(REUTERS) -- Hewlett Packard's new Chief Executive, Meg Whitman, passed her first test with investors, calming nerves and assuring Wall Street that the technology giant will be disciplined with its investments and focused on core operational improvements.

But she faces an uphill task in completely winning over the hearts and wallets of investors, who cut their 2012 outlook after HP posted a 91 percent drop in quarterly earnings on weak computer and printer sales.

Whitman faces the challenge of both restoring the Silicon Valley company's credibility and jump-starting growth in a weak economy.

The former eBay Inc CEO's chief priority needs to be operational execution in its key business units, including printers and PCs, analysts say. At the same time, she must rebuild HP's balance sheet, improve margins in its services unit and make good on the controversial acquisition of software maker Autonomy.

Whitman needs to clearly focus on the business units that they have instead of lusting after software acquisitions, and show some improvement, said Morningstar analyst Michael Holt. We want to see that the supply issue in the printing segment is resolving and that operating margin is recovering.

Specifically, the company needs to take steps to reduce channel inventory in its bread-and-better printing group, which saw revenues decline 10 percent last quarter due to weak consumer demand.

Rebuilding the balance sheet is also crucial. Following the over $11 billion Autonomy acquisition, HP now has nearly $23 billion in long-term debt, nearly 50 percent more than the previous year.

Whitman will need to show progress despite a very weak economic environment in Europe, which accounted for about 36% of HP's fourth quarter revenue, according to analysts. She also faces question on how integrate Autonomy across all its business units.

With all of these challenges, Wall Street now expects HP's revenue to fall to $125.3 billion in 2012 from $127.24 billion this year.

The darkening macro back drop, fundamental challenges in key business segments and HP's unusually high exposure to Europe will test the patience of investors over the next year, said Brian White, analyst with Ticonderoga Securities, who cuts his fiscal year 2012 view for HP following the results.

DELIVERING ON BASICS

Whitman, who took over the top job at HP in September following the ouster of Leo Apotheker, gained cautious approval from Wall Street for her quick decision to retain the PC group, for setting achievable financial targets and for promising to stay away from large acquisitions.

She also pledged to increase investment in research and development and add more sales personnel in its corporate business, calling 2012 a reset and and rebuilding year for HP.

Some analysts also noted that she set modest earnings forecast for the next year, which means that HP could easily meet or beat the targets and improve confidence in its financial forecasting. That would be a welcome change for a company that consistently missed its own financial outlook over the past year.

She put forward a solid performance, especially considering the state of the company and the weak demand environment, White said, referring to Whitman's call with analysts following the results. Former CEO Apotheker's conference calls had often left analysts with more questions than answers.

HP shares have gained 22 percent since she took over, after losing nearly 44 percent in the 10 months of Apotheker's tenure.

A leading vendor in most of the major technology markets -- including PCs, servers, and printers -- HP's businesses generate high sales but have low margins when when compared with chief rival International Business Machines Corp, which derives of major chunk of its profits from software and services.

Software is less than 10 percent of HP's business but that could change if HP capitalized on its Autonomy purchase and managed to cross-sell the acquired software products to its customer base.

It's more about execution right now. More about fixing the house, Shaw Wu, analyst with Sterne Agee said. They have got to get the basics right first before they can really tackle an IBM or Apple, which are arguably the class acts of the industry.

(Reporting by Poornima Gupta)