Updated from 5:08 p.m. EDT

Apple

(AAPL) - Get Report

lowered its sales and earnings guidance for the fiscal third quarter, saying demand has been soft for its computers at the consumer level and pointing to Europe and Japan as particularly weak.

The PC maker said after the close Tuesday that it expects third-quarter sales of $1.4 billion to $1.45 billion, down from previous guidance of about $1.6 billion. In addition to weakness at the consumer level, demand has also been sluggish among advertising and publishing customers, Apple said.

Apple expects earnings to come in between 8 cents and 10 cents a share, compared with previous guidance of 11 cents a share. The company said the sales shortfall will be offset somewhat by better-than-expected gross margins.

"Like others in our industry, we are experiencing a slowdown in sales this quarter," Steve Jobs, Apple's chief executive, said in a statement. "As a result, we're going to miss our revenue projections by around 10%, resulting in slightly lower profits. As one of the few companies currently making a profit in the PC business, we remain very optimistic about Apple's prospects for long-term growth."

Apple's warning comes on the same day Morgan Stanley

took down its estimate for overall personal computer sales in 2002. The firm now expects PC unit sales this year to grow industrywide at a rate of negative to positive 2%, down from a range of flat to up 5%.

Earlier this month, Credit Suisse First Boston said it expects PC sales

around the world to stay flat for 2002, reflecting an expected decline of 7% for the second quarter. CSFB pointed to Apple and

Gateway

(GTW)

as the companies most at risk of getting hit by a weak consumer market.

Shares of Apple ended regular trading at $20.15, down 39 cents, or 1.9%. In Instinet trading after the closing bell, Apple fell another $2.15, or 10.7%, to $18.