HP Reports Second Quarter 2008 Results

-- Second quarter net revenue up 11%, or $2.7 billion, from a
year earlier to $28.3 billion

-- Second quarter GAAP operating profit up 22% to $2.6 billion;
$0.80 earnings per share, up from $0.65 a year earlier

-- Second quarter non-GAAP operating profit up 22% to $2.8
billion; $0.87 earnings per share, up from $0.70 a year
earlier

-- Record cash flow from operations of $4.8 billion

-- $2.8 billion of share repurchases
PALO ALTO, Calif.--(Business Wire)--
HP (NYSE:HPQ) today announced financial results for its second
fiscal quarter ended April 30, 2008, with net revenue of $28.3
billion, up 11% from a year earlier and up 5% when adjusted for the
effects of currency.

In the second quarter, GAAP operating profit was $2.6 billion and
GAAP diluted earnings per share (EPS) was $0.80, up from $0.65 in the
prior-year period. Non-GAAP operating profit was $2.8 billion, with
non-GAAP diluted EPS of $0.87 up from $0.70 in the prior-year period.
Non-GAAP financial information excludes $172 million of adjustments on
an after-tax basis, or $0.07 per diluted share, related primarily to
amortization of purchased intangibles.

"HP turned in another strong quarter, supported by improvement
across our businesses. With 70 percent of revenue now coming from
outside the U.S., we benefited from robust demand in emerging
economies," said Mark Hurd, HP chairman and chief executive officer.
"The company's financial outlook demonstrates its strength in the
global marketplace."

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---------- --------- -------
Q2 FY08 Q2 FY07 Y/Y
---------------------------------------- ---------- --------- -------
Net revenue ($B) $ 28.3 $ 25.5 11%
---------------------------------------- ---------- --------- -------
GAAP operating margin 9.2% 8.3% 0.9 pts
---------------------------------------- ---------- --------- -------
GAAP net earnings ($B) $ 2.1 $ 1.8 16%
---------------------------------------- ---------- --------- -------
GAAP diluted EPS $ 0.80 $ 0.65 23%
---------------------------------------- ---------- --------- -------
Non-GAAP operating margin 10.0% 9.0% 1.0 pts
---------------------------------------- ---------- --------- -------
Non-GAAP net earnings ($B) $ 2.2 $ 1.9 16%
---------------------------------------- ---------- --------- -------
Non-GAAP diluted EPS $ 0.87 $ 0.70 24%
---------------------------------------- ---------- --------- -------
*T

Information about HP's use of non-GAAP financial information is
provided under "Use of non-GAAP financial information" below.

Revenue in the Americas grew 4% on a year-over-year basis to $11.1
billion. Revenue grew 16% in Europe, the Middle East and Africa to
$11.9 billion. Revenue grew 16% in Asia Pacific to $5.2 billion. When
adjusted for the effects of currency, revenue in the Americas grew 2%,
revenue in Europe, the Middle East and Africa grew 6%, and revenue in
Asia Pacific grew 7%. Revenue from outside of the United States in the
second quarter was 70% of the total, with revenue in the BRIC
countries (Brazil, Russia, India and China) growing 26% over the
prior-year period and accounting for 10% of total revenue.

Personal Systems Group

Personal Systems Group (PSG) revenue grew 16% year over year to
$10.1 billion, with unit shipments up 21% on a year-over-year basis.
Notebook revenue for the quarter grew 31% over the prior-year period,
while desktop revenue was flat. Commercial client revenue grew 17%
year over year, while Consumer client revenue increased 16%. Operating
profit was $544 million, or 5.4% of revenue, up from $417 million, or
4.8% of revenue, in the prior-year period.

Imaging and Printing Group

Imaging and Printing Group (IPG) revenue grew 6% year over year to
$7.6 billion. On a year-over-year basis, supplies revenue grew 8%,
Commercial hardware revenue grew 6% and Consumer hardware revenue
declined 3%. Printer unit shipments increased 6% year over year, with
Consumer printer hardware units up 4% and Commercial printer hardware
units up 9%. Momentum in key growth initiatives continued, with solid
growth in both the Graphic Arts and the Enterprise businesses.
Operating profit was $1.2 billion, or 16.2% of revenue, versus $1.2
billion, or 16.3% of revenue, in the prior-year period.

Enterprise Storage and Servers

Enterprise Storage and Servers (ESS) reported revenue of $4.8
billion, up 4% over the prior-year period fueled by ESS blades, which
grew 68%, and storage, which grew 14%. Storage revenue growth was
fueled by the high-end XP line, which grew 21%, and the midrange EVA
line, which grew 17%. On a year-over-year basis, Industry Standard
Server revenue was flat. Business Critical Systems revenue increased
7%. Operating profit was $655 million, or 13.7% of revenue, up from
$452 million, or 9.8% of revenue, in the prior-year period.

HP Services

HP Services (HPS) revenue increased 12% year over year to $4.6
billion. Revenue in Technology Services grew 10% with Outsourcing
Services and Consulting and Integration up 14% and 15%, respectively,
compared with the prior-year period. Operating profit was $508
million, or 11.0% of revenue, up from $449 million, or 10.9% of
revenue, in the prior-year period.

HP Software

HP Software revenue grew 28% compared with the prior-year period
to $727 million, led by 36% growth in the Business Technology
Optimization portfolio. Operating profit was $93 million, or 12.8% of
revenue, up from $7 million, or 1.2% of revenue, in the prior-year
period.

