In Business This Week
TWO CASUALTIES OF THE COMPUTER WARS
In April, Compaq Computer warned that the second quarter, ending June 30, wouldn't be up to snuff. It wasn't kidding. On May 15, the computer maker disclosed that sales for the quarter will be more than 15% below 1990's second-quarter revenues of $862 million. And earnings will fall even more because of big price cuts in April: Compaq is projecting per-share results of 25~--79% below a year ago. The news pummeled Compaq's stock to 36, down 13 1/4.
Compaq blamed the shortfall on a downturn in orders brought on by excess dealer inventories. Indeed, dealers have been hurt all year by intense competition and a soft market. Things have gotten so bad that Businessland may be on its last legs. After five quarters of huge losses, the $1.3 billion retailer reported on May 14 a $43 million loss for the third quarter, which ended Mar. 31, on a 17% drop in revenues, to $270 million. Now, ITT Financial, which finances part of Businessland's inventory, is saying that it will cut off the money flow by July 5.
Businessland acknowledges that it may have to seek protection from creditors under Chapter 11. Businessland also says it's trying to negotiate a sale of the company. The rumor mill says one potential buyer is JWP, a $2.8 billion computer consultant. But JWP won't comment.EDITED BY HARRIS COLLINGWOOD