Reality Takes Bite Out of Apple Computer : Technology: Nation’s No. 2 PC maker anticipates lower earnings and feels pressure to cut costs. Its stock drops.

The price war in the personal computer business has claimed its latest casualty as Apple Computer Inc. said it anticipates a drop in earnings and came under pressure to cut costs.

Apple’s stock dropped sharply on Wednesday’s announcement by Chairman John Sculley that earnings for the second half of the company’s fiscal year will be lower than anticipated and below those for the same period last year.

Speculation arose over possible layoffs and price cuts at the nation’s No. 2 PC maker behind IBM.

“They’ve got to get rolling here. They are going to have to trim expenses,” said Kimball Brown, an analyst with Info Corp. of Santa Clara, Calif. “That either means certain kinds of marketing, R&D; projects or people.”

“Sales are not going to keep rolling here unless they cut prices,” Brown said. He added that he expects an announcement by Apple on PC price reductions next month or in August.

Sculley said Wednesday that unit shipments had increased 35% for the first half of Apple’s fiscal year. But profit margins--reportedly as high as 38% in the past--fell.

“Our growth in unit shipments is coming at lower prices than we previously expected, and this will diminish our profitability during the second half of the fiscal year,” Sculley said in a statement.

Apple remains committed to increasing market share through “aggressive actions to accelerate sales momentum for our Macintosh products,” Sculley said.

“Additionally, we will be taking appropriate actions to position the company for earnings growth as we absorb lower gross margins,” he added, without elaboration.

Apple, founded in 1976, has seen revenue grow sevenfold in the last decade. Last year, it earned $530 million on $7 billion in sales and now employs about 14,000 people. Apple laid off 1,500 people in 1991 and cut salaries.

In April, the company reported earnings of $110.9 million for the three months ended March 26, down 17% from the comparable quarter. Those results disappointed stock analysts.

Apple’s announcement came before financial markets opened for trading. In NASDAQ trading, more than 10 million Apple shares traded hands, closing at $44.25, down $5.25.

Over the last 18 months, an aggressive price war among PC makers has brought average personal computer prices down by about 50%. That competition has benefited consumers but hurt some PC makers.

The strongest competition in the PC market, however, has been among makers of IBM-compatible machines, the so-called clones. Only in recent months have International Business Machines Corp. and Apple cut their prices to remain competitive.