Pace boxes provide access to ITVdigital and BSkyB
Pace said it thought income would be broadly similar to last year, as it had been forced to cut prices in the face of increased competition.
In September, the company had said it was expecting a 10% growth in revenue for the full-year.
The disappointing news about future sales overshadowed Pace's interim results, which saw a 21% increase in pre-tax profits to £22.2m.
Pace's share price fell back on the gloomy outlook, and by Tuesday lunchtime the company's shares were down nearly 8% at 357p.
At the height of the technology share boom, the company's shares reached a peak of over £12 in March 2000.
US focus
Pace is the world's third largest supplier of digital set-top boxes.
In the UK it has sold its boxes to both BSkyB and ITVdigital, but as the UK market becomes increasingly competitive, Pace has begun to target the US market.
The company has just begun shipping boxes to Time Warner Cable in the US, and says it aims to win 15% of the US cable market over the next two years.
Competition from box-making rivals such as Motorola and Scientific-Atlanta has caused Pace to cut prices,
"The lower pricing environment, where Pace has been reducing its average prices by between 10% and 20%, will impact revenues for the full year, which should be broadly similar to last year," the company said in a statement.
Despite the disappointing outlook for revenues, the company said it expected things to pick up later on this year.
"During the second half of calendar 2002 we expect the market to strengthen as customer roll-out rates accelerate and we remain confident of significant new contract wins, particularly in the US."