Update: Compaq Clarifies 4Q Earnings Outlook



Compaq's efforts to transition customers off its Windows NT/Alpha platform will cost the company between $50 million and $100 million in the company's upcoming fourth quarter and an additional $100 million to $150 million in the first quarter of 2000, according to documents filed with the Securities and Exchange Commission.

On Tuesday, a Compaq spokesman said the financial hit would show up as charges against earnings in both quarters. However, Compaq retracted that information today. The company now maintains the program will be covered under normal operating costs, "though it could still have an impact on earnings," says spokesman Jim Finlaw.

According to the company's 10-Q report for the third quarter, the costs will be incurred because a previously announced plan to discontinue offering Windows NT on its Alpha processor-based servers and workstations. Under that plan, customers who have purchased an NT/Alpha server or workstation will be given up to 90% credit toward a new Intel/NT system. Customers choosing to remain on Alpha will be offered a free upgrade to an Open VMS, Tru64 Unix, or Linux system.

Compaq made no mention of the impending costs in an interim 8-K form filed with the SEC immediately after the close of the company's third quarter Oct. 26. However, SEC rules permit companies to file their full quarterly report--in a document known as a 10-Q--up to 45 days after the close of the quarter. Compaq's third-quarter 10-Q is dated Nov. 15.

The company did make reference to the impending fourth-quarter costs during its third-quarter earnings call. However, it made no mention of the additional costs that will be incurred in the first quarter of next year.

Compaq says the final cost of the program will be determined by how many customers take advantage of the transition program. The company could not immediately say how many customers are eligible to do so.

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