IBM and HP downgraded on Wall Street

As concerns over high-tech spending by consumers and businesses alike

increased, the world’s two largest computer makers were hit hard on Wall

Street this week as key market analysts downgraded the earnings potential of the

two companies.

"We think IT spending is slowing down," said Merrill Lynch analyst

Thomas Kraemer. IBM and Hewlett-Packard were especially vulnerable, he said. IBM

shares closed down $4.15 at $86 on the New York Stock Exchange, the lowest since

April 1999. Hewlett-Packard closed at just $30.65, less than half its year high

of $77.

Kraemer said mainframe sales could pick up in the next six months for IBM as

the company launches new models. But any real slowdown in corporate spending

could hurt 2001 second-quarter and full-year results. Regarding Hewlett-Packard,

Kraemer said economic trends "suggest more risk of another disappointment.

A concerted effort by H-P to drive Linux, improve its channel relationships, and

continued success with color could materially improve our outlook. But we'd like

to see those things happen."