H-P Can't Dodge Lexmark Warning Shot

Hewlett-Packard

(HWP)

may have been able to spin off

Agilent

(A) - Get Report

before the test-and-measurement firm's

troubles became known. It couldn't, however, get out of the way of Friday's warning from fellow computer-printer maker

Lexmark

(LXK)

.

While reporting its second-quarter earnings, Lexmark warned that weaker-than-expected

demand for its monochrome laser printers would weigh on its next two quarters, thus igniting fears of weakness in H-P's core imaging business. H-P tanked 6 5/8, or 5.1%, to 123 3/8.

Though today's news was worse than analysts had been expecting, Lexmark's difficulties weren't wholly surprising. The company first acknowledged that the laser-printing segment looked soft in late May. H-P investors may have gotten overly optimistic when it became clear that Lexmark wasn't going to preannounce bad news for the second quarter, and equated that silence as a signal of clear sailing for H-P. The stock had rallied to an all-time high last week.

Lexmark's warning has introduced an element of uncertainty into H-P's third quarter. In a note he issued on Lexmark today,

Bear Stearns

analyst Andy Neff acknowledged "a risk of a price war, although H-P has said it does not expect one." H-P did not return a call for comment.

Neff added, "H-P's stock -- as we have noted elsewhere -- needs upside surprises to support its valuation." Bear Stearns has not performed recent underwriting for H-P, which Neff rates a buy.

"H-P's valuation isn't

Sun's

(SUNW) - Get Report

valuation," Neff told

TheStreet.com

. "But they have to deliver on expectations." H-P is scheduled to report earnings in mid-August.