Compaq Slides on Third-Quarter Warning

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Updated from 9:13 a.m. EDT

Compaq Computer

(CPQ)

was down 5% in late morning after it warned late Monday it now expects to post a third-quarter loss of 5 to 7 cents a share, below the 5 cents expected by analysts. Compaq cited the ongoing price war with competitors and external events including the terrorist attacks.

The No. 2 computer maker said it expects revenue of $7.4 billion to $7.5 billion on lower-than-expected sales. Analysts expected $8.2 billion. The company said economic weakness and a climate of aggressive pricing, the Sept. 11 attacks, a typhoon that hurt a supplier in Taiwan and the announcement a month ago of a possible merger with competitor

Hewlett-Packard

(HWP)

all dampened results.

The company also said it would take a $500 million charge related to its investment in Internet holding company CMGI (CMGI) .

Goldman Sachs today said the warning was no surprise and it lowered estimates on Compaq to a loss of 7 cents a share for the third quarter from a profit of 2 cents, and cut its fourth-quarter forecast to breakeven from earnings of 4 cents a share.

Shares of PC market leader

Dell

(DELL) - Get Report

were also drooping, down 0.6%.