Since analysts generally rely on guidance from the company for their forecasts, Digital Equipment Corp’s warning that it will likely make an operating loss for its fiscal second quarter had them rushing for their red pencils to downgrade their forecasts. The significance of it being an operating loss is not that the company might still make a net profit, but that it will make a loss on operations before the drag-down effect of any special charges it might take. It will also be the first time in its history that the company has reported a loss from operations. Analysts now think the company may report a loss of as much as 60 cents a share. The Street realises what we realise: that it’s totally unpredictable, said Mark Steinkrauss, investor relations director for DEC, who said he had also seen a new estimate of a loss of as little as 30 cents. Before Wednesday, the Street earnings consensus appeared to range from break-even to about 20 cents to the good, he says. Analysts at Dean Witter Reynolds Inc and Cowen & Co, both now looking for a loss of 60 cents, say they doubt the company would have issued a news release this early if it foresaw a loss of only a nickel or a dime. When a market is weak, we just feel it. And now virtually every market is weak, said another DEC spokesman. It appears it’s raining everywhere – with Europe slowing markedly.
