The world's second biggest personal computer maker Compaq has disappointed Wall Street with its latest set of results.

The PC maker blamed widening losses on the economic downturn following the 11 September terror attacks, a typhoon in Taiwan and its merger plans with Hewlett Packard.

Compaq said it lost $120m in the quarter on sales of $7.5bn, compared to profits of $557m on sales of $11.2bn in the same period last year.

Shares in the company dived in after-hours trading, as investors digested the figures.

Could have been worse

But some analysts said the outlook could have been worse.

Dan Miles, of Lehman Brothers, said "Results are in line with the pre-announcement."

The company's outlook for higher revenues and a lower loss was also a positive, Mr Niles added.

Compaq said it expected business pick up following the much-anticipated launch of Microsoft's Windows XP operating system.

But its also warned of a continuing price war in the sector, which could harm its fourth quarter income.

Compaq has lost market share to competitor Dell, which has used aggressive pricing to grow in both the corporate and consumer markets.