MAYNARD, Mass. (AP) _ Digital Equipment Corp. stock rose nearly 10 percent Tuesday after the company reported a 68 percent jump in third fiscal quarter earnings and executives said they should be able to sustain higher profit margins.

Several Wall Street analysts raised their forecasts on Digital's future performance.

The company earned $124 million, or 74 cents a share, in the quarter that ended March 30. It earned $73.8 million, or 44 cents a share, a year earlier.

Revenue was $3.62 billion, up 4 percent from $3.47 billion a year ago.

The profit met a consensus of Wall Street analysts compiled by First Call Inc. Digital's stock closed up $5.25 to $60.62 1/2 on the New York Stock Exchange.

A month ago, the company said flat personal computer sales and price cuts would lead to profits below the $1 per share that analysts had been expecting.

Vincent Mullarkey, Digital's chief financial officer, told reporters the company was working through a bloated inventory of PCs and should be through by the end of June.

He also said the company's gross margins increased to 34.6 percent from 32.2 percent a year ago, a level Digital should be able to sustain.

Digital's growth was led by a 60 percent increase in the company's Alpha Systems servers and a 50 percent jump in storage system sales. Service revenues were up 4 percent.

The company reduced its payroll by 200 over the last quarter and 2,200 over the last year. Cutbacks have left Digital with a workforce of 60,900, about half the number it employed in the mid-1980s.

For the first nine months of its fiscal year, Digital earned $321 million, or $1.21 per share. It lost $38 million, or 45 cents per share, in the same period a year ago.

Nine-month revenue was $10.8 billion, up from $10.1 billion a year ago.