Financial Services

HP Financial Services (HPFS) reported revenue of $685 million, an
increase of 25% year over year. Financing volume and net portfolio
assets increased 15% and 14%, respectively, over the prior-year
period. Operating margin was 6.9% of revenue, up from 6.5% in the
comparable period last year.

Asset management

HP generated $4.8 billion in cash flow from operations for the
quarter. Inventory ended the quarter at $7.7 billion, down 2 days over
the prior year. Accounts receivable of $13.6 billion was up 2 days
over the prior-year period. Accounts payable ended the quarter at
$12.4 billion down 1 day from the prior-year period. HP's dividend
payment of $0.08 per share in the second quarter resulted in cash
usage of $197 million. HP utilized $2.8 billion of cash during the
second quarter to repurchase approximately 66 million shares of common
stock from the open market. HP exited the quarter with $11.8 billion
in gross cash, which includes cash and cash equivalents of $11.6
billion, short-term investments of $56 million, and certain long-term
investments of $117 million.

Outlook

HP estimates Q3 FY08 revenue will be approximately $27.3 billion
to $27.4 billion.

Third quarter FY08 GAAP diluted EPS is expected to be
approximately $0.76 to $0.77 and non-GAAP diluted EPS is expected to
be approximately $0.82 to $0.83. Third quarter FY08 non-GAAP diluted
EPS estimates exclude after-tax costs of approximately $0.06 per
share, related primarily to the amortization of purchased intangibles.

HP estimates FY08 revenue will be approximately $114.2 billion to
$114.4 billion, up from previous guidance of $113.5 billion to $114.0
billion.

FY08 GAAP diluted EPS is expected to be in the range of $3.30 to
$3.34, and FY08 non-GAAP diluted EPS is expected to be in the range of
$3.54 to $3.58. FY08 non-GAAP diluted EPS estimates exclude after-tax
costs of approximately $0.24 per share, related primarily to the
amortization of purchased intangibles.

More information on HP's quarterly earnings, including additional
financial analysis and an earnings overview presentation, is available
on HP's Investor Relations website at www.hp.com/investor/home.

HP's Q2 FY08 earnings conference call is accessible via an audio
webcast at www.hp.com/investor/q22008webcast.

About HP

HP focuses on simplifying technology experiences for all of its
customers - from individual consumers to the largest businesses. With
a portfolio that spans printing, personal computing, software,
services and IT infrastructure, HP is among the world's largest IT
companies, with revenue totaling $110.4 billion for the four fiscal
quarters ended April 30, 2008. More information about HP is available
at www.hp.com.

Use of non-GAAP financial information

To supplement HP's consolidated condensed financial statements
presented on a GAAP basis, HP provides non-GAAP operating profit,
non-GAAP operating margin, non-GAAP net earnings, non-GAAP diluted
earnings per share and gross cash. HP also provides forecasts of
non-GAAP diluted earnings per share. A reconciliation of the
adjustments to GAAP results for this quarter and prior periods is
included in the tables below. In addition, an explanation of the ways
in which HP management uses these non-GAAP measures to evaluate its
business, the substance behind HP management's decision to use these
non-GAAP measures, the material limitations associated with the use of
these non-GAAP measures, the manner in which HP management compensates
for those limitations, and the substantive reasons why HP management
believes that these non-GAAP measures provide useful information to
investors is included under "Use of Non-GAAP Financial Measures" after
the tables below. This additional non-GAAP financial information is
not meant to be considered in isolation or as a substitute for
operating profit, operating margin, net earnings, diluted earnings per
share, or cash and cash equivalents prepared in accordance with GAAP.

Forward-looking statements

This news release contains forward-looking statements that involve
risks, uncertainties and assumptions. If the risks or uncertainties
ever materialize or the assumptions prove incorrect, the results of HP
may differ materially from those expressed or implied by such
forward-looking statements and assumptions. All statements other than
statements of historical fact are statements that could be deemed
forward-looking statements, including but not limited to any
projections of revenue, margins, expenses, earnings, tax provisions,
cash flows, benefit obligations, share repurchases, acquisition
synergies or other financial items; any statements of the plans,
strategies, and objectives of management for future operations,
including execution of cost reduction programs and restructuring and
integration plans; any statements concerning the expected development,
performance or market share relating to products or services; any
statements regarding pending business combination transactions; any
statements regarding pending investigations, claims or disputes; any
statements of expectation or belief; and any statements of assumptions
underlying any of the foregoing. Risks, uncertainties and assumptions
include macroeconomic and geopolitical trends and events; execution
and performance of contracts by suppliers, customers and partners; the
challenge of managing asset levels, including inventory; the
difficulty of aligning expense levels with revenue changes;
assumptions related to pension and other post-retirement costs;
expectations and assumptions relating to the execution and timing of
cost reduction programs and restructuring and integration plans; the
possibility that the expected benefits of pending business combination
transactions may not materialize as expected or that the transactions
may not be timely completed; the resolution of pending investigations,
claims and disputes; and other risks that are described in HP's Annual
Report on Form 10-K for the fiscal year ended October 31, 2007 and
HP's other filings with the Securities and Exchange Commission,
including HP's Quarterly Report on Form 10-Q for the fiscal quarter
ended January 31, 2008. As in prior periods, the financial information
set forth in this release, including tax-related items, reflects
estimates based on information available at this time. While HP
believes these estimates to be meaningful, these amounts could differ
materially from actual reported amounts in HP's Quarterly Report on
Form 10-Q for the fiscal quarter ended April 30, 2008. In particular,
determining HP's actual tax balances and provisions as of April 30,
2008 requires extensive internal and external review of tax data
(including consolidating and reviewing the tax provisions of numerous
domestic and foreign entities), which is being completed in the
ordinary course of preparing HP's Form 10-Q. HP assumes no obligation
and does not intend to update these forward-looking statements.

