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PC vendors all fall down

Gloomy earnings forecasts from the PC industry just keep on coming.

Gloomy earnings forecasts from the PC industry just keep on coming.

PC vendor AST Research yesterday added its name to the list of companies lowering their expectations for revenues in the first quarter of this year. The admission came fast on the heels of a similarly ominous announcement from Digital Equipment about falling revenues and decreasing PC shipments.

For Apple Computer, meanwhile, industry analysts are forecasting a loss that could top $200 million for the firm's second quarter, which ends in mid-April. The bulk of the loss will come from a $125 million restructuring cost, according to Apple, but the figure will still make the $69 million shortfall reported for the last quarter seem minuscule.

All the companies--including IBM and Compaq, the first to predict that their earnings next quarter would come in under analysts' expectations--cited softening consumer demand for PCs.

"We have encountered excess competitor inventory in the channel, overall lower demand for PCs, and greater pricing pressures than originally anticipated through the first two months of the current quarter," said Ian Diery, president and CEO of AST.

Industry analysts say all the major vendors are fighting the same battle. "It's pretty simple. The corporate desktop market is saturated," said Bruce Stephen, vice president of worldwide personal systems research at International Data, a market research firm.

Like Compaq, which has gone through three rounds of price cuts in the past month, AST plans drastic price reductions to halt the sales slump. "The slowdown has caused AST to take aggressive pricing actions to make way for new product rollouts which are planned for early in the second quarter," the company said.

The slump is also hurting components vendors.

Micronics, an established Silicon Valley motherboard and component manufacturer, said revenues for its second quarter will be lower than previous forecasts. Second-quarter revenues will be 30 percent to 35 percent lower than first-quarter levels, the company said. Micronics is a supplier to PC vendors such as Micron Electronics.

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