Updated from 2:23 p.m. EDT

SAN FRANCISCO -- After displaying a surprising immunity to the broader economic slowdown, the PC industry is feeling the pain.

On Tuesday Dell ( DELL), the world's second largest PC maker, warned that global demand has worsened since it last spoke to investors -- only two-and-a-half weeks ago.

The comments, which Dell made ahead of an executive's appearance at an investor conference Tuesday, underscore how rapidly the PC business is deteriorating, as slackening demand for PCs in North America has spread to Europe and increasingly into Asia.

Dell shares tumbled 9.4%, or $1.69, to $16.30 in midday trading Tuesday, falling as low as $15.68 at one point -- the stock's lowest level since February 1998, adjusted for splits.

While Dell has grappled with its share of internal problems in recent months as it seeks to improve its operations and revive the company's growth, many investors seem to take Dell's word that an industry-related slowdown, not Dell-specific problems, were behind the latest warning.

"When things really get difficult, technology is, in the end, a discretionary purchase," says Pat Becker Jr., of Becker Capital Management.

Shares of various PC-related tech firms were under pressure Tuesday, with Apple ( AAPL - Get Report) falling $2.42 to $137.94 and Intel ( INTC - Get Report), the world's No.1 maker of PC microprocessors, down 12 cents at $19.24.

Hewlett-Packard ( HPQ - Get Report), the world's largest PC maker, was up $2.79 at $48.12 in the wake of a securities meeting Monday in which it detailed plans to integrate its $13.9 billion merger with EDS and disclosed that it was laying off nearly 25,000 employees to save costs.

The grim sentiment towards PC makers represents a rapid change of fortune in the business, which until recently was considered a safe harbor by investors.

Even as the credit and housing crunch took a toll on business at financial firms, automakers and others this past year, the fundamental conditions in the PC industry looked healthy: unit shipments increased 14.9% in the first six months of 2008, according to industry research firm IDC.

With financial giants like Lehman Brothers ( LEH)and Merrill Lynch ( MER)either going under or getting consolidated, the market for the corporate hardware sales that Dell relies on is only getting worse.

According to some investors, Dell's warning is merely confirmation of a trend that had become increasingly clear in recent weeks.

Indeed, on Monday, Ingram Micro ( IM), a distributor of technology products, followed up on previous cautious comments by cutting its third-quarter financial estimates.

Trilogy Global Advsior's Vasu Kasibhotla, points to the monthly sales data from Taiwanese contract manufacturers, which he says produce 80% to 90% of the world's notebook supply.

Earlier this month, Compal, a Taiwanese contract manufacturer, cut its estimates of 32 million worldwide notebook unit shipments in 2008 to a lower range of 28 million to 29 million units, according to DigiTimes.

Quanta, another such company, reported a sharp drop in revenue in August, which it reportedly blamed on the new breed of low-cost netbooks.

The slowdown in notebooks in August is pretty clear, says Kasibhotla. And that's a bad sign for the PC industry, which has been heavily reliant on notebook sales for its growth.

"There was double-digit growth in the industry in the first half of the year, but look where it came from," Kasibhotla says. "Desktop was flatish and notebook was growing much faster. Now notebook is decelerating."

As happens every year in the run-up to the crucial holiday sales season, questions and concerns are rampant about whether consumers will buy new PCs in November and December.

One potential star this holiday is the netbook, a miniature email and Web-browsing device whose novelty and low price-tag could catch the eye of budget-minded gift givers. But the netbook's slim profit margins won't do wonders for PC makers' profitability unless they sell extremely large amounts of the gadgets.

With demand slowing, and retail prices falling, the PC industry's problems may extend beyond December.