Note to editors: More news from HP, including links to RSS feeds,
is available at www.hp.com/hpinfo/newsroom/.

(C) 2008 Hewlett-Packard Development Company, L.P. The information
contained herein is subject to change without notice. HP shall not be
liable for technical or editorial errors or omissions contained
herein.

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HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(Unaudited)
(In millions except per share amounts)

Three months ended
-------------------------------
April 30, January 31, April 30,
2008 2008 2007
--------- ----------- ---------

Net revenue $ 28,262 $ 28,467 $ 25,534

Costs and expenses(a):
Cost of sales 21,261 21,499 19,283
Research and development 908 898 903
Selling, general and administrative 3,275 3,241 3,044
Amortization of purchased intangible
assets 211 206 212
In-process research and development
charges 13 - 19
Restructuring 4 10 453
Pension curtailments and pension
settlements, net - - (508)
--------- ----------- ---------
Total costs and expenses 25,672 25,854 23,406
--------- ----------- ---------

Earnings from operations 2,590 2,613 2,128

Interest and other, net 3 72 100
--------- ----------- ---------

Earnings before taxes 2,593 2,685 2,228

Provision for taxes(b) 536 552 453
--------- ----------- ---------

Net earnings $ 2,057 $ 2,133 $ 1,775
========= =========== =========

Net earnings per share:
Basic $ 0.83 $ 0.83 $ 0.67
Diluted $ 0.80 $ 0.80 $ 0.65

Cash dividends declared per share $ - $ 0.16 $ -

Weighted-average shares used to compute net earnings per share:
Basic 2,473 2,560 2,638
Diluted 2,557 2,655 2,731

(a) Stock-based compensation expense included under SFAS 123(R) was as
follows:
Cost of sales $ 36 $ 36 $ 42
Research and development 19 20 18
Selling, general and administrative 97 101 94
--------- ----------- ---------
Total costs and expenses $ 152 $ 157 $ 154

(b) Tax benefit from stock-based
compensation $ (45) $ (47) $ (44)
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HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(Unaudited)
(In millions except per share amounts)

Six months ended
-------------------
April 30, April 30,
2008 2007
--------- ---------

Net revenue $ 56,729 $ 50,616

Costs and expenses(a):
Cost of sales 42,760 38,419
Research and development 1,806 1,780
Selling, general and administrative 6,516 5,952
Amortization of purchased intangible assets 417 413
In-process research and development charges 13 186
Restructuring 14 412
Pension curtailments and pension settlements,
net - (517)
--------- ---------
Total costs and expenses 51,526 46,645
--------- ---------

Earnings from operations 5,203 3,971

Interest and other, net 75 221
--------- ---------

Earnings before taxes 5,278 4,192

Provision for taxes(b) 1,088 870
--------- ---------

Net earnings $ 4,190 $ 3,322
========= =========

Net earnings per share:
Basic $ 1.67 $ 1.24
Diluted $ 1.61 $ 1.20

Cash dividends declared per share $ 0.16 $ 0.16

Weighted-average shares used to compute net
earnings per share:
Basic 2,516 2,672
Diluted 2,603 2,763

(a) Stock-based compensation expense included under SFAS
123(R) was as follows:
Cost of sales $ 72 $ 87
Research and development 39 37
Selling, general and administrative 198 193
--------- ---------
Total costs and expenses $ 309 $ 317

(b) Tax benefit from stock-based compensation $ (92) $ (92)

HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
ADJUSTMENTS TO GAAP NET EARNINGS, EARNINGS FROM OPERATIONS,
OPERATING MARGIN AND EARNINGS PER SHARE
(Unaudited)
(In millions except per share amounts)

Three Three Three
months months months
ended Diluted ended Diluted ended Diluted
April earnings January earnings April earnings
30, per 31, per 30, per
2008 share 2008 share 2007 share
---------------- ---------------- ----------------

GAAP net earnings $2,057 $ 0.80 $2,133 $ 0.80 $1,775 $ 0.65

Non-GAAP
adjustments:
Amortization of
purchased
intangible
assets 211 0.08 206 0.08 212 0.08
In-process
research and
development
charges 13 0.01 - - 19 0.01
Restructuring 4 - 10 - 453 0.16
Pension
curtailments and
pension
settlements, net - - - - (508) (0.19)
Adjustments for
taxes (56) (0.02) (58) (0.02) (31) (0.01)
------- -------- ------- -------- ------- --------

Non-GAAP net
earnings $2,229 $ 0.87 $2,291 $ 0.86 $1,920 $ 0.70
======= ======== ======= ======== ======= ========

GAAP earnings from
operations $2,590 $2,613 $2,128

Non-GAAP
adjustments:
Amortization of
purchased
intangible
assets 211 206 212
In-process
research and
development
charges 13 - 19
Restructuring 4 10 453
Pension
curtailments and
pension
settlements, net - - (508)
------- ------- -------

Non-GAAP earnings
from operations $2,818 $2,829 $2,304
======= ======= =======

GAAP operating
margin 9% 9% 8%
Non-GAAP
adjustments 1% 1% 1%
------- ------- -------

Non-GAAP operating
margin 10% 10% 9%
======= ======= =======
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HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
ADJUSTMENTS TO GAAP NET EARNINGS, EARNINGS FROM OPERATIONS,
OPERATING MARGIN AND EARNINGS PER SHARE
(Unaudited)
(In millions except per share amounts)

