Updated from 9:27 a.m. EST

Hewlett-Packard's

(HPQ) - Get Report

shares took a dive in extended trading after the company reported

plummeting

profit late Wednesday and fell again Thursday.

H-P, which saw its first-quarter profit dip 13% year-over-year and reported revenue $3 billion below analysts' estimate, is finally feeling the strain of the economic slowdown after out-performing the market in recent quarters.

The tech bellwether also issued weak second-quarter guidance, predicting sales between $27.5 billion and $27.7 billion, well below analysts' estimate of $30.95 billion. Excluding charges, the company forecast earnings between 84 cents a share and 86 cents a share, below the consensus estimate of 89 cents a share.

Investors responded negatively to the news Wedneday, pushing H-P's shares down $1.88, or 5.52%, to $32.20 in extended trading. Shares fell even further Thursday, dropping 6.7% to $31.79.

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Despite its challenges, the firm reported first-quarter earnings in line with analysts' estimate of 93 cents a share, prompting at least one analyst to identify opportunities for shrewd investors.

"Cost cutting remains the key theme and we expect HP to continue to meet or beat earnings despite weak revenue," wrote

Goldman Sachs

analyst David Bailey, in a note released late Wednesday. Bailey also maintained his "buy" rating for H-P, citing the company's better-than-expected operating margins: "Operating margin

was significantly better than expected (particularly in printing and services), demonstrating HP's ability to manage expenses in a difficult environment."

Excluding charges, H-P's overall operating margin increased almost one point year-over-year, from 9.9% to 10.8%.

Prior to its first-quarter results, H-P had successfully avoided the effects of the recession thanks to tight

expense management

and the

strength

of its services and PC businesses.

The company, which has been slashing its expenses for years, has also strengthened key parts of its business, according to its CEO Mark Hurd.

"We now have more flexibility to be more competitive," he said, during a conference call late Wednesday. "In addition, as we have done this work, we have not cut into our muscle -- we have strengthened services and R&D."

Although he did not go into specific details, Hurd also promised that H-P's integration of services giant

EDS

is running ahead of schedule.

H-P, which aims to shave more than $1 billion from its 2009 expenses by swallowing EDS, also plans to bring down both its own and its channel inventory during the coming quarters.

Despite its restructuring effort, which has involved cutting thousands of jobs, H-P has now joined the growing list of companies struggling with weakening customer demand.

"While there were pockets of organic growth, the slowdown in IT spending was global," said H-P's Chief Financial Officer, Cathie Lesjak, during the conference call Wednesday. Although the firm's revenue grew 11% in the Americas, sales declined 3% in Europe, the Middle East and Africa, and 11% in Asia Pacific.

Even emerging markets such as Brazil, India, Russia and China could do little to reverse this trend, with revenue plunging 22% year over year.

H-P's results also felt the impact of recent currency fluctuations. First-quarter revenue, for example, which grew 1% to $28.8 billion, would have grown 4% in local currency, according to the tech giant.

Set against this backdrop, H-P's revenues from PCs, enterprise storage and servers, and imaging and printing, all took a pounding. "

The company's revenue miss was spread across all businesses (printing, PCs, services, and enterprise hardware) except software, providing another prime example that demand continues to deteriorate," explained Goldman Sachs' Bailey."

H-P's CEO Mark Hurd, while asserting that his firm is performing well in a tough economy, also admitted that the immediate outlook is less than positive.

"We have modeled the market to get really no better for the rest of the year," he said, in response to an analyst's question. "What we saw in Q1 was what we will see, roughly, for the rest of the year."

H-P's cash haul, however, has grown from $10.3 billion to $11.3 billion in the last two quarters, so the firm at least has some security against the vagaries of the global economy.

During Wednesday's conference call, H-P said it would enforce pay cuts across the board: Hurd by 20%, other executives by 10% to 15%, and most other employees by 5%.

The firm's services business, which grew first-quarter revenue 116% to $8.7 billion, also offers some significant upside for the coming months, although revenue from technology services was flat.

H-P, which competes with

Dell

(DELL) - Get Report

,

Lenovo

and

Apple

(AAPL) - Get Report

in hardware, and with

IBM

(IBM) - Get Report

in services, had largely side-stepped the problems that have hammered some of its rivals. The company had even exploited Dell's

slowing PC sales

, for example, and was also seen as

well-positioned

against IBM in the server space.