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HP's stock rockets on Agilent IPO, earnings

Hewlett-Packard's stock spikes up over 16 percent today in the afterglow of the successful spinoff of Agilent and an improving earnings outlook for 2000.

Hewlett-Packard's stock shot up over 16 percent today, aided by the afterglow of the successful spinoff of Agilent Technologies and an improved earnings outlook for 2000.

HP shot up 13.31 points, a 16.44 percent rise, to close at 94.31. The company holds an 85.4 percent stake in Agilent. Agilent closed its first day of trading at $44.75 a share, an increase of 49.17 percent from its opening price.

In addition, the Palo Alto Calif.-based firm yesterday met lowered expectations on earnings yesterday, helping the stock rebound from expectations that the company might not even make the lowered mark. Also, analysts were encouraged that executives were setting aggressive growth goals of 12 to 15 percent for next year.

"Many people had thought Fiorina would take a conservative stance and low-ball estimates so she could be sure of meeting them," George Elling of Lehman Brothers told Reuters. "But she didn't do that. She took the bull by the horns and was very aggressive."

Analysts said there had been a lot of fear that the company would suggest to them that earnings next year would be lower than they had forecast. After lowering fourth-quarter forecasts twice in October, analysts became concerned that HP's problems would take longer to correct than previously expected.

Yesterday, the company posted profits of $760 million, or 73 cents per share, compared with $710 million, or 72 cents per share, last year. Wall Street analysts surveyed by First Call were expecting profits of 73 cents per share after revising estimates downward.

For the three-month period, HP had revenues of $11.4 billion, up from $10.3 billion for the same period in 1998. Excluding expenses related to the spin-off of Agilent Technologies, HP said that earnings from operations reached 75 cents per share.

"We really tested the ability of the organization to respond and it did. The business performance issues we face are not new, and it will take some time to address them. What is new is the amount of attention that management is paying to them," Carly Fiorina, HP's CEO, said in a conference call yesterday.

Hewlett-Packard has not been able to keep up with competitors such as Sun, in terms of revenue growth. Sun's sales rose 25 percent in the recently ended quarter, bolstered by demand from fast-growing Internet companies.

Fiorina said she has challenged management to meet goals of 12 to 15 percent revenue and profit growth in fiscal 2000. To spur employees on, Fiorina said a new compensation plan is now in place for the top 100 managers that measures performance against HP's best performing competitors.

Fiorina also noted that the company is working to cut $1 billion out of its operational costs through a reorganization. That money will be used to improve its sales force and to fuel strategic research and development activities.

Reuters contributed to this report.