C3 Inc., a computer equipment firm with headquarters in Reston, said yesterday that the U.S. Navy has disqualified the company from further consideration for a 20-year contract worth an estimated $1 billion.

The company, in an announcement by its president, John G. Ballenger, said it would take legal action, if necessary, to try to overturn the Navy's decision, which takes C3 out of the running for a contract to provide a tactical computer program for Navy ships, the "SNAP-1" contract.

According to C3, the disqualification was based on the Navy's analysis of C3's technical proposal and a demonstration of the firm's computer hardware and software. The company said it got word of its disqualification at 4 p.m. Wednesday.

Although the firm asserted that the disqualification would not affect revenue and earnings projections for the company's fiscal year ending March 31, and would have little if any impact on revenue and earnings in the next fiscal year, C3's stock price dropped after the news was announced. The stock, traded over the counter, fell 5 1/4 to 14 1/2 bid yesterday.

John Sanders, a vice president of Wachtel & Co. Inc., said he expects the contract disqualification to have no lasting impact on the firm. "I think the company is in a tremendous business," he said. "There's so much business out there in the long-term future that, although this contract would have been a tremendous plus," it's loss is not a major blow, he said.

Sanders said he had been buying C3 stock yesterday.

C3 (the name stands for computers, communications and control) has prospered through government contracting and has expected to do well as defense spending increases. After slow years in the early 1970s, in the last half of the decade the company's sales soared.

Revenues in the fiscal year ended March 31, 1981, were $32.5 million and earnings were $5 million.