By Scott Moritz

It was a tale of two techs Tuesday. Hewlett-Packard (HPQ) surprised Wall Street on Tuesday with a fourth-quarter earnings report that beat analysts’ profit and sales targets. HP shares soared nearly 14% in early trading.

Meanwhile, glass maker Corning (GLW) warned of a sales shortfall in the current quarter as demand for its flat-screen TV and computer panels drops faster than anticipated. Shares fell nearly 12%.

HP posted preliminary adjusted earnings of $1.03 a share, which compares with 84 cents in the year-ago quarter and beats analysts estimates by 3 cents. Sales for the quarter ended Oct. 31 were $33.6 billion, an 19% improvement from revenues of $28.3 billion in the same quarter last year. Analysts were looking for sales of $33 billion, according to Thomson First Call.

The recent acquisition of IT service shop EDS so far has helped HP dodge the full impact of the impending recession. “Our ability to execute in a challenging marketplace differentiates HP, enabling it to increase share, expand earnings and emerge from the current economic environment as a stronger force,” CEO Mark Hurd said in a statement.

Looking ahead, HP predicts pro forma profit of about 94 cents a share on sales of $32.25 billion in the first quarter ending in January. Analysts expected adjusted earnings of 93 cents a share on $33.7 billion in sales. HP says it will release its October quarter earnings Nov. 24.

Corning, however, continues to struggle with order cuts as flat-panels and big-screen TV inventories pile up. The company, the largest maker of liquid crystal display screens for televisions and computers, says fourth-quarter sales will fall below its guidance of $1.1 billion to $1.2 billion. It warned that profits will be at the low end or below its prior guidance of $0.20 to $0.28 a share. Corning did not offer revised financial targets.

By Scott Moritz

Dell (DELL) is trying unpaid vacations (for starters). 

The No.2 PC maker, already grappling with a massive turnaround strategy, is taking a closer look at expenses and has informed employees of a company-wide cost cutting plan that includes voluntary five-day unpaid leaves for everyone.

According to an internal memo confirmed by a company representative, Dell has frozen its hiring and is considering a range of cost-reduction plans.

In addition to the unpaid furloughs, the company is offering buyouts and cutting some of its contract workers. Dell already completed a 10% staff reduction plan this year that was put in place in May.

Sales, particularly in the company’s PC business, started slumping in September, and Tuesday’s move shows they haven’t bounced back yet. Dell is scheduled to release its October earnings results November 20. Some observers are bracing for a shortfall warning before then, given the slumping demand and overall decline of the economy.

Dell has been particularly vulnerable to the slowdown, having started its shift to a retail sales strategy and away from its famed buyer-direct, made-to-order manufacturing scheme. The company had boosted its staff levels for the transition.

In 2005, Dell had 72,000 employees, and by the end of 2006, the company had about 90,000 workers. Dell had 88,000 employees at the end of last year. “These were mostly white-collar workers brought in to build the business,” says Cowen analyst Lou Miscioscia. “Things have gotten a lot more challenging,” says Miscioscia, who doesn’t see the other PC makers like Hewlett-Packard (HPC) or IBM (IBM) having as bad a problem right now.

The big problem for Dell says UBS analyst Maynard UM, is that “they are unfortunately retooling during the backdrop of a weak end market. “

By Scott Moritz

If Dell’s (DELL) view is right, the tech spending hiatus that started in July isn’t ending anytime soon.

Less than a week after Dell warned that a U.S. slowdown in information technology spending was spreading to Europe and Asia, the No.2 computer maker now says the slump is getting worse.

“We saw some weakness in July, and August is always slow,” Dell CFO Brian Gladden said at a Bank of America investor conference Tuesday. “By the second week in September, we started getting the sense that this isn’t coming back the way we expected it to,” Gladden said. Earlier Tuesday, the company issued a statement that it was “seeing further softening of demand in global end-user demand in the current quarter.”

Dell shares tumbled 10% to a new seven-year low after the company gave its latest grim assessment of the business climate. Outlining the areas of weakness, Gladden pointed out that in the U.S., spending by small and medium-sized businesses is down, and the financial sector, currently in a credit crisis swoon, was a bit challenging. “There’s not a lot of IT spending going on in the financial businesses,” Gladden said.

Overall big business spending, which accounts for about 80% of Dell’s revenue, was “mixed but weaker than we expected in the aggregate,” Gladden said.

Internationally, the U.K. remained a tough environment, Germany had been solid but turned weak in recent weeks and sales in China, which had been slow during the Olympics, had not snapped back as expected, said Gladden.

Tech investors have taken some confidence from the relative good health and solid spending in growing markets outside the U.S. And Wall Street’s deepening woes, while significant, had not had a dramatic effect on the larger IT market. At least not yet.

But as Dell tells it, cash-hoarding corporate customers aren’t exactly ignoring the drama of Lehman Brothers’ bankruptcy protection and AIG’s financing crisis.

Tuesday’s news on the consumer side, where Dell has made efforts to be a bigger player, wasn’t very encouraging either.

Best Buy (BBY), which has been selling Dell computers since last December, blamed its disappointing earnings Tuesday on higher costs and a dip in consumer spending as fuel and food prices rise. “We have some work to do in terms of managing our expenses amid a challenging macro economic environment,” Best Buy CEO Brad Anderson said in a press release.

