Financial analyst John McManus of the Bear, Stearns & Co. brokerage firm pulled a thick sheaf of paper from his briefcase. ''This one's for the garbage shredder,'' he grumbled.
It was an analysis of the stock price and earnings prospects of Digital Equipment Company of Maynard, Mass. The conclusion, arrived at several weeks ago: Buy Digital.
But Digital, one of the pioneers of the minicomputer market, shocked investors this week with an exceedingly poor quarterly profit projection. The stock price plummeted.
In the latest evidence of intense competition among the 150-plus computer companies in the United States, Digital estimated its third-quarter profit had fallen 65 to 75 percent. That news sent Digital, computer issues in general, and the Dow Jones industrial average sliding downward early in the week. Within two trading sessions, however, many of these stocks began to recover, although Digital was still down 273/4 points.
''This really shocked everyone,'' Mr. McManus said of the Digital profit estimate. Bear, Stearns, one of several companies that had thought Digital was going to show healthier profits, quickly removed it from its recommended-stock list.
In some ways the Digital/Bear, Stearns story typifies the changes coming over the computer industry today. Last year computer companies in the eyes of investors could do no wrong. Not so now.
Although the demand for computer equipment is doubling annually, the market has become extremely crowded. Competition involves aggressive advertising, severe cost cutting, battles for shelf space and name recognition - and leapfrogging technological developments that can confuse customers and make new products obsolete within months.
This struggle is primarily being waged for the shrinking share of market that the juggernaut of IBM's personal computer has not yet swallowed up.
Last month Osborne Computers was a casualty of the competition. Earlier, Texas Instruments was hard hit. High-tech stocks, with the exception of IBM and a few other industry leaders, have been severely shaken since midsummer. Venture capital for new computer companies - which last year were going public in record numbers - has been drying up the past six months.
A Digital spokesman traced the company's problems to ''lower than expected shipments of personal computers'' and a shortage of disk-drive units.
''When Digital gets hit, it has an impact on industry and investor thinking, '' says Jim McCamant, co-editor of the California Technology Stock newsletter, which tracks industry developments. ''On the other hand, if Digital is going to lose market share, it provides an opportunity for other companies.''
Mr. McCamant notes that, while Digital's primary problems have been with design and delivery of its personal computer, the company's desktop VAX is still a preferred model for scientists and engineers. McCamant says Digital, with its 77,000 employees and its long history in the field, remains ''a very fine company and quite large.''
McManus at Bear, Stearns, however, criticizes Digital's accounting system for its inability to provide accurate short-term earnings forecasts. It is ''terrible - it allowed them to be badly surprised.'' McManus says Bear, Stearns removed the company from the buy list ''because we don't know what's going on.''
But a Digital spokesman notes that financial analysts made their own predictions of the company's earnings ''based on their own models from independent research firms.'' Digital, he says, felt duty-bound to alert the financial community early to the poor quarterly earnings results; the quarter ends next week.
McManus estimates Digital has been losing $1,000 per unit on each personal computer and has been able to sell only half as many as it projected it would. He notes that the company must remain in the personal computer business, however , and is pessimistic about a turnaround in its fortunes before mid-1984 at the earliest.
''I'm afraid they are not going to be able to stem their losses in the 'PC' area,'' McManus says. ''Digital has a well-engineered product, but it is essentially a me-too product (similar to the IBM, Apple, Honeywell, NCR, etc., entries).