Compaq Beats Estimates but Says Little About Next Quarter

The PC maker returns to profitability for its third quarter.
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Compaq

(CPQ)

reported third-quarter earnings Tuesday afternoon that beat Wall Street expectations but left one analyst seeking more information.

The PC maker said third-quarter earnings rose 21% to $140 million, or 8 cents a share, from the year-ago $115 million, or 7 cents a share. On an operational basis, net income for the quarter was $117 million, or 7 cents a share. A consensus of Wall Street analysts polled by

First Call/Thomson Financial

called for Compaq to earn 5 cents a share.

"I had them estimated at coming in at 7 cents," said Megan Graham Hackett, an analyst with

Standard & Poor's Equity

, moments before joining a teleconference with Compaq executives. Her firm doesn't do underwriting. "But their revenue numbers came in pretty light, so I want to hear from them about that."

Third-quarter revenue rose 4.7% to $9.2 billion from $8.8 billion in the year-earlier quarter.

In late afternoon trading, Compaq's stock rose 1 1/16 to 19 5/16.

Compaq said its reorganization over the summer has given the Houston-based company three business units that help better clarify its direction for sales, service and solutions. Earlier this year, Compaq's stock fell sharply when it disclosed inventory problems.

"Customer response to the PC products we launched during the quarter was tremendous and we continue to be the No. 1 PC supplier in the world," Michael Capellas, Compaq's president and chief executive, said in a statement. "Nonetheless, we have not kept pace with shifts in the PC sales and distribution model. We are moving aggressively to new business models which will lead the next generation of PC innovation and Internet access."

While discussing the company's future, Capellas said Compaq faces "some significant challenges, but we are confident we will continue to make good progress," although he did not address specifics, including projections for the final quarter.

Meanwhile, two research firms said Monday that Compaq's rival,

Dell

(DELL) - Get Report

, another major PC maker, continues to expand its lead in domestic sales. Dell, based in Round Rock, Texas, sold nearly 2 million PCs in the latest measured quarter, while Compaq sold 1.8 million.

Also on Monday, Compaq said

Micron Technology

(MU) - Get Report

would become its top individual provider of memory chips as part of a five-year agreement reportedly worth $20 billion. Micron has supplied Compaq with memory chips for several years, but the deal makes Micron nearly the majority provider for Compaq's components.

The pact ensures Compaq will receive a steady supply of chips in a period when inventories for the components that regulate how fast a computer runs are running low around the world.