They expect muted margins ahead as the company's new management prioritises top-line recovery, and cut their rating to "neutral".

He added that he expected margins to remain at roughly 56 percent through the fourth quarter.

For the 2004 fiscal year, he now expects operating margins of 12.5 to 13 percent.

Intel executives said they expected gross margins to reach about 62 percent in 2004, a 5 percent improvement over last year.

"I expected gross margins to decline as we continue to move aggressively in pricing and our product positioning," he said.

But with the new cutbacks, it expects operating margins to rise to 12.5 percent, higher than the previous goal of 11 percent.

After all, it is common sense to expect low margins in the United States, given the intensity of the competition there.

Intel said it expected gross margins in 1997 to be 60 percent, plus or minus a few percentage points.

"Compaq expects sales, margins and profitability to improve in the remaining quarters of the year."

Mr. Bronson, the chief financial officer, said he expected gross margins to improve as the company became more comfortable with the new technologies.