TECHNOLOGY : Rainbow Takes a Hit After Releasing News Both Good and Bad

The folks at Rainbow Technologies Inc. figured they should water down their recent good news with some anticipated bad news in an effort to keep the company’s stock price steady.

But Wall Street flinched Monday.

In a press release announcing an important deal with Apple Computer Inc., the company also said its third-quarter earnings would be lower than expected--21 cents to 24 cents a share, compared to analysts’ estimates of 30 cents a share.

The bad news prompted a stampede to sell the stock on Monday, sending Rainbow’s stock plummeting nearly 20%, or $5 a share, to $20.50 a share in heavy Nasdaq trading of 540,000 shares.

“We learned that our earnings would be lower than expectations so we decided to put the information out at the same time that the Apple announcement was made,” a Rainbow spokeswoman said.

The company did not say when it expects to release its quarterly results.

Apple said it would form a new software distribution division that will publish more than 80 software programs on a single compact disk. Users would gain access to the programs on the disk by using Rainbow’s proprietary technology. Rainbow isn’t making predictions on revenue from the Apple deal.

A customer must have a special code in order to access programs. To get the code, the customer has to make a call to Apple and pay for the program.

The technology is an alternative to distribution of software on floppy disks, which can be copied illegally and cost more to produce than a CD-ROM.