excluding charges relating to its pending merger with Hewlett-Packard, the company earned 4 cents per share. The consensus of analysts surveyed by Thomson Financial/First Call was that Compaq would make a penny per share.

"Our first quarter results continue to demonstrate Compaq's strong focus on customer success, on winning in key markets and on execution during what continues to be a challenging economic environment,"said Michael Capellas, Compaq's chairman and CEO.

Compaq said earlier this month that it expected to meet or beat analysts' expectations for the first three months of the year.

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Revenue was $7.7 billion, down 16 percent from the $9.2 billion in the January-March period last year.

Compaq and Palo Alto, Calif.-based HP could close their proposed $19 billion merger soon. The deal, enthusiastically supported by Compaq investors, is thought to have narrowly won the support of HP investors at its hotly contested shareholders' meeting last month.

An independent firm said Wednesday that a preliminary tally supports HP's victory claim. However, dissident HP director Walter Hewlett has sued to stop the deal, saying company officials improperly coaxed favorable votes.

The result could take at least another week to become official because Hewlett will demand a recount and then each side can challenge certain ballots.

HP also has acknowledged that federal prosecutors and the Securities and Exchange Commission are looking into executives' contacts with major investors just before the merger vote.

HP announced its plan to buy Compaq in September and the deal has received the necessary regulatory approvals, leaving certification of the HP shareholder vote and the settlement of legal issues as the final hurdles.

The companies say merging will create a technology powerhouse rivaling IBM Corp., with complete packages of hardware, software and services for corporate clients.

Shares of Compaq closed at $10.82, up 14 cents, on the New York Stock Exchange, before the earnings were released. The shares fell 7 cents in after-hours trading.

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