An expected recovery in technology markets that could add to early indications that the world is heading out of recession has yet to take hold, according to figures released on Tuesday by Hewlett-Packard.

The group damped enthusiasm in the industry, announcing a 19 per cent drop in profit amid continued weakness in the European economy and a reluctance among corporate buyers to upgrade.

After positive results and comments from other technology leaders, Mark Hurd, chief executive, said he was not ready to call an upturn even as he predicted that 2010 would be better for all.

Hewlett-Packard said its fiscal third-quarter profit fell 19 per cent as sales dropped about that proportion in all its major lines except services.

HP shares had gained about 2 per cent during the day but gave that up in after-hours trading after the results news.

The stock drop might reflect cautious projections from Mr Hurd, who said business remained stable in the US and was strong in China while continuing to be weak in Europe.

For the three months ended July 31, HP said net income fell to $1.64bn, or 67 cents a share, from $2.03bn, or 80 cents. Sales dipped to $27.5bn from $28bn.

The declines had generally been expected, and using the non-GAAP numbers HP prefers, the company exceeded consensus profit estimates.

HP left its full-year projections unchanged, implying that the third-quarter success by the group’s yardstick would be mitigated in the period just begun.

Analysts pressed Mr Hurd on how much more money could be wrung from EDS, the acquisition of nearly a year ago.

Sales at the EDS-enhanced services businessrose 93 per cent in the quarter, limiting the group-wide fall in revenue to 2 per cent. But profit margins at EDS are lower than those at the rest of HP. “We’ve got more work to do on that front,” Mr Hurd said.

The company is confronting margin pressure in Europe and in the PC business, where market share gains have been balanced by a shift to netbooks. In the handheld market, HP is losing ground to rivals.

“We do have smartphones,” Cathie Lesjak, chief financial officer, told the Financial Times.

“We have a few good design spots in Verizon, and we’re looking at ways to grow that.”Sales at the PC business unit fell 18 per cent to $8.4bn, even though volume grew. Desktop revenue fell 26 per cent. Operating profit margin for the group contracted to 4.6 per cent of revenue from 5.7 per cent.

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