The company remained profitable, however, posting results that were in line with analyst expectations. HP recorded a profit of US$1.7 billion on sales of $27.4 billion. Earnings per share were $0.70 for its second fiscal quarter, ended April 30.

In a hopeful sign, the company reaffirmed its earlier guidance for fiscal 2009, saying it expected to earn between $3.76 and $3.88 per share for the year. That's better than analysts had been expecting. In a Thomson Financial survey of 26 financial analysts, the consensus estimate was $3.71 for the year. However, the company was pessimistic on revenue for the year, saying it would be down by 4 percent to 5 percent. Last quarter, HP had said it expected revenue to be down between 2 percent and 5 percent.

The quarter's revenue drop would have been much worse had HP not seen its services sales nearly double, year-over-year, thanks to the company's Aug. 26 acquisition of Electronic Data Services (EDS). Services revenue was up 99 percent, totaling $8.5 billion for the quarter.

HP is in the process of cutting 24,600 EDS jobs as it absorbs the computer services giant. The company's EDS integration is "tracking ahead of schedule," HP said in a statement Tuesday.