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HP Reports Third Quarter 2007 Results

-- Net revenue of $25.4 billion, up $3.5 billion year over year, or 16% -- GAAP operating profit of $2.1 billion; $0.66 earnings per share, up from $0.48 in the prior-year period -- Non-GAAP operating profit of $2.3 billion; $0.71 earnings per share, up from $0.52 in the prior-year period

PALO ALTO, Calif, Aug 16, 2007 (BUSINESS WIRE) -- HP (NYSE:HPQ) today announced financial results for its third fiscal quarter ended July 31, 2007, with net revenue of $25.4 billion, representing growth of 16% year over year, or 12% when adjusted for the effects of currency.

GAAP operating profit was $2.1 billion and GAAP diluted earnings per share (EPS) was $0.66, up from $0.48 in the prior-year period. Non-GAAP operating profit was $2.3 billion, with non-GAAP diluted EPS of $0.71 up from $0.52 in the prior-year period. Non-GAAP financial information excludes $134 million of adjustments on an after-tax basis, or $0.05 per diluted share, related primarily to amortization of purchased intangibles. GAAP and non-GAAP financial information include all stock-based compensation expense in both current and prior-year periods.

"HP's latest results demonstrate continued strength across each of our key businesses and geographies with our best revenue growth since 2000," said Mark Hurd, HP chairman and chief executive officer. "We are executing increasingly well in creating demand for our innovative products and services, and we are continuing to become a more efficient organization."


                                          ----------------------------
                                           Q3 FY07  Q3 FY06     Y/Y
 ---------------------------------------------------------------------
 Net revenue ($B)                           $25.4    $21.9      16%
 ---------------------------------------------------------------------
 GAAP operating margin                      8.3%      6.9%    1.4 pts
 ---------------------------------------------------------------------
 GAAP net earnings ($B)                     $1.8      $1.4      29%
 ---------------------------------------------------------------------
 GAAP diluted EPS                           $0.66    $0.48      38%
 ---------------------------------------------------------------------
 Non-GAAP operating margin                  9.0%      7.6%    1.4 pts
 ---------------------------------------------------------------------
 Non-GAAP net earnings ($B)                 $1.9      $1.5      29%
 ---------------------------------------------------------------------
 Non-GAAP diluted EPS                       $0.71    $0.52      37%
 ---------------------------------------------------------------------

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

During the quarter, on a year-over-year basis, revenue in the Americas grew 14% to $11.1 billion, revenue in Europe, the Middle East and Africa grew 16% to $9.7 billion, and revenue in Asia Pacific grew 22% to $4.6 billion. When adjusted for the effects of currency, revenue in the Americas grew 13%, revenue in Europe, the Middle East and Africa grew 9%, and revenue in Asia Pacific grew 18%. Revenue from outside of the United States was 65%, with revenue in the BRIC countries (Brazil, Russia, India and China) growing 35% over the prior year in the third quarter and now accounting for more than 8% of revenue.

Personal Systems Group

Personal Systems Group (PSG) revenue grew 29% year over year to $8.9 billion, with unit shipments up 33% on a year-over-year basis. These results bring PSG's year-to-date revenue growth to nearly $5 billion. Notebook revenue grew 54% over the prior-year period, while desktop revenue grew 12%. Commercial client revenue grew 19% year-over-year, while Consumer client revenue increased 46%. Operating profit was $519 million, or 5.8% of revenue, up from $275 million, or 4.0% of revenue, in the prior-year period.

Imaging and Printing Group

Imaging and Printing Group (IPG) revenue grew 8% year over year to $6.8 billion. On a year-over-year basis, supplies revenue grew 9%, commercial hardware revenue grew 6% and consumer hardware revenue grew 10%. Printer unit shipments increased 10% year over year, with consumer printer hardware units up 8% and commercial printer hardware units up 17%. Momentum in key growth initiatives continued, with printer-based multi-function devices up 76%. Operating profit was $981 million, or 14.5% of revenue, up from $884 million, or 14.2% of revenue, in the prior-year period.