Six months Six months
ended Diluted ended Diluted
April 30, earnings April 30, earnings
2008 per share 2007 per share
-------------------- --------------------

GAAP net earnings $ 4,190 $ 1.61 $ 3,322 $ 1.20

Non-GAAP adjustments:
Amortization of purchased
intangible assets 417 0.16 413 0.15
In-process research and
development charges 13 - 186 0.07
Restructuring 14 0.01 412 0.15
Pension curtailments and
pension settlements, net - - (517) (0.19)
Adjustments for taxes (114) (0.04) (70) (0.02)
---------- --------- ---------- ---------

Non-GAAP net earnings $ 4,520 $ 1.74 $ 3,746 $ 1.36
========== ========= ========== =========

GAAP earnings from
operations $ 5,203 $ 3,971

Non-GAAP adjustments:
Amortization of purchased
intangible assets 417 413
In-process research and
development charges 13 186
Restructuring 14 412
Pension curtailments and
pension settlements, net - (517)
---------- ----------

Non-GAAP earnings from
operations $ 5,647 $ 4,465
========== ==========

GAAP operating margin 9% 8%
Non-GAAP adjustments 1% 1%
---------- ----------

Non-GAAP operating margin 10% 9%
========== ==========
*T

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HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(In millions)

April 30, October 31,
2008 2007
----------- -----------
(unaudited)

ASSETS

Current assets:
Cash and cash equivalents $ 11,591 $ 11,293
Short-term investments 56 152
Accounts receivable 13,558 13,420
Financing receivables 2,589 2,507
Inventory 7,678 8,033
Other current assets 11,577 11,997
----------- -----------

Total current assets 47,049 47,402
----------- -----------

Property, plant and equipment 7,906 7,798

Long-term financing receivables and other
assets 10,318 7,647

Goodwill and purchased intangible assets 26,531 25,852
----------- -----------

Total assets $ 91,804 $ 88,699
=========== ===========

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Notes payable and short-term borrowings $ 711 $ 3,186
Accounts payable 12,425 11,787
Employee compensation and benefits 3,103 3,465
Taxes on earnings 798 1,891
Deferred revenue 5,446 5,025
Other accrued liabilities 14,663 13,906
----------- -----------

Total current liabilities 37,146 39,260
----------- -----------

Long-term debt 7,688 4,997
Other liabilities 8,817 5,916

Stockholders' equity 38,153 38,526
----------- -----------

Total liabilities and stockholders' equity $ 91,804 $ 88,699
=========== ===========
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HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(In millions)

Three months Six months
ended ended
April 30, April 30,
2008 2008
------------ ----------

Cash flows from operating activities:
Net earnings $ 2,057 $ 4,190
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 760 1,509
Stock-based compensation expense 152 309
Provision for bad debt and inventory 107 185
In-process research and development charges 13 13
Restructuring 4 14
Deferred taxes on earnings 625 986
Excess tax benefit from stock-based
compensation (75) (163)
Other, net (29) (23)

Changes in assets and liabilities:
Accounts and financing receivables (1,205) (198)
Inventory 232 286
Accounts payable 1,217 558
Taxes on earnings (278) (370)
Restructuring (24) (55)
Other assets and liabilities 1,209 711
------------ ----------
Net cash provided by operating
activities 4,765 7,952
------------ ----------

Cash flows from investing activities:
Investment in property, plant and equipment (704) (1,315)
Proceeds from sale of property, plant and
equipment 105 193
Purchases of available-for-sale securities
and other investments (58) (78)
Maturities and sales of available-for-sale
securities and other investments 85 191
Payments made in connection with business
acquisitions, net (1,001) (1,265)
------------ ----------
Net cash used in investing activities (1,573) (2,274)
------------ ----------

Cash flows from financing activities:
Issuance of commercial paper and notes
payable, net (999) (1,898)
Issuance of debt 3,002 3,018
Payment of debt (903) (1,008)
Issuance of common stock under employee
stock plans 363 917
Repurchase of common stock (2,845) (6,169)
Excess tax benefit from stock-based
compensation 75 163
Dividends (197) (403)
------------ ----------
Net cash used in financing activities (1,504) (5,380)
------------ ----------

Increase in cash and cash equivalents 1,688 298
Cash and cash equivalents at beginning of
period 9,903 11,293
------------ ----------
Cash and cash equivalents at end of period $ 11,591 $ 11,591
============ ==========
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HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
SEGMENT INFORMATION
(Unaudited)
(In millions)

Three months ended
-------------------------------
April 30, January 31, April 30,
2008 2008 2007(a)
--------- ----------- ---------

Net revenue:

Enterprise Storage and Servers $ 4,780 $ 4,820 $ 4,594
HP Services 4,627 4,378 4,125
HP Software 727 666 568
--------- ----------- ---------
Technology Solutions Group 10,134 9,864 9,287
--------- ----------- ---------
Personal Systems Group 10,071 10,791 8,663
Imaging and Printing Group 7,591 7,312 7,161
HP Financial Services 685 642 550
Corporate Investments 230 218 175
--------- ----------- ---------
Total Segments 28,711 28,827 25,836
Eliminations of intersegment net
revenue and other (449) (360) (302)
--------- ----------- ---------

Total HP Consolidated $ 28,262 $ 28,467 $ 25,534
========= =========== =========

Earnings (Loss) from operations:

