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Compaq Announces Low Earnings, Restructuring

After announcing that it expects to lose $.15 per share for the second quarter, Compaq Computer Corp. announced it would split the company into three divisions including the Enterprise Solutions and Services Group, headed by Enrico Pesatori, recently promoted senior vice president and group general manager. The other two divisions will be called Personal Computer and Consumer.

The new enterprise group is comprised of the existing Enterprise Computing Group and Compaq Services. Other aspects of the realignment include the creation of a global sales and marketing group, the establishment of a dedicated organization to manage all of Compaq's e-commerce activities, continued building of a world-class supply chain with end-to-end alignment from demand management to delivery, and finally the creation of a customer advocacy organization, combining Compaq's quality and customer satisfaction organization with its customer advocacy initiatives.

The three individual divisions will have its own profit-and-loss accountability. "The operational issues that affected Compaq in the first quarter continued to influence our business this quarter," says Benjamin Rosen, chairman and acting CEO. Rosen took over for Eckhard Pfeiffer who was asked to resign in April after poor earnings in the first quarter.

While operating expenses have increased, Rosen says that revenues and gross margins are expected to be anywhere from flat to down from the first quarter. "In the two months since the change of management at the company, we have taken a deep look into the strengths and challenges of Compaq," Rosen said in company statement released today. "We have determined that significant structural changes are required to enable this company to realize its enormous potential and secure its position as the preferred information technology partner for global customers."

Compaq is already off to an expensive third quarter. The company reports it will realize a significant restructuring charge. But Compaq also says the realignment plan will eliminate $2 billion in ongoing operating costs. -- Brian Ploskina

About the Author

Scott Bekker is editor in chief of Redmond Channel Partner magazine.

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