Hewlett-Packard reported quarterly earnings that were ahead of expectations, but the company slashed its outlook on the heels of a warning from its CEO of "another tough quarter" ahead.
The company posted adjusted earnings of $1.24 per share, ahead of expectations for $1.21. But shares fell 4.3 percent in premarket trading.
HP cut its outlook for the third quarter and full fiscal year, due in part to impact from the Japanese earthquake and tsunami as well as weak sales in personal computers and reduced operating profit for services.
The news comes as the company faces a perception problem caused by leaked memos showing difficult times for the usually reliable tech leader, particularly on the services end.
"When I came to HP I did a strategic deep-drive on services and I came to the conclusion that despite our intent to drive business into higher-value parts of the service industry, we didn't actually do that," CEO Leo Apotheker said in a CNBC interview after the earnings report came out.
"It became very clear that we were missing market opportunities," he added. "We are going to address this. we are going to focus our services business on the higher part of the value chain. That requires some work, some investment, and hence the impact it will have for a couple of quarters."
HP cut its full-year profit forecast to "at least $5.00 per share" excluding items from previous outlook of "$5.20 to $5.28" and cut full year revenue outlook to $129 billion to $130 billion from $130 billion to $131.5 billion.
Apotheker, who took the helm in September, aims to boost earnings and dividends by pushing into sectors such as cloud computing, where services are hosted from data centers.
"Now is the time," he said. "We're not going to wait any longer. We are going to make a few changes. Therefore, we have to adjust our margin expectations for services."
The world's largest technology company by sales said revenue in the fiscal second quarter ended April 30 rose to $31.63 billion, up 3 percent from the previous year and slightly above the average analyst estimate of $31.52 billion, according to Thomson Reuters I/B/E/S.
HP reported net income of $2.3 billion, or $1.05 a share, up from $2.2 billion, or 91 cents a share, a year earlier.
For the third quarter of fiscal 2011, the company estimates revenue of approximately $31.1 billion to $31.3 billion, GAAP diluted earnings of about 90 cents per share, and non-GAAP diluted EPS of approximately $1.08.
Third quarter fiscal 2011 non-GAAP diluted EPS estimates exclude after-tax costs of approximately 18 cents per share, related primarily to the amortization of purchased intangibles, restructuring charges and acquisition-related charges, the company said in a statement.
The news comes the day after Bloomberg cited Apotheker warning of "another tough quarter" and an unaffordable headcount plan.
In February, HP trimmed 2011 revenue projections on weak consumer PC demand and a lackluster showing from IT services, following weak first-quarter sales.
—Reuters contributed to this report.