After releasing disappointing earnings last night,

Agilent Technologies

(A) - Get Report

became the subject of a heated debate on Wall Street this morning. One side, led by

Morgan Stanley Dean Witter

analyst Jay Deahna, said the company has hit an order bottom and should be bought based on management's assertion that orders will be positive again in the fourth quarter. The other, led by

J.P. Morgan H&Q

analyst Daniel Kunstler, argued that there are few signs of an industry recovery and projected a cyclical downturn that will take a long time to fix.

Morgan Stanley upgraded the company to strong buy from market outperform while J.P. Morgan told investors that a near-term buy rating "no longer works" and switched to a long-term buy. Both firms differ on the interpretation of last night's earnings release from the company, which by any gauge was devastating. (Both J.P. Morgan and Morgan Stanley have had a banking relationship with Agilent in the past three years.)

In recent trading, Agilent was off 5.5% to $36.68, well below its 52-week high of $83.75. Yesterday, the company posted second-quarter income of $96 million, far less than the $166 million it booked last year. Sales were slightly higher this year, but the company's operating profit took a big hit. The second quarter came in at $51 million, far less than the $165 million from last year.

Last night, Agilent Chief Financial Officer Bob Walker told investors $100 million in orders would be canceled in the third quarter. That's after $500 million of orders were canceled in the latest second quarter. Walker told investors there aren't likely to be any more cancellations, but he said the company will post a loss in the third quarter.

Most importantly, Walker told investors that the company might return to profitability in the fourth quarter if incoming orders throughout the rest of the third quarter remain steady with the second quarter -- the major flashpoint of controversy.

Morgan Stanley's Deahna believed Walker's assertion and raised his price-target to $50 from $45. After hearing Agilent management say that communication chip customers have burned through most of their inventories, Deahna argued that the company would indeed be able to turn a profit in the fourth quarter. "The company sees a pick up in chip orders in the near future, which should cut the wake in terms of driving the company back to sequential revenue growth in the fourth quarter," he wrote to investors this morning.

But J.P. Morgan's Kunstler wasn't willing to put blind faith in the idea that Agilent can easily cut through the choppy seas. He told investors to wait. "With the prospect of a large loss in the third quarter and a fourth-quarter recovery that has a large speculative component, we find it hard to bank on significant and sustainable appreciation in the next couple of quarters," he wrote.

Morgan Stanley found another bull in

Lehman Brothers

analyst Edward C. White Jr., who told investors to buy on weakness. White

reiterated his strong buy rating, but slashed his 2001 earnings estimate by 78 cents and his 2002 earnings estimates by a dollar. "Short-term weakness in the company's shares will present an opportunity for investors to own a leading technology hardware company with strong growth opportunities," he said. (Lehman Brothers has a banking relationship with Agilent.)

Bear Stearns

analyst Robert Maire said he liked the company's long-term prospects, but he was unconvinced about Agilent's near-term future -- falling in line with J.P. Morgan's thinking. He cut his rating to neutral from attractive and said he would get more interested in the stock if it fell below $30. "Uncertainty is perhaps the greatest fear on the part of investors, and as such, typically one of the biggest discounters in valuation of a company," he wrote. "Though there remains much potential in the many sectors of Agilent, it remains for the time being 'potential.'" (Bear Stearns has no banking relationship with Agilent.)

Rack up another vote for J.P. Morgan --

Credit Suisse First Boston

analyst David Dusenberry reiterated his hold rating and said that fourth-quarter profitability for Agilent was in "serious doubt." He also dropped his earnings estimates. (CSFB has a banking relationship with Agilent.)