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Updated to include comment on the movement in Harley-Davidson shares Thursday

NEW YORK (

TheStreet

) -- The third period was unkind to the motorcycle business, at least judging by

Harley-Davidson's

(HOG) - Get Harley-Davidson, Inc. Report

latest quarterly report, issued before the opening bell Thursday morning.

But investors bid the company's stock up 5.4% in afternoon trading, perhaps reacting to a plan also announced by Harley to jettison its Buell motorcycle brand and sell its MV Agusta unit, an Italian cycle maker, as soon as it can.

Heavy buying in Harley shares ahead of the company's earnings report yielded to selling at the open of Thursday's session, with the stock plunging 7% in the early going. But it staged a dramatic reversal through the rest of the day, perhaps as investors delved into the company's report a bit and saw that the results "weren't as disastrous as some were expecting," says Steven Spencer, a trader and partner at SMB Capital in New York.

Add in a probable short squeeze as Harley shares began advancing -- some 17% of the company's float was in the hands of short sellers as of Sept. 25 -- and the intraday rally intensified.

Harley stock closed Thursday at $27.69, up $1.43, or 5.45%. Volume reached nearly 17 million shares, more than three times the daily average turnover in the name.

Harley's results appeared to suggest that slackening demand for Harley hogs -- a discretionary item if ever there was one -- may finally have slowed down.

The iconic Milwaukee-based chopper maker said its profit cratered by 84% to $26.5 million, or 11 cents a share.

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But that included a $14.2 million charge to pay for the shuttering of Buell and a write-down of $18.9 million in the value of MV Agusta, which specializes in racing bikes.

Harley policy is to refrain from providing non-GAAP figures, so it didn't strip out the charges from its EPS number. With 233.9 million shares outstanding, however, the charges would translate to roughly 14 cents on a per-share basis.

Analysts, who normally exclude one-time items from their projection models, were looking for Harley to post earnings of 21 cents a share in the quarter.

With revenue the focal point for many investors, Harley reported a steep drop on its top line as well. Revenue fell 21% to $1.12 billion, just topping Wall Street's consensus target of $1.1 billion.

Global retail sales of Harley motorcycles, a key reading of the company's core business, dropped 21.3% year over year, Harley said, but that's an improvement over the second-quarter decline of about 30%.

Said Harley chief Keith Wandell, "While the environment remains challenging for us, we are mildly encouraged by the moderation in the decline of dealer retail Harley-Davidson motorcycle sales."

As a result of shutting down Buell, Harley will lay off about 100 workers. In total, the company will spend about $125 million to discontinue the brand, about $115 million of that in 2009.

Buell and MV Augusta combined to bring in $21.8 million in revenue in the third quarter, down from $26.1 million a year ago.

-- Written by Scott Eden in New York

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Scott Eden has covered business -- both large and small -- for more than a decade. Prior to joining TheStreet.com, he worked as a features reporter for Dealmaker and Trader Monthly magazines. Before that, he wrote for the Chicago Reader, that city's weekly paper. Early in his career, he was a staff reporter at the Dow Jones News Service. His reporting has appeared in The Wall Street Journal, Men's Journal, the St. Petersburg (Fla.) Times, and the Believer magazine, among other publications. He's also the author of Touchdown Jesus (Simon & Schuster, 2005), a nonfiction book about Notre Dame football fans and the business and politics of big-time college sports. He has degrees from Notre Dame and Washington University in St. Louis.