Colt's Manufacturing Co., whose firearms have played a role in the nation's history for more than a century, is discontinuing its cheaper handgun models and reshaping itself to focus more directly on its "smart gun" technology, weapons that will fire only for their owners.

Industry experts said yesterday that the moves constitute a high-stakes gamble: that the new technology can pull Colt out of financial difficulty while providing a cushion against what could be a devastating wave of litigation against the gun industry by shooting victims and others. The strategy is risky, experts said, because the smart-gun technology is still plagued with problems and brings its own potential for legal liability if it fails to operate properly.

This shift, in reality, may not be a huge one for Colt because it had been a relatively small player in the civilian handgun market. For example, it manufactured about 90,000 handguns in 1997, compared with more than 380,000 by Smith & Wesson, according to the federal Bureau of Alcohol, Tobacco and Firearms.

The company issued a statement yesterday saying it "strongly refuted" reports that it was exiting the retail handgun business.

"We intend to continue the growth of our military and law enforcement market segment while focusing our commercial efforts on our most important and profitable product lines," said William Keys, chief executive of New Colt Holding Corp., which owns Colt's Manufacturing.

Colt notified distributors that it would continue to produce its single-action Army revolvers and custom-made "classic" handguns--such as the Colt revolver romanticized in Western films--but would discontinue seven models, including its double-action revolvers and small 9mm pistols.

The company is pursuing the vision of Steven Sliwa, the Colt president who left his job recently to head iColt, a start-up venture that will develop and market the smart-gun technology.

Political momentum is building to mandate some form of safety mechanism. Legislation requiring gun locks has received widespread support in Congress, and Maryland Gov. Parris N. Glendening (D) has proposed that all new guns sold in his state must be equipped with smart-gun technology.

Colt is developing a product that emits a radio signal allowing only the authorized user to fire a handgun. Other companies have marketed combination locks and similar devices to keep children from firing guns by accident.

"This could be an evolution of the gun industry to survive in the next century," said Andrea Camp, a senior fellow with the Institute for Civil Society who has been involved in developing policies for smart-gun technology.

It's unclear whether Colt's new iColt spinoff will help insulate the company from any damages assessed in the growing number of lawsuits filed against gun manufacturers. A federal judge ruled earlier this year against Colt and other manufacturers in a civil lawsuit filed by the families of shooting victims in Brooklyn, N.Y.

Colt has been involved in negotiations seeking a settlement to avoid the litigation, which contends gun manufacturers have not done enough to ensure the safety of their products or their legal distribution in the marketplace.

A Smith & Wesson official said Colt is not establishing a pattern for others to follow. "What Colt's has chosen to do is not something Smith & Wesson is going to do," said Ken Jorgensen, director of public affairs for Smith & Wesson.

For Colt, the announcement that it was abandoning much of its handgun line came after years of erratic financial performance. The company entered into Chapter 11 bankruptcy protection in 1992. It developed a smart-gun prototype as part of its comeback strategy four years later and has since obtained federal funding to continue its development.

Colt told distributors in a letter that its recent decision was a result of the cost of fighting litigation.

Staff researcher Alice Crites contributed to this report.