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DEC Expects to Post Loss for 2nd Quarter

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From Reuters

Dwindling worldwide demand for big computer systems will probably leave Digital Equipment Corp. with an operating loss for the last quarter of 1991, the company warned Wednesday.

The announcement, in which Digital conceded that recession is taking a bigger than expected toll on its high-ticket business, crushed hopes on Wall Street for a profit in the company’s second quarter and sent the stock price skidding.

But the company said its services and software businesses, which are less affected by the economy, continue to grow and now account for more than 50% of operating revenue.

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Digital shares plunged $5.375 to trade at $51.125 on the New York Stock Exchange after the announcement.

The company’s investor relations director, Mark Steinkrauss, said many analysts now expect an operating loss of between 30 cents and $1.00 per share.

Steinkrauss would not say whether Digital expected to post earnings within the new Wall Street estimate range.

But he acknowledged that Digital would probably not have issued the earnings warning if it expected a quarterly loss of just a few cents a share.

Wall Street already had low expectations for the second quarter ending in Dec. 28. Several analysts cut their estimates as recently as this week.

The Maynard, Mass.-based company, which ranks as the nation’s second-biggest computer maker after International Business Machines Corp., will post results Jan. 16.

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Smith Barney analyst Shao Wang cut his estimate for the second time this week, to a 30-cent-per-share loss. He had trimmed the projection to a 10-cent profit Tuesday.

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