Hewlett-Packard's disappointing third-quarter results on Tuesday have fuelled concerns about the computer and printer maker's business model and its credibility among investors.
Its shares fell 10 per cent yesterday after its third-quarter revenues and earnings failed to meet expectations.
Mr Joel Wagonfeld, analyst at Banc of America Securities, said HP's "inconsistent performance leaves us unsure as to the sustainable trajectory of revenue and profit growth for the combined company".
The lacklustre results were a setback for the company, which is trying to demonstrate the merits of its $19 billion (€17 billion) acquisition of Compaq Computer last year.
The company has been plagued by anaemic revenue performance since the acquisition closed in May 2002, but it has been able to point, in part, to the weak economic environment that has hurt information technology sales worldwide. However, the most recent quarter was the first time HP has failed to live up to earnings expectations.
Mr Wagonfeld said his key concerns about HP's combined results have been the quality, visibility and predictability of the company's earnings.
Analysts said HP's most recent results raised key questions about the group's business model for its personal computer unit.
HP faces tough competition from Dell, which has become the world's leading PC maker, with its low-cost, direct-sales business model.
The group said the PC division swung to a loss because the company aggressively cut prices even as costs for components began to rise. The company also ordered too few computer monitors and then had to ship by air to get adequate supplies.
HP said it had adopted a more disciplined approach to pricing for the back-to-school season, but analysts said Dell's lower cost base would enable it to price more aggressively, forcing HP to choose between market share and profitability.
Mr Martin Reynolds at research group Gartner said: "HP really needs to grow market share in PCs and the enterprise business to be competitive in the long run and to fight Dell to a standstill in the US market. Looking at the latest results, they have a way to go."
HP on Tuesday reported fiscal third-quarter net income of $297 million, or 10 cents a share, compared with a loss of $2 billion, or 67 cents, the year before.
Not including charges, HP earned 23 cents a share, short of analysts' expectations of 26 cents. Revenue rose 5 per cent to $17.35 billion compared with expectations of $17.46 billion.
