Updates with new stock information and comments from Hewlett-Packard's post-earnings conference call

PALO ALTO, Calif. (

TheStreet

) --

Hewlett-Packard

(HPQ) - Get Report

beat Wall Street's estimates in its

third-quarter results

, giving the tech sector a boost as it struggles to emerge from the recession.

H-P posted revenue of $27.5 billion, down 2% from the same period last year, but just above analysts' estimate of $27.25 billion.

The results, which were released after market close Tuesday, will be welcomed by

investors

desperate for good news after a

turbulent

spell marked by weak IT spending and

job cuts

.

Shares of H-P fell 2%, to $43.10, in extended trading.

The tech bellwether also beat Wall Street's profit estimate. Excluding items, H-P earned 91 cents a share on net income of $2.2 billion, compared to 86 cents a share and $2.2 billion in the prior year's quarter. Analysts surveyed by Thomson Financial had expected earnings of 90 cents a share.

"H-P's performance this quarter is a result of our strong business portfolio, efficient cost structure and scale," said Mark Hurd, H-P's CEO, in a statement. "Business is stabilizing, and we are confident that H-P will be an early beneficiary of an economic turnaround and will continue to outperform when conditions improve."

Including items, however, H-P earned 67 cents a share on net income of $1.6 billion, down from 80 cents a share and $2 billion in the prior year's quarter.

The third-quarter numbers nonetheless bode well for H-P, which competes with

IBM

(IBM) - Get Report

and

Dell

(DELL) - Get Report

, according to Goldman Sachs analyst David Bailey.

"Slight revenue and earnings upside provides another sign of stabilizing demand and should keep H-P shares moving higher given valuation and earnings power," he wrote, in a note released Tuesday.

H-P, which was one of

TheStreet.com

's

top tech picks

for 2009, enjoyed impressive numbers from its services business, where revenue grew 93% to $8.5 billion, thanks largely to the firm's

EDS

acquisition. Sales from the company's Personal Systems Group (PSG), however, dipped 18% year over year to $8.4 billion, and revenue from the Imaging and Printing Group (IPG) declined 20% to $5.7 billion.

For the fourth quarter, H-P expects revenue of $29.7 billion, compared to analysts' estimate of $29.82 billion. Excluding items, the PC maker also predicts earnings of $1.12 a share, although this excludes after-tax costs of approximately 15 cents a share. Analysts surveyed by Thomson Reuters had predicted earnings of $1.07 a share.

Hurd singled out the firm's performance in China as one of the quarter's highlights during a conference call to discuss the results. Revenue in China grew double-digits over the prior year, he said, striking a bullish tone in relation to H-P's rivals.

"H-P is winning in the data center," he added.

H-P, which has undergone a major cost-cutting effort, also hopes to drive more efficiency out of its EDS acquisition.

"We have not captured all of the savings out of the EDS integration," said Hurd, in response to an analyst's question. "We have done a lot of work, but there's more work to do."

Written by James Rogers in New York