Enterprise Storage and Servers $ 655 $ 673 $ 452
HP Services 508 489 449
HP Software 93 51 7
--------- ----------- ---------
Technology Solutions Group 1,256 1,213 908
--------- ----------- ---------
Personal Systems Group 544 628 417
Imaging and Printing Group 1,230 1,150 1,167
HP Financial Services 47 43 36
Corporate Investments 6 8 (18)
--------- ----------- ---------
Total Segments 3,083 3,042 2,510

Corporate and unallocated costs and
eliminations (134) (89) (75)
Unallocated costs related to stock-
based compensation expense (131) (124) (131)
Amortization of purchased
intangible assets (211) (206) (212)
In-process research and development
charges (13) - (19)
Restructuring (4) (10) (453)
Pension curtailments and pension
settlements, net - - 508
Interest and other, net 3 72 100
--------- ----------- ---------

Total HP Consolidated Earnings Before
Taxes $ 2,593 $ 2,685 $ 2,228
========= =========== =========

(a) Certain fiscal 2008 organizational reclassifications have been
reflected retroactively to provide improved visibility and
comparability. For each of the quarters in fiscal year 2007, the
reclassifications resulted in the transfer of revenue and
operating profit among the Enterprise Storage and Servers, HP
Services and HP Software segments within the Technology Solutions
Group. There was no impact on the previously reported financial
results for the other segments.
*T

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HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
SEGMENT INFORMATION
(Unaudited)
(In millions)

Six months ended
April 30,
-----------------
2008 2007(a)
-------- --------

Net revenue:

Enterprise Storage and Servers $ 9,600 $ 9,015
HP Services 9,005 8,057
HP Software 1,393 1,166
-------- --------
Technology Solutions Group 19,998 18,238
-------- --------
Personal Systems Group 20,862 17,382
Imaging and Printing Group 14,903 14,160
HP Financial Services 1,327 1,097
Corporate Investments 448 332
-------- --------
Total Segments 57,538 51,209
Eliminations of intersegment net revenue and
other (809) (593)
-------- --------

Total HP Consolidated $56,729 $50,616
======== ========

Earnings (Loss) from operations:

Enterprise Storage and Servers $ 1,328 $ 905
HP Services 997 855
HP Software 144 25
-------- --------
Technology Solutions Group 2,469 1,785
-------- --------
Personal Systems Group 1,172 831
Imaging and Printing Group 2,380 2,240
HP Financial Services 90 68
Corporate Investments 14 (47)
-------- --------
Total Segments 6,125 4,877

Corporate and unallocated costs and eliminations (223) (141)
Unallocated costs related to stock-based
compensation expense (255) (271)
Amortization of purchased intangible assets (417) (413)
In-process research and development charges (13) (186)
Restructuring (14) (412)
Pension curtailments and pension settlements, net - 517
Interest and other, net 75 221
-------- --------

Total HP Consolidated Earnings Before Taxes $ 5,278 $ 4,192
======== ========

(a) Certain fiscal 2008 organizational reclassifications have been
reflected retroactively to provide improved visibility and
comparability. For each of the quarters in fiscal year 2007, the
reclassifications resulted in the transfer of revenue and
operating profit among the Enterprise Storage and Servers, HP
Services and HP Software segments within the Technology Solutions
Group. There was no impact on the previously reported financial
results for the other segments.
*T

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HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
SEGMENT / BUSINESS UNIT INFORMATION
(Unaudited)
(In millions)

Three months ended
-------------------------------
April 30, January 31, April 30,
2008 2008 2007(a)
--------- ----------- ---------

Net revenue:

Industry standard servers $ 2,818 $ 2,988 $ 2,818
Business critical systems 919 855 862
Storage 1,043 977 914
--------- ----------- ---------
Enterprise Storage and Servers 4,780 4,820 4,594
--------- ----------- ---------
Technology services 2,331 2,241 2,120
Outsourcing services 1,370 1,303 1,200
Consulting and integration 926 834 805
--------- ----------- ---------
HP Services 4,627 4,378 4,125
--------- ----------- ---------
Business technology
optimization(b) 593 548 437
Other(b) 134 118 131
--------- ----------- ---------
HP Software 727 666 568
--------- ----------- ---------
Technology Solutions Group 10,134 9,864 9,287
--------- ----------- ---------
Notebooks 5,373 5,664 4,086
Desktops 3,921 4,401 3,913
Workstations 494 467 402
Handhelds 102 89 116
Other 181 170 146
--------- ----------- ---------
Personal Systems Group 10,071 10,791 8,663
--------- ----------- ---------
Commercial Hardware 1,811 1,726 1,709
Consumer Hardware 974 1,180 1,008
Supplies 4,812 4,399 4,444
Other (6) 7 -
--------- ----------- ---------
Imaging and Printing Group 7,591 7,312 7,161
--------- ----------- ---------
HP Financial Services 685 642 550
Corporate Investments 230 218 175
--------- ----------- ---------
Total Segments 28,711 28,827 25,836
--------- ----------- ---------

Eliminations of intersegment net
revenue and other (449) (360) (302)
--------- ----------- ---------

Total HP Consolidated $ 28,262 $ 28,467 $ 25,534
========= =========== =========

(a) Certain fiscal 2008 organizational reclassifications have been
reflected retroactively to provide improved visibility and
comparability. For each of the quarters in fiscal year 2007, the
reclassifications resulted in the transfer of revenue among
Enterprise Storage and Servers, HP Services and HP Software segments
within the Technology Solutions Group. In addition, revenue was
transferred among the business units within the Imaging and Printing
Group and among the business units within the Personal Systems Group,
but there was no change to the previously reported revenue for either
segment as a whole. There was no impact on the previously reported
financial results for the HP Financial Services and Corporate
Investments segments.

