"But you don't like to see them give it all away in gross margins."

In the third quarter, it reported gross margins of 43 percent.

"Can you really get away with charging $3,500 per year, especially when your gross margins are 82 percent?"

Such a change could be one logical cause for the fall in its gross margin.

Some analysts said they expected the gross margin to fall to 19 percent, which is low by industry standards.

In the previous quarter, the company's gross margin was 69.3 percent.

"They knocked the cover off the ball on gross margin."

Some investors have focused on the difference in gross margins at the companies.

He said the gross margin for the service business had also risen because of lower overall costs.

He estimated that the company's gross margins for the year would be 35.4 percent, compared with 37.8 in 1987.