Enterprise Storage and Servers

Enterprise Storage and Servers (ESS) reported revenue of $4.5 billion, up 10% over the prior-year period. On a year-over-year basis, industry-standard server revenue increased 16%, with x86 blade revenue up 81%. Storage revenue grew 6%, with revenue growth of 7% in external disk storage, including 14% in the midrange EVA line, and partially offset by a decline in the tape business. Business critical systems revenue declined 3%, with Integrity systems growth of 71% offset by declines in PA-RISC and Alpha. Operating profit was $464 million, or 10.2% of revenue, up from $296 million, or 7.2% of revenue, in the prior-year period.

HP Services

HP Services (HPS) revenue increased 8% year over year to $4.2 billion. Revenue in Technology Services grew 5% over the prior-year period, while Consulting and Integration revenue rose 11%, and Outsourcing Services revenue rose 11%. Operating profit was $430 million, or 10.3% of revenue, up from $364 million, or 9.4% of revenue, in the prior-year period.

HP Software

HP Software revenue grew 74% over the prior-year period to $554 million, led by strong growth from the businesses acquired in HP's purchase of Mercury Interactive. On a year-over-year basis, HP OpenView grew 14% excluding Mercury. Operating profit was $81 million, or 14.6% of revenue, up from $13 million, or 4.1% of revenue, in the prior-year period.

Financial Services

HP Financial Services (HPFS) reported revenue of $582 million, an increase of 12% year over year. Financing volume and net portfolio assets increased 7% and 8%, respectively, over the prior-year period. Operating margin was 6.7% of revenue, comparable to the same period last year.

Asset management

HP generated $1.9 billion in cash flow from operations. Inventory ended the quarter at $8.0 billion, up $728 million sequentially and up $542 million year over year. Accounts receivable increased $268 million sequentially and increased $2.2 billion over the prior-year period to $11.8 billion. Accounts payable increased $168 million sequentially and $978 million over the prior-year period to $11.7 billion. HP's dividend payment of $0.08 per share in the second quarter resulted in cash usage of $209 million. HP utilized $2.5 billion of cash during the third quarter to repurchase approximately 55 million shares of common stock from the open market. HP exited the quarter with $12.5 billion in gross cash, which includes cash and cash equivalents of $12.5 billion, short-term investments of $40 million, and certain long-term investments of $23 million.

Outlook

HP estimates Q4 FY07 revenue will be approximately $27.0 billion to $27.2 billion.

Fourth quarter FY07 GAAP diluted EPS is expected to be in the range of $0.75 to $0.76, and non-GAAP diluted EPS is expected to be in the range of $0.80 to $0.81. Non-GAAP diluted EPS estimates exclude after-tax costs of approximately $0.05 per share, related primarily to the amortization of purchased intangible assets.

HP estimates FY07 revenue will be approximately $103.0 billion to $103.2 billion.

FY07 GAAP diluted EPS is expected to be in the range of $2.61 to $2.62, and FY07 non-GAAP diluted EPS is expected to be in the range of $2.86 to $2.87. FY07 non-GAAP diluted EPS estimates exclude after-tax costs of approximately $0.25 per share, related primarily to the amortization of purchased intangible assets, in-process research and development charges, restructuring charges and pension curtailment gains.

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 Q3 FY07 earnings conference call is accessible via an audio webcast at www.hp.com/investor/q32007webcast.

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 $100.5 billion for the four fiscal quarters ended July 31, 2007. 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 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 plans; any statements concerning the expected development, performance or market share relating to products or services; 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 plans; the resolution of pending investigations, claims and disputes; and other risks that are described in HP's Quarterly Report on Form 10-Q for the fiscal quarter ended April 30, 2007 and HP's other filings with the Securities and Exchange Commission, including HP's Annual Report on Form 10-K for the fiscal year ended October 31, 2006. As in prior quarters, 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 July 31, 2007. In particular, determining HP's actual tax balances and provisions as of July 31, 2007 and for the fiscal quarter then ended 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) 2007 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.

