SCIENCE/TECHNOLOGY : Touchstone, Feeling the Lag in PC Sales, Posts Quarterly Loss

When the computer industry is in the doldrums, as it is now, it’s usually the little guys who feel it the hardest.

Take Touchstone Software, for example.

The small Huntington Beach company develops software that helps personal-computer users trouble-shoot problems with their machines--similar to the contraptions that auto mechanics use to diagnose problems with cars.

But PC sales have been slumping for a while. The slump was one of the reasons Touchstone officials cited Wednesday for the firm’s $240,730 loss for the second quarter ended June 30. Sales were up slightly, to $884,140 from $876,588 in the year-earlier period.

Touchstone said that some additional hiring early in the quarter and expenses associated with a failed merger also helped dampen earnings. The loss has prompted the company to take “very strong action” to strengthen its balance sheet, Chairman Larry Dingus said.

Touchstone has cut its work force to about 25, down from a high of 40 several months ago, Dingus said. Most of the reductions stem from a decision to contract with an outside company to assemble, package and ship the company’s products to customers.

But Dingus said he is optimistic that a new product due out in September or October will help boost sales and profits. The product is designed to help computer managers diagnose problems with computer networks that link together PCs and other office equipment, such as printers.