Personal computer maker Gateway Inc. (GTW) on Monday lowered its 2005 revenue and earnings forecast, sending it shares plunging 9 percent as pricing in the PC industry became increasingly cutthroat.

While Gateway reported a quarterly net profit after a year-ago loss, helped by a payment from Microsoft Corp. (MSFT), investors focused on pressure on its gross margins in the quarter.

Like Dell Inc. (DELL) whose quarterly sales missed analysts' expectations, Gateway's revenue also was below analysts' forecasts. Chief Executive Wayne Inouye (search) said in a statement that Gateway saw "competitive pressures" in the quarter.

"We had to contend with gross margin pressure in all of our major business units in the second quarter due to competitive pressures," Inouye said in a statement.

Shares of Dell, Intel Corp. (INTC) and Hewlett-Packard Co. (HPQ) were little changed after the news.

Gateway said it had second-quarter net income of $17.2 million, or 5 cents per share, compared with a net loss of $338.6 million, or 91 cents, in the year-earlier period, which included charges.

Sales rose to $873.1 million from $837.6 million.

Gateway said the just-completed quarter included $15.1 million in benefits related to an April 2005 settlement with Microsoft, which paid Gateway $150 million in April to settle long-standing antitrust issues.

The agreement requires Gateway to use a substantial majority of the payment to fund various marketing and promotional initiatives as well as development and testing of new Gateway products that use Microsoft products.

The year-ago quarter included large restructuring charges.

Gateway was scheduled to report results in late July, but said it delayed reporting results pending receiving advice from the U.S. Securities and Exchange Commission (search) on how to account for the payment from Microsoft.

Gateway reduced its full-year 2005 revenue forecast to $3.9 billion to $4.0 billion from $4.0 billion to $4.25 billion. Earnings per share before items are now expected at 13 cents and 15 cents, down from its earlier forecast of 17 cents to 19 cents.

Shares of Gateway fell to $3.55 on the Inet electronic brokerage network after the close of the regular trading session. Its stock closed up 8 cents, or 2.1 percent, at $3.89 on the New York Stock Exchange Monday.