The PC maker will axe another 2,000 jobs after reporting quarterly earnings that just missed lowered expectations.
Compaq reported a profit of US$200 million on revenue of US$9.2 billion, excluding a one-time charge for restructuring and investment gains.
Combined with job cuts announced earlier, yesterday's announcement means the PC maker will shed 7,000 jobs - 4,500 through layoffs and the rest through attrition.
"Our plan now is to eliminate about 7,000 positions" Jeff Clarke, Compaq's chief financial officer, said in a conference call after the earnings announcement. The majority of the job cuts will come through an ongoing consolidation of the company's commercial and consumer PC divisions. Most of the cuts will be finished by the end of next week, he said.
The additional job cuts are part of a five-step plan to reduce costs, reduce inventory, introduce more aggressive pricing, increase product innovation, and beef up its services organization, the company said in a statement.
PCs proved to be Compaq's weak point. The company's access business group, which handles corporate and consumer PCs, accounted for US$4.4 billion, or 48 percent, of Compaq's revenue, but lost US$82 million. In the same period last year, revenue came to US$4.7 billion, but the group made US$15 million.
Overall, "we'll be much more aggressive with pricing and programs to drive demand in our core markets," Michael Capellas, Compaq's chairman and CEO, said during the conference call.
One area where Compaq sees to gain back some steam is servers.
"We are getting more aggressive with industry-standard servers, particularly in the US," Capellas said. "We will go after (market) share, particularly" with small and mid-sized businesses, he said. "No, we are absolutely not losing money in that business."
Services represented 21 percent of Compaq's first-quarter revenue. Capellas wants to step that up.
"Our long-term goal is 30 percent" of revenue, Capellas said. "We intend to be very aggressive in this space." Compaq will make acquisitions in the services area if necessary, he added.
The company gave up its No. 1 position in worldwide PC sales to rival Dell Computer during the first quarter in an extremely sluggish market. Compaq grew by only 0.3 percent worldwide and lost ground in North America, according to Gartner. Meanwhile, Dell used aggressive pricing to help grow by 34.3 percent worldwide and 30.7 percent in the United States.
Dell's lead puts it ahead of Compaq in worldwide market share by less than one percentage point, with a 12.8 percent share vs. Compaq's 12.1 percent share.
Despite the global surge from Dell, Compaq still enjoys the top PC spot in Europe.
News.com's Michael Kanellos contributed to this report.
