Escom now expects its 1995 losses to widen 44% to about 180 million marks ($118 million) from a March estmate of 125 million marks. The retailer also warned of "significant losses" during the first six months of this year, and sales are running well below its projection. Escom had estimated 1995 sales of 2.35 billion marks and forecast growth of 8% to 10% in 1996 sales.

Escom spokeswoman Isa Scholtissek said the group is still talking with potential investors, and hopes to avoid bankruptcy. "The management is trying to find a solution within the next two weeks," she said.

In March, Escom raised 60 million marks and declared it would embark on a restructuring program under its new chairman, Helmut Jost. Some Escom shareholders expressed shock at the sudden turn for the worse.

"We have no comment," said Joachim Froehlich, chairman of Gold-Zach AG, an investment company which acquired a 7% stake in March. "We were surprised by this announcement, and we're now in the process of clarifying the entire situation."

Escom was particularly vulnerable because growth in the key German consumer and small-business market has essentially stalled. Escom PCs, like those at rival Vobis Microcomputer AG, are among the lowest priced, and the company hasn't been able to crack the business market. By contrast, Vobis, which makes many of its computers to order is still making a small profit.

Former Chairman Manfred Schmitt is being blamed for Escom's current problems, which date back to a disappointing Christmas quarter, when sales fell sharply below year-earlier levels.

Left with a huge inventory of unsold Pentium 75 models, Escom has been taking write-downs on its inventory ever since. On Wednesday, Escom said it must increase the amount of those write-downs because of a continued fall in component prices, and because it has gained more knowledge on the extent of its stockpiles in preparing its 1995 result.

On top of that, Escom is paying for a costly expansion into the U.K. market. On Monday, it announced plans to close 65 of 235 stores there. That move follows other restructuring measures, including the closure of its German production facility and the sale of its Amiga Technologies subsidiary for $40 million to Chicago-based Visual Information Service Corp.

Escom filed for protection with the local court in Bensheim, near its headquarters in Heppenheim. Officials there must now decide whether to accept the request, but a court spokesman said a decision is unlikely to be made before August.