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followers, the cost-cutting story is wearing thin. Shares of H-P took a drubbing as investors shrugged off the company's January quarter earnings outperformance and focused on the dimming growth outlook. A day after CEO Carly Fiorina sounded doubtful about achieving sales growth targets this year, a couple of Wall Street analysts argued that H-P will come up short of the revenue goal.

In recent trading, shares plunged $2.72 or 15% to $15.46.

In a morning note, Goldman Sachs downgraded H-P shares to in-line from an outperform rating. "While H-P's valuation remains low -- and investors already owning HPQ shares are unlikely to sell them based on the January quarter -- we also see little that will get new investors excited at this point," wrote Laura Conigliaro.

Back in December, Fiorina had suggested the company would see growth of around 2% to 4% in fiscal year 2003, in line with expected IT spending growth. But Conigliaro expects revenue to stay flat with last year's levels.

Others are more pessimistic. "We think that

2% to 4% growth rate is unlikely and now forecast a 3% decline," said Merrill's Steve Milunovich in a note. Calling January quarter revenue "disappointing," he dished out two-thirds of the blame to the weak spending environment, laying the rest at H-P's feet.

The company's recent sales shortfall came mostly from the computer arm, where commercial PC sales fell 4% sequentially, followed by enterprise systems, which saw a 6% drop-off in revenues, noted Milunovich. "Given strong 4Q results from the distributors, we expected better for H-P," he said.

In follow-up conversations with H-P execs, he added, it appeared that January may have come in weak relative to November and December -- a trend that raises some concerns about other vendors in the March quarter.

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On the plus side, H-P can boast that it returned its computer arm to profitability a quarter ahead of schedule -- a feat accomplished largely through cost-cutting, given that sales were slightly down. But yesterday Fiorina implied that it may be tough to improve on that performance, given continued aggressive promotions by rivals.

Certainly, H-P shows no signs of easing up on the price front. "I think the pricing environment is what it is," said H-P's Jim McDonnell, vice president of marketing and sales strategy in the computer division, in an interview with

. "The key with that is not to be unhappy about it but understand and react to it."

H-P has plenty of company when it comes to the revenue squeeze. Earlier this month,


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predicted sales will fall off around 2% in the quarter now under way. "H-P had the same negative view on the overall IT spending environment as


(HPQ) - Get HP Inc. Report

, but at twice Dell's revenue size, it is harder for them to buck the trend," summed up Lehman's Dan Niles in a note out this morning.

In the wake of the latest results, Niles trimmed his revenue outlook for fiscal year 2003 by $700 million, on top of an earlier revenue estimate cut of $800 million only last month. He now expects sales of $72.3 billion.