Updated from 5:41 p.m. ET

Compaq

(CPQ)

reported third-quarter sales and earnings above Wall Street's expectations Tuesday after the close of regular trading. But fallout from the euro's tumble forced the company to lower its earnings guidance for the fourth quarter.

Excluding the $25 million Compaq made by selling some of its Internet investments, the company earned 30 cents a share in the most-recent quarter. Analysts polled by

First Call/Thomson Financial

were expecting the company would earn 29 cents a share. Including the gain, the PC maker earned $550 million, up from the prior year's $140 million.

Revenue looked strong, coming in at $11.2 billion. That figure is up from the year-ago's $9.2 billion and about $450 million higher than the First Call consensus.

After-hours trading showed investors reacting cautiously to the latest chapter in Compaq's long turnaround story. After closing the regular session at $27, the stock had last traded at $26 on

Island

.

Compaq's bottom line was helped by cost cutting that reduced operating expenses to $1.9 billion, $132 million lower than the year-ago quarter. The gross profit margin grew to 23.9% from the second quarter's 23.6% and the prior year's 23.2%. Meanwhile, Compaq did well in the two important areas of servers and storage. Sales of

Intel

-based servers running the

Windows NT

operating system rose 41% to $1.6 billion. And revenue in the company's storage division, flat in the second quarter, managed to rise 9%.

"Looking forward, we expect continued strong revenue growth," CEO Michael Capellas said in a statement. "We are confident that we can achieve 18% revenue growth and strong earnings per share improvement in the fourth quarter."

That would put the company's fourth-quarter sales at about $12.4 billion and give Compaq revenue growth of nearly 20% for the second half of 2000. Back in July, Capellas told analysts to expect "strong, double-digit revenue growth" in the second half of the year.

So, then, a blowout? Not exactly. The company conceded that 2000 revenue from its

Wildfire Unix

servers was on course to total $800 million, below its earlier estimate of $1 billion. And though the $133 million that Compaq's consumer PC business earned was an improvement from the prior quarter's $63 million and last year's loss of $169 million, it's still a fairly meager profit. Likewise, few investors are likely to get very excited about the 12% to 14% sales growth the company forecast for 2001

And then there's that darn euro. The company said its attempts to hedge itself against the fluctuations of the European currency had forced it to cut its fourth-quarter pretax earnings by $100 million. According to David Bailey, an analyst at

Gerard Klauer Mattison

, assuming a 32% tax rate and taking into account the continuing reduction of shares through buybacks, Compaq has essentially taken close to 4 cents off its per-share earnings guidance for the fourth quarter. Prior to the conference call, the First Call consensus for that period stood at 41 cents per share.

"They continue to show solid progress," said Bailey, whose firm hasn't done underwriting for Compaq. "But there are still several areas where they need to improve their performance. The revenue numbers are better; the EPS is good in a difficult environment where a lot of competitors are having trouble. But targeting 12% to 14% revenue growth next year -- that's moderate growth."