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Hewlett-Packard Shares Slide

Shares of Hewlett-Packard fell sharply Tuesday after Wall Street analysts downgraded shares of the computer maker following its fourth quarter earnings report.

Although the Dow component handily beat analyst estimates, the earnings came on revenue growth of just 4 percent. Shares of Hewlett-Packard (HWP) dropped 6 to close at 61 1/8 on Tuesday.

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Donaldson, Lufkin & Jenrette downgraded H-P to "underperform" from "market perform." Lehman Brothers trimmed H-P's fiscal year 1999 earnings per share estimate to $3.25 from $3.40 while maintaining its "outperform" rating for the company.

H-P said its fourth quarter earnings before extraordinary expenses was $880 million, or 79 cents a share. Wall Street expected the computer and printer manufacturer to make 74 cents a share during the quarter, according to First Call. H-P earned $806 million, or 75 cents a year ago and 58 cents in the previous quarter.

The company's profit from operations did not include $170 million, or 11 cents a share, in charges for its voluntary severance offers and writedown of products.

Last week, BancBoston Robertson Stephens' Daniel Niles upgraded Hewlett-Packard to "buy" from "long-term attractive" and forecast an upside surprise in the report. But the earnings came as H-P's total sales rose to $12.2 billion from year-ago revenue of $11.8 billion.

U.S. revenue rose 4 percent to $5.7 billion, while European sales grew 15 percent to $4.2 billion. Sales in the Asia-Pacific declined 20 percent. H-P said 53 percent of its sales came from outside of the United States during the quarter.

"We believe that revenue, which slowed to 5 percent year over year, can return to near 20 percent growth levels in 1999 as PCs servers and printers rebound following the inventory pricing issues in the first half of 1998 and driven by new products," Niles said.

Looking ahead, H-P expressed caution. "Although our business in Europe is showing improvement, the environment in Asia remains weak, and there are signs of slowing in parts of Latin Ameria," Chief Executive Lewis Platt said in a statement. "Our challenge in the new year is to restore robust and profitable revenue growth across the company."

On the upside during the quarter, H-P said its Pavilion home personal computers, NetServer systems, LaserJet 4000 printers and ScanJet 4100C printer sales were strong. Some desktop computers and OmniBook notebook sales were strong but were hurt by lower selling prices.

The company's cost of goods before special charges jumped to 68.4 percent from 66.4 percent in the year-ago period. Cost of products sold in the third quarter was 68.4 percent.

Written By Tiare Rath and Steve Gelsi

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