Shares of Hewlett-Packard Co. (HPQ) surged to a new 52-week high Wednesday after the computer and printer maker's fiscal third-quarter results easily surpassed Wall Street expectations, though a one-time tax adjustment led to a sharp decrease in earnings.

HP shares rose $2.30, or about 10 percent, to $26.00 on the New York Stock Exchange (search). The stock, which rose as high as $26.15 on Wednesday, had previously traded in a 52-week range between $16.73 and $25.25.

In the first full quarter under CEO Mark Hurd (search), the company reported higher sales in all its major businesses — computers, printers and services. It also predicted the momentum would continue in the current quarter as a corporate restructuring continues.

"I expected to see improvements out of HP under the new management, but this is more and sooner," said Cindy Shaw, an analyst at Moors & Cabot Capital Markets. "I thought it would take Mark Hurd a lot longer to show tangible improvements like this."

For the three months ended July 31, HP earned $73 million, or 3 cents per share, compared with $586 million, or 19 cents per share, in the same period last year. Profit fell due to one-time tax adjustments from the repatriation of $14.5 billion in foreign earnings.

Excluding $988 million in adjustments, HP earned $1.06 billion, or 36 cents per share, compared with profit of $728 million, or 24 cents per share, in the third quarter of fiscal 2004.

Sales rose 10 percent, to $20.8 billion, from $18.89 billion in the third quarter of fiscal 2004.

On a pro forma basis, the results beat Wall Street estimates. Analysts were expecting the Palo Alto-based company to earn 31 cents per share on sales of $20.47 billion, according to a survey by Thomson Financial.

"I'm encouraged by what we have achieved to date, but more hard work is ahead of us," Hurd said.

For the first nine months of fiscal 2005, HP earned $1.98 billion, or 68 cents per share, on sales of $63.78 billion. In the same period of fiscal 2004, HP earned $2.41 billion, or 78 cents per share, on sales of $58.52 billion.

The company said it expects fourth-quarter revenue to be in the range of $22.4 billion to $22.8 billion, with earnings between 44 cents and 47 cents per share. Analysts were expecting 43 cents per share on sales of $22.67 billion.

It's been a tumultuous year for HP, a Silicon Valley pioneer that was founded in a garage in 1939.

HP's board ousted CEO Carly Fiorina (search) in February and hired Hurd, who was running NCR Corp., in late March. The new chief executive almost immediately started undoing his predecessor's changes while embarking on his own reorganization.

In recent months, Hurd has annulled Fiorina's shotgun marriage of HP's PC and printing divisions. He also has reorganized the company's sales force and ended a deal in which HP resold Apple Computer Inc.'s (AAPL) iPod music players.

The biggest move, however, came in July, when he announced plans to cut 14,500 jobs and overhaul HP's retirement plan in a restructuring that he said will save the company $1.9 billion a year and bring its costs closer to its competition.

"We are advancing the work. It is on schedule," Hurd said Tuesday.

With products ranging from digital cameras, televisions and PCs to servers, printers and services, some have questioned whether HP is too big to manage effectively. Hurd has said he is still reviewing the company's businesses.

But its current strategy leaves the company in a precarious spot. At the high end, it competes with International Business Machines (IBM) and its strong consulting team. At the low end, it faces the efficiency of Dell Inc.(DELL).

There are signs that HP has made progress. Dell, for instance, said last week that low-priced laptops and other bargain PCs contributed to its lower-than-expected guidance. On Monday, Gateway Inc. CEO Wayne Inouye singled out HP's aggressive pricing as he lowered his company's sales and earnings outlook.

HP's Personal Systems Group, which includes PCs, saw revenue grow 8.2 percent to $6.39 billion from $5.9 billion in the third quarter of 2004. Operating profits grew to $163 million in the third quarter 2005, up from $23 million the previous year.

Hurd described overall PC demand as "steady" and "stable." He said notebook revenue grew 21 percent while desktop sales dipped slightly.

HP's Imaging and Printing Group saw profits fall to $771 million from $836 million in the third quarter of fiscal 2004, but sales increased to $5.91 billion from $5.65 billion.

The Enterprise Storage and Servers Group saw sales grow to $4 billion, up from $3.33 billion in the third quarter of fiscal 2004. The division swung to a profit of $150 million in the third quarter, compared with a loss of $211 million last year.

HP Services revenue grew 10 percent to $3.8 billion, though operating profit fell 18.5 percent to $256 million.