Sometimes low expectations are a blessing. That's probably the case for Hewlett-Packard ( HPQ), which will report financial results for its third quarter today following a monthlong parade of technology earnings reports that mostly ranged from uninspiring to painful.

Nobody's expecting much upbeat news at this point, but at least more lousy news wouldn't come as a surprise.

Given that H-P holds the top spot in PC market share, its guidance is bound to sway sentiment on the sector.

Back in June, at a time most observers still were expecting a second-half spending pickup, H-P was one of the first tech companies to warn of a slowdown.

CEO Carly Fiorina predicted then that the company's second-half sales would decline 5% to 7% from the first half. It's not clear how she'll adjust that forecast.

Leading up to the report, some analysts have been busy tamping down expectations for revenue at the company, in what will be its first combined earnings report since it merged with Compaq.

One relatively new concern centers on indications of flagging consumer confidence and profit warnings at electronics retailers. Neither bodes well for a company that draws about a third of its revenue from consumers.

"H-P's heavy reliance on consumer end markets renders it vulnerable to this relatively fickle source of demand," wrote Banc of America analyst Joel Wagonfeld in a research note speculating that revenue could come in below his expectations of $17 billion. "We believe the company will offer an overall muted outlook, particularly with respect to consumer demand just ahead of the critical back-to-school season and also for enterprise spending exiting the second half of 2002."

Wall Street estimates are for $16.74 billion in revnue for the third quarter and 14 cents a share in earnings, according to First Call/Thomson Financial.

In a move that could further depress revenue, H-P has recently cut prices on its consumer offerings, in an apparent bid to stem recent market-share losses to Dell ( DELL). According to a report from First Albany, H-P has trimmed prices on desktops significantly, with Compaq products undergoing price cuts of as much as 15% this month.

It's not clear yet whether H-P will apply the same strategy to the enterprise market.

At least on the corporate side, though, there are scattered signs that business isn't getting worse. Earlier this month, Lehman analyst Dan Niles upgraded H-P and the computer hardware sector from underweight to market weight, citing data from the U.S. government that shows business investment is increasing for the first time since the first quarter of 2001. Previously, he had been negative on the group since the last quarter of 2000.

"In general, we have been very bearish on an IT spending pickup and have long believed that there was no pickup in IT spending this year and that next year would be mediocre also," wrote Niles. "We still believe that, but this is the first time in our minds that we have been positively surprised by any corporate spending patterns in the U.S. for almost two years, in that it is not getting worse and is actually stabilizing."

At the same time he upgraded H-P, though, Niles also cut his revenue expectation for the third quarter by a hefty $500 million, citing expectations for lackluster computer sales. Following its merger with Compaq, H-P will draw about 28% of its revenue from PCs.

In the meantime, H-P also must contend with its own internal difficulties -- namely, the disruptions that inevitably result from a big merger. Analysts cite concerns about its integration with Compaq as one more reason to be cautious on the stock for the time being. (Though on the plus side, H-P appears to have made decent progress toward its goal of wringing $3 billion in costs from the Compaq purchase).

To be sure, H-P looks cheap by some measures. It now trades at the low end of historical ranges of price-to-sales and price-to-book, notes Banc of America's Wagonfeld. Nonetheless, he wrote, "We believe the concerns over integration risk and quality of earnings will continue to outweigh an otherwise attractive valuation."