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Wall Street speaks its mind

Wall Street has its own take on the mixed earning reports from three technology industry stalwarts.

Wall Street has its own opinion about the mixed earnings from three technology industry stalwarts, regardless of whether quarterly reports were good or grim.

Hewlett-Packard and design software giant Autodesk failed to meet analysts' expectations, but Cisco Systems, fresh from a merger with rival network infrastructure vendor StrataCom, boosted its sales by almost $600 million over the same quarter last year.

By today's final bell, however, the market proved it has a mind of its own. Yesterday's two earnings losers HP and Autodesk, which reported drops in net earnings, are actually up in today's trading. HP closed at 41-7/8, up 1-7/8 from yesterday's price, and Autodesk jumped 7/8 to 21-3/8.

Cisco, which delivered higher than expected earnings, ended trading at 56, down 1-3/4 from Thursday's close.

HP reported a 26 percent drop in net earnings, despite an 18 percent rise in revenues for the quarter. Net earnings were $425 million, or 40 cents per share, compared with $576 million, or 55 cents per share, in the same quarter last year. Analysts were expecting earnings of 48 cents.

HP also took a significant amount of one-time charges as it shut down its disk-mechanism manufacturing division in July. The company attributed most of the loss of earnings per share, 13 of the 15 cents, to the closure, but officials also expressed disappointment.

"This was a difficult quarter," chairman Lewis Platt said in a prepared statement. "Some of the factors that resulted in this quarter's slower growth were unique to HP, while others were the same factors that have led to slowing in some segments of the electronics industry in recent months."

Still, net revenue was up to $9.1 billion, compared to $7.7 billion for the same quarter last year, and some observers weren't too concerned.

"You see a shift in people's investment from high-flying companies to those with established economic models," said Mark Whitcher, an associate at Broadview Associates, a merger-and-acquisition consultancy based in New Jersey.

Autodesk had expected a down quarter. The company's earnings for the quarter ending July 31 were $128.7 million, compared with $140.7 million for the same quarter last year. Analysts, predicting a down quarter, had put expected revenues in the $130 million neighborhood.

Net income was also down last quarter, ending at $10.6 million, or 22 cents per share, in part reflecting a one-time charge for in-process research and development related to an acquisition completed during the quarter. First quarter revenues last year were $26.3 million, or 52 cents per share.

"We are dissatisfied with our performance this quarter," CEO Carol Bartz said in a prepared statement. "Our results were impacted by a dramatic slowdown in Europe, as well as a cyclical slowing of AutoCAD sales."

Analysts agreed that the downturn in Europe, which provides 45 percent of Autodesk's business, hurt the company. But they also attributed the slackened sales to the lingering effects of a buggy AutoCAD release 13. Analysts also praised Autodesk's move to diversify, including its four-month-old multimedia division, Kinetix, but CAD software still accounts for 75 percent of its revenues.

But Cisco, the leading manufacturer of Internet-working equipment such as hubs and routers, provided the bright spot in yesterday's financial reports by beating expectations, even with the one-time charge associated with the StrataCom merger. After the merger, fourth-quarter sales of $1.3 billion translated into $276.6 million in net revenue, or 41 cents per share. Analysts were expecting revenues of 40 cents per share.

"It's great," said Terrie Murphy, managing director at Smith Barney. "This will be very well received by Wall Street. They've done an outstanding job."

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