The stock dropped as low as 68.94, down 11.38 from yesterday's close of 81.63. More than 23 million shares traded hands, more than seven times the daily trading average.
The company said yesterday after the markets closed that its earnings are expected to come in at about 65 cents per share, vs. 75 cents per share reported for the same period last year, when it posted net earnings of $784 million. Analysts had been expecting profits of 74 cents a share, according to First Call.
"While we did achieve good revenue and order growth this quarter, we are disappointed that our early calculations show earnings per share coming in well short of expectations," Lewis Platt, company chairman, said in a statement.
The Palo Alto, California-based company said its product mix, pricing pressures in the PC business, and economic weakness in Asia, were significant factors in its results. Final numbers will be announced Friday at 5:00 a.m. PT.
HP's weakness mostly came as a result of price cuts in the business PC arena. HP cut prices on these PCs to keep up with other vendors, such as Compaq, which cut prices to clear out an inventory glut.
During the past year, HP has been making efforts to increase its market share, according to Roger Kay, an analyst at International Data Corporation. The company has grown at a rate of 100 percent in some markets, and has been one of the fastest-growing major PC vendors of the past year.
Typically, however, unit growth for the sake of market share results in attenuated profits.
Analysts reacted to HP's earnings warning with a round of downgrades.
Goldman Sachs removed HP from its recommended list and now rates the stock a "market outperform."
Morgan Stanley maintained its "outperform" rating on the computer maker, but it lowered its fiscal 1998 earnings estimate to $3.08 per share from $3.35 per share and its second quarter estimate to 65 cents per share from 79 cents per share. The firm also lowered fiscal 1999 estimate to $3.75 per share from $4.01 per share.
Morgan Stanley analyst Tom Kraemer expects stock to come under pressure but would be a buyer in the upper $60s and low $70s per share.
Bear Stearns analyst Andrew Neff is keeping his "attractive" rating on the company, but lowered his 1998 estimate to $3.15 per share from $3.30 per share. The analyst also reduced his 1999 estimate to $3.80 per share from $3.90 per share.
CS First Boston is keeping its "accumulate" rating on the stock but cut its 1998 estimate to $3.25 per share from $3.35 per share, its 1999 estimate to $3.75 per share from $3.90 per share.
Hewlett-Packard said the weak Asian economy affected a number of its businesses--particularly measurement systems, whose products typically have higher gross margins.
The expected earnings include the impact of previously announced printer-manufacturing consolidations in North America, effects associated with the acquisition of Heartstream, and other charges.
Reuters contributed to this report.