NEW YORK (CNN/Money) - Hewlett-Packard lent further credence to a day-long rally on Wall Street Wednesday, announcing fiscal fourth-quarter earnings of 24 cents a share, 2 cents better than analysts were expecting.

Shares of Hewlett-Packard (HPQ: Research, Estimates) were up $1.90 at $18.47 in after-hours trading.

In the company's fourth-quarter results, announced after the closing bell, HP reported revenues of $18 billion, topping analyst expectations of $17.29 billion but down from $18.2 billion for the same quarter last year.

Pro forma earnings per share were 24 cents, up from 8 cents a share in the same quarter last year, before the Compaq merger was finalized. Pro forma gross margin increased to 26.6 percent from the third quarter's 25.7 percent.

Including charges for more than 12,500 layoffs and restructuring resulting from the $19 billion merger with Compaq, HP earned $390 million, or 13 cents a share, in the quarter ended Oct. 31.

In a conference call after the earnings announcement, Chairman and CEO Carly Fiorina raised the total eventual number of employee reductions to 17,900 worldwide.

While Fiorina cautioned investors on HP's outlook, the company stood by analyst expectations of $18.4 billion in revenue and earnings of 27 cents a share for the company's first quarter of fiscal 2003.

"We do not see any meaningful improvement in IT spending, and we are not counting on a strong holiday buying season," said Fiorina. "We still have a lot of work to do. But the results today validate and demonstrate our progress towards our goals of meeting and exceeding all of our integration targets."

The company has been faced with the challenge of slashing costs while managing the largest merger in the history of the computer business. In addition, HP recently lost the services of a talented manager in Michael Capellas, the erstwhile CEO who bolted for the top spot at WorldCom last week, leaving the embattled Fiorina alone at the helm of the massive new company. And analysts are now concerned with the possibility that more former Compaq executives may want to follow Capellas' lead.

"It's not clear whether this will be the first of several Compaq execs leaving the company, and that is worrisome," said Shebly Seyrafi, analyst at A.G. Edwards & Sons.

Walter Winnitzki, analyst at First Albany Corp., echoed these sentiments. "When a chief executive comes into a new company he likes to surround himself with some familiar people that he knows and trusts," says Winnitzki. "Given some of the comments Capellas has made, there is likely to be some familiar faces at WorldCom."

The company is also facing increased pressure from its archrival in the PC business, Dell Computer, which entered HP's longtime stronghold market, printers, earlier this year. Dell's advances in the printer market, as well as the handheld PC market, are likely to drive prices down across the industry, making profitability a more difficult prospect.

Despite all of this, expectations were surprisingly high leading up to the earnings announcement, with the Nasdaq gaining a robust 3.2 percent ahead of the news. Analysts have been pleased with HP's accelerated cost-cutting, the execution of the merger, and Fiorina's aggressive new marketing strategy. To better compete with the reigning king of computer services, IBM, HP unveiled an extensive new advertising campaign that analysts speculate will cost the company upwards of half a billion dollars.