HP meets profit forecast, lowers revenue outlook

— -- Hewlett-Packard's lucrative printer ink business isn't recession-proof.

The computer giant announced a 17% drop in profit for the first quarter Tuesday on slower sales of its products — to $1.7 billion, or 70 cents a share, from $2.1 billion in the year-ago quarter.

Excluding one-time charges, the results were in line with analysts' estimates of 86 cents a share.

Palo Alto, Calif.-based HP, the No. 1 PC and printer manufacturer, reported revenue of $27.4 billion, down 3% from $28.3 billion in the year-ago quarter.

For the complete year, HP said it expects sales to be down 4% to 5%.

HP CEO Mark Hurd, in a conference call with analysts, wasn't ready to predict that the worst is over.

"We see a couple of areas with some encouraging signs," he said, identifying China and the U.S. as having "some slight improvements."

"But I'm not ready to call it better," he said. "With the exception of a few places, it will be the same the rest of the year."

PC sales fell 19%, with desktop revenue down 24% and notebooks falling 13%.

The supplies category, which includes HP's cash cow — printer ink — fell 14%. And printers fell 23%, HP said.

Services revenue increased 99% to $8.5 billion due primarily to the EDS acquisition.

HP's results "weren't great," says Roger Kay, an analyst with Endpoint Technologies. "But they could have been worse."

"What I'm hearing from HP is that a floor is being established for the bottom," he adds. Hurd "was hesitant to say it outright, but he went 85% of the ways toward that. It looks like we'll have a better second half."

In after-hours trading, Hewlett-Packard stock fell $1.65, or 4.5%, to $34.93, after rising 85 cents in regular trading.