HP earnings drop 17 percent

This story was updated at 3:57 p.m. PDT with information from the analyst call.

For the second quarter of 2009, Hewlett-Packard announced Tuesday its revenue and earnings all took a tumble.

HP's net earnings of $1.7 billion for the quarter was down 17 percent from $2.1 billion earned the same quarter a year ago. Quarterly revenue of $27.4 billion was down 3 percent. Earnings per share amounted to 86 cents per share, on track with what analysts had been expecting, but came out to 70 cents per share due to a $382 million (16 cents per share) after-tax charge the company took for acquisitions and restructuring that took place during the quarter.

It's the second straight quarter of declines for HP. Chief executive Mark Hurd tried to put a positive spin on the results.

"HP executed well in a tough market environment," Hurd said in a call with analysts Tuesday afternoon.

Tough was an apt description. Revenue was down in all regions with the exception of North and South America, where revenue increased 9 percent from a year ago to $12.1 billion. Revenue fell 11 percent in Europe, the Middle East, and Africa and 10 percent in the Asia Pacific region to $10.6 billion and $4.7 billion, respectively.

The main bright spot appears to be the services division, whose $8.5 billion in revenue was up 99 percent. But it's an unfair comparison since the main portion of that business is derived from the EDS acquisition, which took place in August last year.

Chief Financial Officer Cathie Lesjak noted that HP is pleased with the integration process related to EDS. Roughly half of the 25,000 positions HP pledged to eliminate after the acquisition have been removed so far, she said. An additional 6,400 jobs will be cut this year, but she did not say which departments they would come from.

All other business divisions--storage, computers, imaging and printing, software, and financial services--saw revenues drop. It's not unexpected that the economy is catching up to HP, despite the company's emphasis on strict fiscal discipline.

There were some positive signs, like some stronger demand in China and incremental improvements in the U.S. consumer market, according to Hurd. But he was hesitant to say he sees any sort of overall improvement in demand from corporate customers or a general turnaround in the economy--yet.

"You can view this as sort of 'steady as she goes,'" he told analysts. "The quarter behaved generally as we expected."

And looking ahead, he expects much of the same the rest of the year.

"Customers are telling us they are delaying (ordering PCs and servers) as long as they can," and he said he does not expect any dramatic change that will alter projected enterprise spending within the next few months.

"We need another quarter of data to make a meaningful statement about any upturn."

HP is forecasting earnings of 64 cents to 68 cents per share for the third quarter.

HP stock was down 4.9 percent in after-hours trading to $34.80.