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Hewlett-Packard Execs Bullish on Future

The self-described e-services company sees low double-digit revenue growth in its second half.



is finally

learning how to play the Wall Street game of guiding expectations.

After two years of missing estimates, the PC and peripherals company has now beaten earnings expectations for the fourth quarter in a row. For its second quarter ended April 30, H-P earned $918 million, or 88 cents a share, a 34% increase in profits over the year-ago quarter. Revenue -- a constant sore spot that keeps H-P from the kind of rallies seen by


(IBM) - Get International Business Machines Corporation Report

-- was up 3% year over year, to $12.4 billion from $12 billion.

According to H-P CFO Bob Wayman, this revenue weakness will change dramatically in the second half of the company's fiscal year, which ends in October. Wayman told analysts to expect "low double-digit revenue growth" for both the third and fourth quarters on a year-over-year basis.

That's some ambitious guidance from H-P, which had respective year-over-year growth of 1% and 3% in the first two quarters of this year. To spur this kind of growth, H-P plans an aggressive rollout of products, including the company's well-regarded N-class servers in June.

Wayman also hinted in Monday's conference call that operating costs -- which rose only 1% year over year this quarter in terms of dollars -- will rise as early as the third quarter because of the company's realignment into two companies later this fiscal year. H-P execs will spell out the realignment at an analyst meeting in New York City on June 2.

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Dan Niles, an analyst at

BancBoston Robertson Stephens

, went so far as to say Monday that he is telling clients to sell IBM and buy H-P. "If you have to be in hardware, H-P is a much lower-risk way of playing the market than IBM right now, " he said.

Niles said the company's measurement division, which later this year will be spun out into a separate entity, is recovering. Revenue was up 13% on a sequential basis, and orders -- always a good indicator of future growth -- grew 14% over last year's second quarter. Niles has a long-term attractive rating on the stock, and his firm has done no H-P underwriting.

H-P's 10% order growth was its best in four quarters, thanks to strong demand from Asia. Since more than half of the company's sales are international, a stronger Pacific Rim will benefit H-P going forward. H-P also maintained its No. 4 position worldwide in terms of PC sales.

Wayman also said H-P is the fastest-growing indirect vendor of PCs in the U.S. Big question marks still surround its PC division, which is sticking with a hybrid model eerily similar to



. And investors know what recently happened to that company.

H-P, which seems to have its hand in just about every tech product line, has its work cut out for it. Two of its main divisions, PCs and printers, suffer from declining average selling prices and fierce worldwide competition.

Now that H-P has said it will be able to hit IBM-like levels in terms of revenue growth, the diversified giant will need to juggle faster growth with growing expenses to please a suddenly receptive Wall Street.