Hewlett-Packard

(HWP)

reported earnings that surpassed analysts' expectations Tuesday, as income growth slightly outpaced revenue growth.

Crediting rapid growth in the PC business and a restructured sales force, the company said it now expects "consistent and profitable double-digit growth on an ongoing basis."

For the second quarter ended April 30, the Palo Alto, Calif.-based computing and imaging company reported earnings of 87 cents a diluted share, excluding expenses from an early retirement program and results from

Agilent

(A) - Get Report

, the semiconductor test and measurement equipment maker that H-P plans to spin off on June 2 through a dividend to shareholders. H-P currently holds 380 million shares, or about 84.1%, of Agilent's common stock.

Agilent itself reported earnings Tuesday that matched analysts' expectations, as orders grew 38% in dollar terms.

H-P's latest results exceeded the consensus of 82 cents a diluted share predicted by analysts polled by

First Call/Thomson Financial

.

Including those expenses, net income was $899 million, or 79 cents a diluted share, a gain of 17% over the $766 million, or 73 cents a diluted shares, reported in the comparable quarter last year.

Revenue grew 15%, to $12 billion, from $10.5 billion in the comparable quarter last year. In the year-earlier quarter, revenue growth was just 4%. Analysts had predicted growth of close to 15% this quarter. The company said the growth was actually 17%, "adjusted for currency effects," but it did not elaborate.

Gross margins as a percentage of revenue fell to 28.5% from 30.2% in the comparable quarter last year.

Analysts have expressed concern about profit margins as the company's focus has shifted toward less-profitable consumer PCs and printers. In the first quarter, profit narrowed slightly from the comparable quarter because of the changing product mix and rising expenses.

H-P's shares retreated 1 5/8 to 138 1/2 in after hours trading, according to

Instinet

. They had closed up 6 1/8, or 5%, at 140 1/8 for the day. The company's results were reported after regular trading had ended.

Agilent, meanwhile, reported net income of $166 million, or 36 cents a share, including investment gains, for the second quarter ended April 30. Without the one-time items, earnings of 32 cents a share matched the First Call/Thomson Financial consensus. In the comparable quarter last year, net income was $157 million, or 41 cents a share.

Revenue was $2.5 billion compared to $2 billion in the comparable quarter.

The company attributed the fall in net income on its health care business, where orders fell 8%. Orders were pulled into fiscal 1999 to avoid problems from the year 2000 computer bug and hospitals were under pressure, Agilent said.

Agilent shares fell 5 5/8 to 90 3/8 in after hours trading, according to Instinet. The slide erased gains of 7 13/16, or 9%, made in regular trading.