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Friday, 16 March, 2001, 08:35 GMT
Compaq cuts 5,000 jobs
Compaq chairman Michael Capellas.
Chairman Michael Capellas blames "pricing pressures"
Compaq, the world's number one maker of personal computers, and software maker Oracle are the latest technology companies to issue a profits warning.

Compaq has also announced plans to cut 5,000 jobs - 7% of its workforce - after being hit by a PC price war.

The PC firm slashed its earnings predictions for the first quarter of this year by about a third, less than two months after reporting a 55% rise in profits for the last three months of 2000.

The cutbacks could affect workers in Scotland. Compaq employs more than 3,000 workers at two manufacturing plants in Ayr and Erskine.

A spokeswoman for Compaq UK said it was "far too early" to tell how many, if any, would be made redundant.

Oracle expects slow year

Both firms made announcements after the markets had closed on Thursday night in the US.

Oracle reported that the US slowdown would hit database and application software sales in the last quarter.

The company also expects problems later in the year.

"We're assuming that the economy gets a little worse in Q4 than Q3," said Larry Ellison, Oracle's founder and chief executive.

"What the economy does, we'll do," he added in a conference call to analysts.

Compaq

Some analysts had predicted 18 cents per share, Compaq now told them it would be more like 12 or 14 cents.

The job cuts will affect about 7% of the giant's staff and will come as its commercial and consumer PC operations merge in an effort to slash costs.

In January, Compaq was hailed as the darling of a stock market that was being burdened by almost daily profit warnings and job cut announcements by both the computer giant's competitors and by other hi-tech firms.

But since then, the economic slowdown in the US has led to a price war which has been tough to tackle for Compaq, chairman Michael Capellas acknowledged.

"We see continued weakness in the US economy and resultant pricing pressures," he said.

"Clearly, we are operating in a challenging environment."

The restructuring should lead to cost reduction of about $500-600m. It will cost $125-150m.

Compaq's share price rose 15 cents to $18.50, prior to the news.

Oracle

Oracle said its third-quarter earnings rose to $583m, or 10 cents a share, from $503m, or 8 cents per share, in the same quarter last year.

The results were in line with Oracle's warning on March 1, when it cut its previous forecast.

Market professionals believe the news will lead to a sell-off of high-tech shares in Europe on Friday, then massive selling of Compaq shares when trading resumes in New York.

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See also:

23 Jan 01 | Business
Compaq underpins shares surge
06 Mar 01 | Business
PC price war escalates
15 Feb 01 | Business
Death of the PC?
15 Mar 01 | Business
Nasdaq extends losses
22 Jan 01 | Business
Dell warns on profits
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