(b) The OpenView business unit was renamed as "Business Technology
Optimization" and the OpenCall and Other business unit was renamed as
"Other" effective in fiscal 2008. The renamed "Other" business unit
includes primarily the OpenCall and Business Information Optimization
products.

HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
SEGMENT / BUSINESS UNIT INFORMATION
(Unaudited)
(In millions)

Six months ended
April 30,
---------------------
2008 2007(a)
----------- ---------

Net revenue:

Industry standard servers $ 5,806 $ 5,507
Business critical systems 1,774 1,708
Storage 2,020 1,800
----------- ---------
Enterprise Storage and Servers 9,600 9,015
----------- ---------
Technology services 4,572 4,182
Outsourcing services 2,673 2,329
Consulting and integration 1,760 1,546
----------- ---------
HP Services 9,005 8,057
----------- ---------
Business technology optimization(b) 1,141 897
Other(b) 252 269
----------- ---------
HP Software 1,393 1,166
----------- ---------
Technology Solutions Group 19,998 18,238
----------- ---------
Notebooks 11,037 8,232
Desktops 8,322 7,734
Workstations 961 807
Handhelds 191 307
Other 351 302
----------- ---------
Personal Systems Group 20,862 17,382
----------- ---------
Commercial Hardware 3,537 3,325
Consumer Hardware 2,154 2,249
Supplies 9,211 8,586
Other 1 -
----------- ---------
Imaging and Printing Group 14,903 14,160
----------- ---------
HP Financial Services 1,327 1,097
Corporate Investments 448 332
----------- ---------
Total Segments 57,538 51,209
----------- ---------

Eliminations of intersegment net revenue and
other (809) (593)
----------- ---------

Total HP Consolidated $ 56,729 $ 50,616
=========== =========

(a) Certain fiscal 2008 organizational reclassifications have been
reflected retroactively to provide improved visibility and
comparability. For each of the quarters in fiscal year 2007, the
reclassifications resulted in the transfer of revenue among
Enterprise Storage and Servers, HP Services and HP Software segments
within the Technology Solutions Group. In addition, revenue was
transferred among the business units within the Imaging and Printing
Group and among the business units within the Personal Systems Group,
but there was no change to the previously reported revenue for either
segment as a whole. There was no impact on the previously reported
financial results for the HP Financial Services and Corporate
Investments segments.

(b) The OpenView business unit was renamed as "Business Technology
Optimization" and the OpenCall and Other business unit was renamed as
"Other" effective in fiscal 2008. The renamed "Other" business unit
includes primarily the OpenCall and Business Information Optimization
products.

HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
CALCULATION OF NET EARNINGS PER SHARE
(Unaudited)
(In millions except per share amounts)

Three months ended
-------------------------------
April 30, January 31, April 30,
2008 2008 2007
--------- ----------- ---------

Numerator:
Net earnings $ 2,057 $ 2,133 $ 1,775
Adjustment for interest expense on
zero-coupon subordinated
convertible notes, net of taxes 1 2 2
--------- ----------- ---------

Net earnings, adjusted $ 2,058 $ 2,135 $ 1,777
========= =========== =========

Denominator:
Weighted-average shares used to
compute basic EPS 2,473 2,560 2,638
Effect of dilutive securities:
Dilution from employee stock plans 79 87 85
Zero-coupon subordinated
convertible notes 5 8 8
--------- ----------- ---------
Dilutive potential common shares 84 95 93
--------- ----------- ---------

Weighted-average shares used to
compute diluted EPS 2,557 2,655 2,731
========= =========== =========

Net earnings per share:
Basic(a) $ 0.83 $ 0.83 $ 0.67
Diluted(b) $ 0.80 $ 0.80 $ 0.65

(a) HP's basic earnings per share was calculated based on net earnings
and the weighted-average number of shares outstanding during the
reporting period.

(b) The diluted earnings per share included additional dilution from
potential issuance of common stock, such as stock issuable pursuant
to exercise of stock options and conversion of debt, except when such
issuances would be antidilutive.

*T

-0-
*T
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
CALCULATION OF NET EARNINGS PER SHARE
(Unaudited)
(In millions except per share amounts)

Six months ended
April 30,
----------------
2008 2007
------- -------

Numerator:
Net earnings $ 4,190 $ 3,322
Adjustment for interest expense on zero-coupon
subordinated convertible notes, net of taxes 3 4
------- -------

Net earnings, adjusted $ 4,193 $ 3,326
======= =======

Denominator:
Weighted-average shares used to compute basic EPS 2,516 2,672
Effect of dilutive securities:
Dilution from employee stock plans 81 83
Zero-coupon subordinated convertible notes 6 8
------- -------
Dilutive potential common shares 87 91
------- -------

Weighted-average shares used to compute diluted EPS 2,603 2,763
======= =======

Net earnings per share:
Basic(a) $ 1.67 $ 1.24
Diluted(b) $ 1.61 $ 1.20

(a) HP's basic earnings per share was calculated based on net earnings
and the weighted-average number of shares outstanding during the
reporting period.