Dell’s shift to a retail strategy isn’t well-timed. Since founder Michael Dell’s return to the top job in early 2007, Dell has attempted to shift from its online, made-to-order PC-maker approach to more of a retail PC supplier. As part of the effort, the company says it has already eliminated two factories, including one in Austin, Tex.

Dell is looking to cut more costs and has been shopping its manufacturing plants around as part of an attempt to move more of its manufacturing to partners. The company is about one year into a three-year cost-cutting plan and is expected to have reached its target of eliminating 8,900 employees by the end of this quarter.

Asked if the company was considering a quicker move to bring down expenses, Gladden said: “We are taking a fresh look at all those costs given the environment.”

The news comes a day after PC rival Hewlett Packard announced that it would cut 24,600 people, or 7%, of its combined EDS and HP workforce. Nearly half of those workers targeted are in the United States. HP plans to replace some of those workers with employees in other countries as part of its globalization plan.

By Scott Moritz

Motorola, the flailing No. 3 mobile phone maker, is dropping like a lead handset in industry rankings.

Skipping the No.4 slot, Motorola (MOT) is set to land at the back of the pack at No. 5, according to second quarter shipment numbers. Motorola shipped between an estimated 22 million and 23 million phones in the second quarter, say industry sources cited in a DigiTimes story Thursday. Those numbers compare with projections for 28.1 million phones shipped by LG and 24 million units from Sony Ericsson. Nokia (NOK) and Samsung are No. 1 and No. 2.

The stunning freefall in sales is happening at a faster clip than many observers expected. In March, Fortune.com reported that if Motorola’s weak sales trends continued, the Schaumburg, Ill.-based tech titan could fall to fourth place by year end.

Without any compelling new phones to followup on the Razr’s success, Motorola has been in free fall the past two years. The once-profitable handset unit, and formerly Motorola’s strongest business, lost half its marketshare since 2006 and plunged into the red. Earlier this year, Motorola announced plans to cut its losses and spin off its phone business. Even a recent headhunting mission to find a new CEO turned somewhat laughable when the targeted Hewlett-Packard executive announced that he was quite happy in his current job.

Motorola is expected to report second quarter results on July 31.

By Michal Lev-Ram

Intel’s Classmate PC was meant to be an affordable laptop for underprivileged kids in developing countries. Now the chip giant says it plans to bring the low-cost personal computers to the United States and Europe.

But the Classmate PC won’t be the first stripped-down laptop to be sold in the developed world. Others, including the 2-pound Eee PC by Taiwanese manufacturer Asus, have already hit saturated computer markets in countries like England. If the trend continues, analysts say it could force other manufacturers to cut prices to compete, especially in a weakening tight economy. Of course, the Classmate also would drive demand for Intel’s chips.

Intel says the cost of making the next-generation Classmate will be between $250 and $350 a pop. At this point it’s not clear how much they will retail for in the United States and Europe. But Intel says the price point will stay within the “netbooks” category — a growing segment of bare bones mini laptops that sell for under $500.

Intel (INTC) began selling its Classmate PC last year in Brazil, Mexico and other countries. The small rugged laptop has a waterproof keyboard, 7-inch screen and just 2GB of flash storage. But an Intel spokesperson said the model that will go on sale in the United States later this year will be a second-generation version that caters to the needs of students in more mature PC markets.

“It’s an initiative in the PC market that is in tune with the challenged economic climate,” says Matthew Wilkins, an analyst with research firm iSuppli. “Disposable income is being pushed, and a platform that is more affordable for the consumer is a good thing right now.”

Wilkins says it’s likely big manufacturers like Dell (DELL) and Hewlett-Packard (HPQ) will launch low-cost laptop models later this year.

By Michal Lev-Ram

Can Hewlett-Packard convince investors that it can keep growing in a weakening economy? That’s the key question facing the Palo Alto-based tech bellwether as it gears up to report first quarter earnings Feb. 19.

Although analysts don’t expect any surprises in the results from HP’s (HPQ) most recent quarter, they’re prepared to be surprised — in a bad way — by its guidance for the next. Like Apple (AAPL) and Cisco Systems (CSCO), companies that projected slower-than-expected revenue growth in the coming months (and whose shares took a hit as a result), the giant printer and PC maker could face tough times if consumer and corporate spending continues to slump.

“Their biggest challenge is the economy — just like every other company out there,” says American Technology Research analyst Shaw Wu. “This is a tough environment to be selling stuff in.”

Last week Wu lowered his target price for HP to $51 (the stock closed Thursday at $43.26), though he also added that the company is in a better position than most to “weather the storm.” It has “arguably the IT industry’s broadest portfolio of products,” he said. It sells to both the consumer and corporate markets and has a broad international footprint.

Selling hardware — printers, ink cartridges, computers — has long been HP’s bread and butter. Recently, though, it has started making a bigger push into software and services, such as its Snapfish online printing service.

About two-thirds of HP’s revenue come from outside of the United States — some of it from regions that have been largely untouched by the credit crisis. That’s an advantage analysts expect the CEO Mark Hurd to stress next week when he faces investors.

“HP generates over 65% of its revenues internationally, which should limit downside in case of a U.S. slowdown,” wrote Bernstein Research’s Toni Sacconaghi in a report to clients earlier this week.

According to Thomson First Call, analysts expect HP’s first quarter revenue to come in at $27.6 billion, with earnings per share of 81 cents.