PALO ALTO, Calif. -- Microsoft (MSFT) - Get Report and Intel (INTC) - Get Report are masters of managing Wall Street's expectations. Now Hewlett-Packard (HWP) , the granddaddy of Silicon Valley, is finally figuring out how to play the game.

"Underpromise and overdeliver, that's one of our top strategies," says Larry Sennat, communications manager of H-P's personal systems group. Adds CFO Bob Wayman: "Two years ago, revenues were good, but expenses were out of control. Now Wall Street sees the opposite. ... We are now telling Wall Street to expect only modest growth going forward."

In other words, be extra conservative, for when has Wall Street rewarded a tech company for simply meeting quarterly earnings expectations? For its fiscal second quarter ending April 30, Hewlett-Packard expects revenue to rise less than 5% from last year's record $12 billion, a quarter that "was our best quarter in terms of orders ever," says Wayman.

It shouldn't have to be this way for this first-class research-and-development outfit. H-P made a costly bet that Microsoft's Windows 2000 and Intel's McKinley chip would propel earnings and revenue growth this year, but delays have left H-P searching for growth in other areas. The company's new midrange Unix servers should help third- and fourth-quarter earnings, and an improving Asian outlook has Wayman high on the semiconductor measurement business. But the key in the interim may be how Wayman and CEO Lew Platt massage the sell side.

"The lower number gives them more wiggle room," a fund manager who is long the stock said last week at the

BancBoston Robertson Stephens

tech conference.

In the past Hewlett-Packard has failed to recognize the importance of guiding analysts' expectations, and has accordingly received little wiggle room when it disappointed its followers. The company has over the last two to three years consistently missed Wall Street estimates or warned at the last minute of shortfalls, as

TheStreet.com

has

documented. As a result, the stock has suffered. That makes for a sharp contrast with Microsoft shares, which have mostly continued to rise as earnings consistently beat Wall Street targets.

By gradually lowering expectations, Wayman is setting the stage for one of the company's five divisions -- Measurement, InkJet, LaserJet, Personal Systems and the newly created Enterprise Computing Solutions, headed by rising star Ann Livermore -- to provide an upside surprise. "The semiconductor test-and-measurement arena has hurt us, but the worst is behind us there," the executive says.

Meanwhile, Hewlett-Packard has high hopes for Livermore's enterprise computing division and its new

eServices

marketing strategy. A new advertising campaign is on the way, says Platt, with the message something along the lines of how the company will catch the second wave of the Internet craze. Can H-P differentiate this message from the successful "dot.com" and "e-business" ad blitzes of

Sun Microsystems

(SUNW) - Get Report

and

IBM

(IBM) - Get Report

, respectively?

It better, for shareholders are growing restless as the stock remains mired at 1997 levels. "Back in the day, H-P was the company to work for," H-P shareholder Theresa Payette said after the company's annual session with stockholders at De Anza College in Cupertino, Calif. "But things have changed."