(b) The diluted earnings per share included additional dilution from
potential issuance of common stock, such as stock issuable pursuant
to exercise of stock options and conversion of debt, except when such
issuances would be antidilutive.
*T

-0-
*T
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
CALCULATION OF NON-GAAP NET EARNINGS PER SHARE
(Unaudited)
(In millions except per share amounts)

Three months ended
-------------------------------
April 30, January 31, April 30,
2008 2008 2007
--------- ----------- ---------

Numerator:
Non-GAAP net earnings $ 2,229 $ 2,291 $ 1,920
Adjustment for interest expense on
zero-coupon subordinated
convertible notes, net of taxes 1 2 2
--------- ----------- ---------

Non-GAAP net earnings, adjusted $ 2,230 $ 2,293 $ 1,922
========= =========== =========

Denominator:
Weighted-average shares used to
compute basic EPS 2,473 2,560 2,638
Effect of dilutive securities:
Dilution from employee stock plans 79 87 85
Zero-coupon subordinated
convertible notes 5 8 8
--------- ----------- ---------
Dilutive potential common shares 84 95 93
--------- ----------- ---------

Weighted-average shares used to
compute diluted EPS 2,557 2,655 2,731
========= =========== =========

Non-GAAP net earnings per share:
Basic(a) $ 0.90 $ 0.89 $ 0.73
Diluted(b) $ 0.87 $ 0.86 $ 0.70

(a) HP's basic non-GAAP earnings per share was calculated based on
non-GAAP net earnings and the weighted-average number of shares
outstanding during the reporting period.

(b) HP's diluted non-GAAP earnings per share included additional
dilution from potential issuance of common stock, such as stock
issuable pursuant to exercise of stock options and conversion of
debt, except when such issuances would be antidilutive.
*T

-0-
*T
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
CALCULATION OF NON-GAAP NET EARNINGS PER SHARE
(Unaudited)
(In millions except per share amounts)

Six months ended
April 30,
-----------------
2008 2007
-------- --------

Numerator:
Non-GAAP net earnings $ 4,520 $ 3,746
Adjustment for interest expense on zero-coupon
subordinated convertible notes, net of taxes 3 4
-------- --------

Non-GAAP net earnings, adjusted $ 4,523 $ 3,750
======== ========

Denominator:
Weighted-average shares used to compute basic EPS 2,516 2,672
Effect of dilutive securities:
Dilution from employee stock plans 81 83
Zero-coupon subordinated convertible notes 6 8
-------- --------
Dilutive potential common shares 87 91
-------- --------

Weighted-average shares used to compute diluted
EPS 2,603 2,763
======== ========

Non-GAAP net earnings per share:
Basic(a) $ 1.80 $ 1.40
Diluted(b) $ 1.74 $ 1.36

(a) HP's basic non-GAAP earnings per share was calculated based on
non-GAAP net earnings and the weighted-average number of shares
outstanding during the reporting period.

(b) HP's diluted non-GAAP earnings per share included additional
dilution from potential issuance of common stock, such as stock
issuable pursuant to exercise of stock options and conversion of
debt, except when such issuances would be antidilutive.
*T

Use of Non-GAAP Financial Measures

To supplement HP's consolidated condensed financial statements
presented on a GAAP basis, HP provides non-GAAP operating profit,
non-GAAP operating margin, non-GAAP net earnings, non-GAAP diluted
earnings per share and gross cash. HP also provides forecasts of
non-GAAP diluted earnings per share. These non-GAAP financial measures
are not in accordance with, or an alternative for, generally accepted
accounting principles in the United States. The GAAP measure most
directly comparable to non-GAAP operating profit is earnings from
operations. The GAAP measure most directly comparable to non-GAAP
operating margin is operating margin. The GAAP measure most directly
comparable to non-GAAP net earnings is net earnings. The GAAP measure
most directly comparable to non-GAAP diluted earnings per share is
diluted net earnings per share. The GAAP measure most directly
comparable to gross cash is cash and cash equivalents. Reconciliations
of each of these non-GAAP financial measures to GAAP information are
included in the tables above.

Use and Economic Substance of Non-GAAP Financial Measures Used by
HP

Non-GAAP operating profit and non-GAAP operating margin are
defined to exclude the effects of any restructuring charges, charges
relating to the amortization of purchased intangible assets, pension
curtailment and settlement gains and losses, and in-process research
and development charges recorded during the relevant period. Non-GAAP
net earnings and non-GAAP diluted earnings per share consist of net
earnings or diluted net earnings per share excluding those same
charges. In addition, non-GAAP net earnings and non-GAAP diluted
earnings per share are adjusted by the amount of additional taxes or
tax benefit associated with each non-GAAP item. HP's management uses
these non-GAAP financial measures for purposes of evaluating HP's
historical and prospective financial performance, as well as HP's
performance relative to its competitors. HP's management also uses
these non-GAAP measures to further its own understanding of HP's
segment operating performance. HP believes that excluding those items
mentioned above from these non-GAAP financial measures allows HP
management to better understand HP's consolidated financial
performance in relationship to the operating results of HP's segments,
as management does not believe that the excluded items are reflective
of ongoing operating results. More specifically, HP's management
excludes each of those items mentioned above for the following
reasons:

-- Restructuring charges consist of costs primarily related to
severance and benefits for employees terminated pursuant to a
formal restructuring plan, including strategic reallocations
or workforce reductions and early retirement programs. HP
excludes these restructuring costs (and any reversals of
charges recorded in prior periods) for purposes of calculating
these non-GAAP measures because it believes that these
historical costs do not reflect expected future operating
expenses and do not contribute to a meaningful evaluation of
HP's current operating performance or comparisons to HP's past
operating performance.

-- Purchased intangible assets consist primarily of customer
contracts, customer lists, distribution agreements, technology
patents, and products, trademarks and trade names purchased in
connection with acquisitions. HP incurs charges relating to
the amortization of these intangibles, and those charges are
included in HP's GAAP presentation of earnings from
operations, operating margin, net earnings and net earnings
per share. Amortization charges for HP's purchased intangible
assets are inconsistent in amount and frequency and are
significantly impacted by the timing and magnitude of HP's
acquisitions. Consequently, HP excludes these charges for
purposes of calculating these non-GAAP measures to facilitate
a more meaningful evaluation of HP's current operating
performance and comparisons to HP's past operating
performance.

