The company, which has been dogged for much of the year by price wars in the PC market and the economic crisis in Asia, said its earnings rose to $621 million in the quarter ended July 31 from $617 million a year ago.

Earnings per share were flat at 58 cents on a diluted basis, reflecting an increase in the number of shares outstanding.

Although those numbers were above almost all analyst estimates, the company said it saw little reason to celebrate.

"We're not satisfied with our overall performance," chairman Lewis Platt said in a statement, adding that the third-quarter results were "substantially below the goals we had entering the quarter."

The Palo Alto, California-based company, whose products range from laptop computers to printers and powerful computer workstations, is the second-largest computing company behind International Business Machines Corp.

Hewlett-Packard's sales rose to $11 billion from $10.5 billion, which the company said was another disappointment and reflected its lowest rate of revenue growth since the second quarter of 1997.

In a conference call with analysts after the earnings were released, Hewlett-Packard chief financial officer Bob Wayman listed several reasons the company had for being conservative about its outlook.

Asia, he said, remained "quite weak" and showed no signs of a turnaround, while the personal computer market was seeing continuing pricing pressures and the looming year 2000 technology crisis could create more problems.

"No one knows how that will unfold," he said.

In addition to the continuing softness in Asia, the company also said it was seeing new signs of an uncertain outlook in the United States and Latin America.

Amid these multiple trouble spots, Hewlett-Packard said there were some signs it had made progress, at least in stemming its declines.

Operating expenses grew just four per cent in the third quarter, compared with a growth rate of 17 per cent in the first half of the year. Hewlett-Packard has wrestled with high expenses most of this year and said the third-quarter figures showed some of the steps it had taken, such as management pay cuts, had started to pay off.

"This was great progress in a crucial aspect of our performance," said Wayman. For that reason, he said the company would likely take more cost-cutting measures in the fourth quarter.

A Hewlett-Packard spokeswoman said the company would consider a wide range of cost-cutting options, which might include job cuts. She said Wayman's comments "were not signalling any mandatory job cuts," and that the company has typically been able to reduce expenses through alternatives to layoffs like attrition and voluntary incentives.

Last month, Hewlett-Packard imposed a three-month, five per cent pay cut on 2,400 of its managers and said it would shut its offices for the week over Christmas to bring down costs. That move followed other management pay cuts and temporary office closings during the second quarter.

The company said revenue in its computer business was up six per cent, although personal computer revenues was flat. Still, it said the PC business was one of the bright spots, returning to profitability in the third quarter after losing money in the prior period.