Updated from 12:35 p.m. EDT

Shares of

Lexmark

(LXK)

nose-dived Friday after the computer-printer maker reported second-quarter earnings short of Wall Street's estimates, and also warned third-quarter profits would likely also miss forecasts, both because of slack demand for high-end printers.

Lexmark closed down 22%, or 14 1/4, to a new 52-week low of 49 3/4.

The company said its net income rose 13%, to $84.1 million, or 62 cents a diluted share, from $74.5 million, or 55 cents a share, in the second quarter of last year. Analysts had expected earnings of 64 cents a share in the latest quarter, according to a consensus estimate provided by

First Call/Thomson Financial.

The No. 2 supplier of inkjet printers in the U.S. after

Hewlett-Packard

(HWP)

, Lexmark reported revenue rose 9% to $893 million, from $817 million. The company said the effects of foreign currency translation figure precluded what would otherwise have been a 13% increase.

At the release of first-quarter earnings in March, management had said supply problems should cease in the second quarter, but in May, Lexmark and rivals

Hewlett-Packard

and

Xerox

all warned of slowing sales in the three-month period.

Yet Friday's hammering of Lexmark shares suggests the company's results surprised investors. Andrew Neff, an analyst with

Bear Stearns

, said he received several calls, before Lexmark's earnings release, from investors asking whether to buy ahead of the numbers. "People may have read into the fact that

Lexmark did not preannounce," Neff said, and thereby positioned share prices for a fall. Neff rates Lexmark attractive and said his firm has done no underwriting for the company.

Lexington, Ky.-based Lexmark attributed the quarter's results to less-than-expected demand for its more expensive, monochrome laser printers. Also, since Lexmark makes over half of its money overseas, a weak euro hurt profits, the company said.

In its quarterly release, Lexmark also said earnings for the current three-month period should surpass results in the year-earlier period. During a conference call Friday, however, company management guided down expectations for the quarter, saying profits could miss Wall Street's estimate of $2.81 a share, according to a First Call survey.

Lexmark's statements prompted swift action from analysts.

Merrill Lynch

cut its rating on the stock to intermediate-term accumulate from intermediate-term buy, and

Salomon Smith Barney

downgraded Lexmark to neutral from outperform.

Bear Stearns

lowered 2000 earnings estimates to $2.60 from $2.70 and for 2001 from $3.15 to $3.00.

Paul Curlander, Lexmark's chairman and chief executive, said the company expects earnings per share to grow 10% to 15% this year. "However, we believe that our goal of 20% average annual increases in earnings per share remains attainable going forward," he said in a statement.

Once the information products division of

IBM

(IBM) - Get Report

, Lexmark went public in November 1995. In today's report, Lexmark pointed to year-to-year earnings growth for the 19th consecutive quarter since its IPO.

Lexmark's debt-to-total-capital ratio at June 30 was 22% compared to 17% at the end of the first quarter. Since that quarter,

Moody's

and

Standard & Poor's

upgraded the company's debt rating.

During the quarter, Lexmark spent $175 million to repurchase more than 2 million shares of its common stock. It said it is authorized to spend an additional $153 million in buybacks.