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Wednesday, July 15, 1998 Published at 14:47 GMT 15:47 UK

Business: The Company File

Ten digit loss for Compaq

The world's second biggest PC computer maker has gone into substantial loss in the second quarter of 1998, hit by the high costs of acquiring a rival firm.

Compaq, which recently acquired computer firm Digital, reported a net quarterly loss of $3.6bn (£2.2bn). That included $3.2bn in write-offs for part of Digital's technology business and $430m in restructuring charges.

Even excluding the exceptional items, Compaq just about broke even, earning a mere $32m on sales of $5.8bn. For the half year as a whole, the company has only earned $48m.

Last year profits in the same quarter were $257m, on sales of $5.5bn.

Softer sales, and backlogs of Compaq PCs at wholesale distributors, have hurt profits, but the company says inventories have now been reduced.

Tricky transition

Chief financial office Earl Mason, said that he believed that the acquisition would increase earnings by the fourth quarter, after a "transitional" third quarter.

"We are now moving quickly with the integration of Digital...the third quarter will largely be transitional, focusing on the integration of products and services, and the achievement of revenue and cost synergies."

Compaq says its cash position is strong, despite the $8.4bn it paid for Digital.

The companies had $4.6bn in cash reserves.

The results were expected, but added to the gloom among the personal computer industry.

Yesterday Intel, the leading manufacturer of computer chips, reported profits down 29%, while Singapore, one of Asia's leading manufacturing centres for computer components like hard drives, said it saw little sign of a turn-around in the electronics sector.

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