Compaq last week announced that its financial results for the first quarter will be lower than expected, with revenues estimated at $US9.4 billion, as a resulting of falling PC prices.
Based on that forecast, the company now expects to report earnings at 15 cents per share, 5 cents to 11 cents lower than Wall Street expectations.
Prior to the announcement, 33 analysts polled by First Call, had predicted Compaq would post earnings of between 20 cents and 36 cents per share for the quarter, ended March 31.
Compaq will announce actual results for the quarter on April 21.
The company reported revenues in the first quarter of 1998 at $US5.7 billion, with earnings at $US16 million, or 1 cent per share.
An analyst said Compaq faced heated price competition in addition to declining PC prices.
"The quarter's shortfall reflects lower than anticipated market demand and increased competitive pricing in the commercial PC sector," Earl Mason, senior vice president and chief financial officer, said in a statement.
Average personal computer prices have dropped markedly in the last year from about $US2,000 to nearly $US1,000, said Rob Enderle, a vice president at Giga Information Group, an IT consulting firm.
"The prices are dropping extremely quickly," he said. "The whole segment of the PC market is under a lot of pressure."
Nonetheless, the company expects increased earnings in the next year, Eckhard Pfeiffer, Compaq president and chief executive officer, said in a statement. The company plans to cut costs and operating expenses, he said.