US personal computer maker Gateway has cut its sales and profit forecasts for 2005 after pressure on gross margins.
Gateway is seeking to boost non-PC revenues
It is now forecasting sales of between $3.9bn-$4bn for the year, down from its earlier prediction of $4bn-$4.25bn.
The earnings per share forecast has been cut to between 13-15 cents, from an earlier estimate of 17-19 cents.
The firm reported a second-quarter profit of $17.2m (£9.62m) - helped by a payment from Microsoft - compared with a $338.6m loss in the year-ago period.
Earlier this month, rival PC maker Dell had said that average PC prices were falling.
Gateway chief executive Wayne Inouye said: "We had to contend with gross margin pressure in all of our major business units in the second quarter due to competitive pressures."
Sales for the quarter were $873.1m, up from $837.6m a year ago as the firm sold 26% more PCs than a year ago. However, analysts had forecast sales of about $889m.
Its profit was the first in 13 consecutive quarters of losses, helped by a $15.1m payment from Microsoft. The payment was part of total of $150m in payouts Microsoft agreed - in April - to make over four years to settle an anti-trust case.
"They're making admirable progress but it's just an extremely difficult situation they're in with their size relative to competitors and the competitiveness of the PC market," said Barry Jaruzelski, lead partner in Booz Allen Hamilton's global technology and electronics practice.
Its current strategy is to boost non-PC sales by selling other consumer electronic goods, such as wide-screen TVs and digital cameras.