Compaq predicts profit but doubts remain over HP merger

Compaq lifted some of the gloom surrounding the PC industry last night by predicting it will post a profit for its fourth quarter.

The company is due to announce its results on 16 January and last night said it believes it will report its first profitable quarter in 12 months on the back of better than expected sales.

Sales for the three months rose to $8bn, beating the original prediction of $7.6bn. The attributed the figures to increased demand from Christmas shoppers and the processing of the final shipment of business orders delayed in the wake of the 11 September terrorist attacks.

The company declined to offer a figure for the likely profit.

Compaq said its PC, server and storage units experienced the biggest growth following a swell in European demand.

However, it is unclear if the news will convince HP shareholders to sanction the much-maligned merger between the two companies.

Compaq shares rose 29 cents to close at $11.68 following last night's news. The share price surged again in after hours trading to $11.93.

Analysts at Lehman Brothers have recommended Compaq as a 'strong buy' and predicted the share price could rise to as much as $13 within a year.