"They're trying to be a powerhouse consulting firm," Kokernak said. "Just about every hardware and software maker is trying to do that." Sales at Compaq's PC division, the company's largest revenue generator, fell to US$3.82 billion from US$4.91 billion. The group had an operating loss of US$155 million, compared with operating income of US$44 million a year earlier.
The company has been losing PC market share to Dell, which has said it will keep slashing prices to lure buyers during the slump in demand. Compaq and Gateway Inc have been reducing prices to keep up, hurting profitability.
In the second quarter, Dell garnered 13 percent of the worldwide PC market by unit shipments, compared with Compaq's 11 percent, researcher Dataquest Inc said last week. Dell was the only PC maker whose sales increased during the period.
"Even considering the brutal market conditions, I'm disappointed with our performance in the consumer market, particularly in our retail business," Capellas said.
Sales of servers and storage devices, which have wider profit margins than PCs, fell 21 percent to US$2.7 billion on weaker demand, aggressive competition and reductions of inventory among distributors. Operating income in the division was US$74 million, down from US$383 million in the same period last year.
Including a restructuring charge of US$493 million, Compaq had a loss of US$279 million, or US$0.17 a share, in the recent period. In last year's second quarter, a gain of US$25 million made net income US$388 million, or US$0.22. Sales in the year-ago period were US$10.1 billion.
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