-- In the first quarter of fiscal 2007, HP recognized a net
curtailment gain for its non-U.S. pension plans. The net gain
primarily reflects a plan design change in Mexico where HP
ceased pension accruals for current employees who did not meet
defined criteria based on age and years of service (calculated
as of December 31, 2006). In the second quarter of fiscal
2007, HP recorded a pension curtailment gain primarily
resulting from the decision to cease pension accruals under
its U.S. defined benefit pension plan for all employees who
were still accruing benefits under that plan. The curtailment
gain was partially offset primarily by a settlement expense
associated with the distribution and subsequent transfer of
accrued pension benefits from HP's U.S. Excess Benefit Plan to
HP's U.S. Executive Deferred Compensation Plan for the
terminated vested plan participants. Because pension
curtailment gains and pension settlement losses are
inconsistent in amount and frequency, HP believes that
eliminating these gains and losses for purposes of calculating
these non-GAAP measures facilitates a more meaningful
evaluation of HP's current operating performance and
comparisons to HP's past operating performance.

-- In-process research and development charges relate to amounts
assigned to tangible and intangible assets to be used in
research and development projects that have no alternative
future use and therefore are charged to expense at the
acquisition date. Charges for in-process research and
development in connection with HP's acquisitions are reflected
in HP's GAAP presentation of earnings from operations,
operating margin, net earnings and net earnings per share.
In-process research and development expenses are not
indicative of HP's ongoing operating costs and are generally
unpredictable. Accordingly, HP believes that eliminating these
expenses for purposes of calculating these non-GAAP measures
contributes to a meaningful evaluation of HP's current
operating performance and comparisons to HP's past operating
performance.

Gross cash is a non-GAAP measure that is defined as cash and cash
equivalents plus short-term investments and certain long-term
investments that may be liquidated within 90 days pursuant to the
terms of existing put options or similar rights. HP's management uses
gross cash for the purpose of determining the amount of cash available
for investment in HP's businesses, funding strategic acquisitions,
repurchasing stock and other purposes. HP's management also uses gross
cash for the purposes of evaluating HP's historical and prospective
liquidity, as well as to further its own understanding of HP's segment
operating results. Because gross cash includes liquid assets that are
not included in GAAP cash and cash equivalents, HP believes that gross
cash provides a more accurate and complete assessment of HP's
liquidity and segment operating results.

Material Limitations Associated with Use of Non-GAAP Financial
Measures

These non-GAAP financial measures may have limitations as
analytical tools, and these measures should not be considered in
isolation or as a substitute for analysis of HP's results as reported
under GAAP. Some of the limitations in relying on these non-GAAP
financial measures are:

-- Items such as amortization of purchased intangible assets,
though not directly affecting HP's cash position, represent
the loss in value of intangible assets over time. The expense
associated with this loss in value is not included in non-GAAP
operating profit, non-GAAP operating margin, non-GAAP net
earnings and non-GAAP diluted earnings per share and therefore
does not reflect the full economic effect of the loss in value
of those intangible assets.

-- Items such as restructuring charges that are excluded from
non-GAAP operating profit, non-GAAP operating margin, non-GAAP
net earnings and non-GAAP diluted earnings per share can have
a material impact on cash flows and earnings per share.

-- HP may not be able to liquidate immediately the long-term
investments included in gross cash, which may limit the
usefulness of gross cash as a liquidity measure.

-- Other companies may calculate non-GAAP operating profit,
non-GAAP operating margin, non-GAAP net earnings, non-GAAP
diluted earnings per share and gross cash differently than HP
does, limiting the usefulness of those measures for
comparative purposes.

Compensation for Limitations Associated with Use of Non-GAAP
Financial Measures

HP compensates for the limitations on its use of non-GAAP
operating profit, non-GAAP operating margin, non-GAAP net earnings,
non-GAAP diluted earnings per share and gross cash by relying
primarily on its GAAP results and using non-GAAP financial measures
only supplementally. HP also provides robust and detailed
reconciliations of each non-GAAP financial measure to its most
directly comparable GAAP measure within this press release and in
other written materials that include these non-GAAP financial
measures, and HP encourages investors to review carefully those
reconciliations.

Usefulness of Non-GAAP Financial Measures to Investors

HP believes that providing non-GAAP operating profit, non-GAAP
operating margin, non-GAAP net earnings, non-GAAP diluted earnings per
share and gross cash to investors in addition to the related GAAP
measures provides investors with greater transparency to the
information used by HP's management in its financial and operational
decision-making and allows investors to see HP's results "through the
eyes" of management. HP further believes that providing this
information better enables HP's investors to understand HP's operating
performance and to evaluate the efficacy of the methodology and
information used by management to evaluate and measure such
performance. Disclosure of these non-GAAP financial measures also
facilitates comparisons of HP's operating performance with the
performance of other companies in HP's industry that supplement their
GAAP results with non-GAAP financial measures that are calculated in a
similar manner.

HP
Robert Sherbin, +1-650-857-2381
robert.sherbin@hp.com
Ryan J. Donovan, +1-650-857-8410
ryan.j.donovan@hp.com
HP Media Hotline, +1-866-266-7272
pr@hp.com
Asa Svanstrom, +1-650-857-2246 (Investors)
asa.svanstrom@hp.com
www.hp.com/go/newsroom

Copyright Business Wire 2008