Digital Equipment’s Stock Topples 17%

Digital Equipment Corp.’s stock plunged 17% on Wednesday after the corporation warned it would not meet Wall Street’s profit expectations because of flat sales of personal computers. Shares in other personal computer makers also fell.

Digital had been shooting for revenue growth from PCs of 30% in the quarter that ends March 31; and analysts thought Digital would meet the predictions because it rejuvenated its PC operation in the fall.

But demand has slowed for PCs among North American businesses and wholesalers, and distributors have become clogged with inventory. As a result, PC makers have been forced to cut prices and profits.

The problem worsened last month when Compaq Computer Corp., the biggest PC maker, announced it would cut prices and accept a lower profit margin to meet its desire for 35% growth.

Digital matched Compaq’s cuts immediately.

“Our relative competitiveness has been assured,” said Bruce Claflin, vice president and general manager of Digital’s PC business. “But these price actions were certainly larger than had been planned and contributed to this quarterly issue.”

Digital’s stock sank throughout the day as Wall Street analysts revised their profit forecasts downward. Digital shares closed down $11.25 to $56 on the New York Stock Exchange.

Compaq’s stock finished down $2 at $38.125. IBM closed down $4.75 to $117 and Hewlett-Packard Co. finished down $3.625 to $97.635, all on NYSE. Dell Computer Corp. was down $1.125 to $32.50 on Nasdaq.

Personal computers account for only about 15% of Digital’s total revenue, which is expected to be about $4 billion in the current quarter. The company, based in Maynard, Mass., said sales and profit expectations for its minicomputers and other products continue to be on track.