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Pfeiffer cites PC weakness
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April 12, 1999: 12:01 a.m. ET
Compaq CEO says soft demand is slowing the growth of entire industry
By correspondent Bruce Francis
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NEW YORK (CNNfn) - Eckhard Pfeiffer is blaming overall weakness in the PC business for his company's impending dramatic shortfall in profits.
Pfeiffer, the chief executive of Compaq Computer Corp., said Sunday that his personal conversations with unidentified leaders in the chip and disk drive business indicate that Compaq's problems are not unique.
He said he expects industry growth for the first quarter to be 8 or 9 percent when the final numbers are tallied, not 12 to 13 percent that was expected.
The weaker demand eroded the top line at Compaq (CPQ) by 3 or 4 percentage points, and competitive pricing cut into the bottom line, Pfeiffer said in a telephone interview.
"That's not the end of the world," the German-born CEO said. But Pfeiffer also sounded frustrated with the prospect of being blamed for market conditions: "If you don't meet the estimates, you are bad."
On Friday, Compaq warned that its profits would be just 15 cents a share, less than half of what Wall Street analysts were expecting on average.
Compaq's news was delivered a week after the quarter had closed and less than two weeks before the company is scheduled to report earnings.
Pfeiffer also said that the company was less successful in selling options with PC's -- like additional memory, larger hard drives and other accessories. Options carry fatter margins that the PC itself.
Citing SEC restrictions on disclosing information before the official release of earnings, Pfeiffer declined to comment on analyst speculation that weak sales of high-end products were partly to blame.
But Pfeiffer remained upbeat about the future: "This is not going to change the course of Compaq."
That optimism was tempered by the enormous task of integrating Compaq's two recent acquisitions: DEC and Tandem. Pfeiffer said the process will continue for a year, and that many customers have to get used to new sales people.
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