Paul Chan, Compaq Computer Asia-Pacific vice president and managing director, indicated today that the company does not rule out the possibility of further job cuts this year should sales disappoint.
"We are going to face a tough year (ahead). Demand in the first and second quarter is not going to be as strong as last year," Chan told reporters during a media briefing today.
As a result, the company will "pay a lot of attention" on cost improvement, he added. Chan could not provide details on potential layoffs, but noted that the current regional headcount is under 4,000. Compaq's Asia-Pacific pie excludes Japan, China, Hong Kong and Taiwan.
In March, Compaq combined its Commercial and Consumer PC divisions into a single unit, called the Access Business Group, to take charge of the sale of handheld devices, notebooks, desktops and workstations to homes and offices.
This move, together with some consolidation in Compaq's corporate marketing and supply chain operations, resulted in the reduction of 5,000 positions, or 7 percent of its global workforce. Of these cuts, "a few hundred" were in Asia-Pacific, said Chan, without elaborating.
"This year, we will continue to ensure efficiency and the right level of structural costs," he added.
Under tremendous pressure is the company's largest unit, the Access Business Group, which incurred a worldwide loss of US$587 million for the period of 2001.
Chan would not say if the Access business is profitable in Asia-Pacific. However, he noted that the company will reduce subsidies for its regional channel partners to cut costs. Compaq declined to name these partners nor elaborate on pricing adjustment.
In addition, Compaq will also tailor its products to the needs of specific countries in the region to increase sales. In price-sensitive markets, for example, the company will sell lower-cost products stripped of "bells and whistles", Chan explained.
The Access Business Group contributed 43 percent, or US$1 billion, to the region's total sales of US$2.35 billion last year.
Last week, the computer maker reported a better-than-expected fourth-quarter net income of US$92 million, compared with a net loss of US$672 million in the year-ago period.
For 2001, Compaq announced a loss of US$785 million on sales of US$33.6 billion, compared with earnings of US$569 million on revenues of US$42.2 billion in 2000.
Government, education contracts
Besides squeezing profits out of its Access unit, Compaq also plans to grow revenues from its Services (particularly in customer support) and Enterprise Computing (including servers, storage and supercomputer products) businesses. This was announced by its chairman and CEO Michael Capellas during last week's earnings conference call.
"In this environment, we believe the fastest-growing market segments will be industry standard servers and storage area networks," Capellas said.
In Asia-Pacific, Chan said the company will concentrate on marketing its high-end computing and services offerings to governments and educational institutions. "Governments, in particular, tend to make infrastructural investments in a slow economy. We will have to win some of these deals."
New supercomputer customer wins include the Australian Partnership for Advanced Computing and the Network for Electronic Transfers (S) Pte Ltd in Singapore.
On Tuesday, Singapore's BioInformatics Institute (BII) also said that it had purchased 16 Itanium-based computing units from Compaq, to allow the secured sharing of biomedical data among research institutes in the Republic and overseas.
Other target sectors include telecommunications and financial services, Chan said.
