1 Predicting the financial results of computer firms has been a tough job lately.
2 Take Microsoft Corp., the largest maker of personal computer software and generally considered an industry bellwether.
3 In July, the company stunned Wall Street with the prediction that growth in the personal computer business overall would be only 10% in 1990, a modest increase when compared with the sizzling expansion of years past.
4 Investors -- taking this as a sign that a broad industry slump was in the offing -- reacted by selling the company's stock, which lost $3.25 that day to close at $52 in national over-the-counter trading.
5 But that was all of three months ago.
6 Last week, Microsoft said it expects revenue for its first quarter ended Sept. 30 to increase 34%.
7 The announcement caused the company's stock to surge $6.50 to close at $75.50 a share.
8 Microsoft's surprising strength is one example of the difficulty facing investors looking for reassurances about the financial health of the computer firms. 'It's hard to know what to expect at this point,' said Peter Rogers, an analyst at Robertson Stephens & Co. 'The industry defies characterization.'
9 To illustrate, Mr. Rogers said that of the 14 computer-related firms he follows, half will report for their most recent quarter earnings below last year's results, and half above those results.
10 Among those companies expected to have a down quarter are Hewlett-Packard Co., Amdahl Corp. and Sun Microsystems Inc., generally solid performers in the past.
11 International Business Machines Corp. also is expected to report disappointing results.
12 Apple Computer Inc., meanwhile, is expected to show improved earnings for the period ended Sept.
13 Another contradictory message comes from Businessland Inc., a computer retailer.
14 In July, the company reported that booming sales of new personal computers from Apple and IBM had resulted in net income more than doubling for its fourth quarter ended June 30 to $7.4 million, or 23 cents a share.
15 This month, however, Businessland warned investors that results for its first quarter ended Sept. 30 hadn't met expectations.
16 The company said it expects earnings of 14 to 17 cents a share, down from 25 cents a share in the year-earlier period.
17 While the earnings picture confuses, observers say the major forces expected to shape the industry in the coming year are clearer.
18 Companies will continue to war over standards.
19 In computer publishing, a battle over typefaces is hurting Adobe Systems Inc., which sells software that controls the image produced by printers and displays.
20 Until recently, Adobe had a lock on the market for image software, but last month Apple, Adobe's biggest customer, and Microsoft rebelled.
21 Now the two firms are collaborating on an alternative to Adobe's approach, and analysts say they are likely to carry IBM, the biggest seller of personal computers, along with them.
22 The short-term outlook for Adobe's business, however, appears strong.
23 The company is beginning to ship a new software program that's being heralded as a boon for owners of low-end printers sold by Apple.
24 The program is aimed at improving the quality of printed material.
25 John Warnock, Adobe's chief executive officer, said the Mountain View, Calif., company has been receiving 1,000 calls a day about the product since it was demonstrated at a computer publishing conference several weeks ago.
26 Meanwhile, competition between various operating systems, which control the basic functions of a computer, spells trouble for software firms generally. 'It creates uncertainty and usually slows down sales,' said Russ Crabs, an analyst at Soundview Financial Group.
27 Mr. Crabs said this probably is behind the expected weak performance of Aldus Corp., maker of a widely used computer publishing program.
28 He expects Aldus to report earnings of 21 cents a share on revenues of $19.5 million for its third quarter, compared with earnings of 30 cents a share on revenue of 20.4 million in the year-earlier period.
29 Aldus officials couldn't be reached for comment.
30 On the other hand, the battle of the bus is expected to grow increasingly irrelevant.
31 A bus is the data highway within a computer.
32 IBM is backing one type of bus called microchannel, while the nine other leading computer makers, including H-P and Compaq Computer Corp., have chosen another method.
33 'Users don't care about the bus,' said Daniel Benton, an analyst at Goldman, Sachs & Co.
34 He said Apple's family of Macintosh computers, for instance, uses four different buses 'and no one seems to mind.'
35 The gap between winners and laggards will grow.
36 In personal computers, Apple, Compaq and IBM are expected to tighten their hold on their business.
37 At the same time, second-tier firms will continue to lose ground.
38 Some lagging competitors even may leave the personal computer business altogether.
39 Wyse Technology, for instance, is considered a candidate to sell its troubled operation. 'Wyse has done well establishing a distribution business, but they haven't delivered products that sell,' said Kimball Brown, an analyst at Prudential-Bache Securities.
40 Mr. Brown estimates Wyse, whose terminals business is strong, will report a loss of 12 cents a share for its quarter ended Sept.
41 Personal-computer makers will continue to eat away at the business of more traditional computer firms.
42 Ever-more powerful desk-top computers, designed with one or more microprocessors as their 'brains,' are expected to increasingly take on functions carried out by more expensive minicomputers and mainframes.
43 'The guys that make traditional hardware are really being obsoleted by microprocessor-based machines,' said Mr. Benton.
44 As a result of this trend, longtime powerhouses H-P, IBM and Digital Equipment Corp. are scrambling to counterattack with microprocessor-based systems of their own.
45 But they will have to act quickly.
46 Mr. Benton expects Compaq to unveil a family of high-end personal computers later this year that are powerful enough to serve as the hub for communications within large networks of desk-top machines.
47 A raft of new computer companies also has targeted this 'server' market.

Investors - - taking this as a sign that a broad industry slump was in the offing - - reacted by selling the company ' s stock , which lost $ 3 . 25 that day to close at $ 52 in national over - the - counter trading .
reacted
Why did investors react by selling the company's stock?