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



                                               Three months ended
                                          ----------------------------
                                          July 31,  April 30, July 31,
                                            2007      2007      2006
                                          --------- --------- --------

Net revenue                                $25,377   $25,534  $21,890

Costs and expenses(a):
     Cost of sales                          19,164    19,283   16,472
     Research and development                  917       903      920
     Selling, general and administrative     3,002     3,044    2,830
     Amortization of purchased intangible
      assets                                   183       212      153
     In-process research and development
      charges                                    -        19        -
     Restructuring                              (5)      453        5
     Pension curtailments and pension
      settlements, net                           -      (508)       -
                                          --------- --------- --------
          Total costs and expenses          23,261    23,406   20,380
                                          --------- --------- --------

Earnings from operations                     2,116     2,128    1,510

Interest and other, net                        165        87      221
Gains on investments                             5        13        7
                                          --------- --------- --------

Earnings before taxes                        2,286     2,228    1,738

Provision for taxes(b)                         508       453      363
                                          --------- --------- --------

Net earnings                               $ 1,778   $ 1,775  $ 1,375
                                          ========= ========= ========

Net earnings per share:
     Basic                                 $  0.68   $  0.67  $  0.50
     Diluted                               $  0.66   $  0.65  $  0.48


Cash dividends declared per share          $  0.16         -  $  0.16

Weighted-average shares used to compute
 net earnings per share:
     Basic                                   2,600     2,638    2,768
     Diluted                                 2,697     2,731    2,839

(a) Stock-based compensation expense
 included under SFAS 123(R) was as
 follows:
      Cost of sales                        $    34   $    42  $    35
      Research and development                  19        18       17
      Selling, general and administrative       91        94       75
                                          --------- --------- --------
          Total costs and expenses         $   144   $   154  $   127

(b) Tax benefit from stock-based
 compensation                              $   (36)  $   (44) $   (38)

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



                                                    Nine months ended
                                                    ------------------
                                                    July 31,  July 31,
                                                      2007      2006
                                                    --------  --------

Net revenue                                         $75,993   $67,103

Costs and expenses(a):
     Cost of sales                                   57,583    50,834
     Research and development                         2,697     2,721
     Selling, general and administrative              8,954     8,380
     Amortization of purchased intangible assets        596       451
     In-process research and development charges        186        52
     Restructuring                                      407         6
     Pension curtailments and pension settlements,
      net                                              (517)        -
                                                    --------  --------
          Total costs and expenses                   69,906    62,444
                                                    --------  --------

Earnings from operations                              6,087     4,659

Interest and other, net                                 363       416
Gains on investments                                     28        11
                                                    --------  --------

Earnings before taxes                                 6,478     5,086

Provision for taxes(b)                                1,378       585
                                                    --------  --------

Net earnings                                        $ 5,100   $ 4,501
                                                    ========  ========

Net earnings per share:
     Basic                                          $  1.93   $  1.61
     Diluted                                        $  1.87   $  1.57


Cash dividends declared per share                   $  0.32   $  0.32

Weighted-average shares used to compute net
 earnings per share:
     Basic                                            2,648     2,799
     Diluted                                          2,734     2,870

(a) Stock-based compensation expense included under
 SFAS 123(R) was as follows:
      Cost of sales                                 $   121   $   107
      Research and development                           56        50
      Selling, general and administrative               284       238
                                                    --------  --------
          Total costs and expenses                  $   461   $   395

(b) Tax benefit from stock-based compensation       $  (128)  $  (120)


               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
                  July    Earnings  April   Earnings  July    Earnings
                   31,      Per      30,      Per      31,      Per
                   2007    Share     2007    Share     2006    Share
                 ------- --------- ------- --------- ------- ---------

GAAP net
 earnings        $1,778  $ 0.66    $1,775  $ 0.65    $1,375  $ 0.48

Non-GAAP
 adjustments:
 Amortization of
  purchased
  intangible
  assets            183    0.07       212    0.08       153    0.05
 In-process
  research and
  development
  charges             -       -        19    0.01         -       -
 Restructuring       (5)      -       453    0.16         5       -
 Pension
  curtailments
  and pension
  settlements,
  net                 -       -      (508)  (0.19)        -       -
 Gains on
  investments(a)      -       -         -       -        (7)      -
 Adjustments for
  taxes             (44)  (0.02)      (31)  (0.01)      (43)  (0.01)
                 ------- --------- ------- --------- ------- ---------

Non-GAAP net
 earnings        $1,912  $ 0.71    $1,920  $ 0.70    $1,483  $ 0.52
                 ======= ========= ======= ========= ======= =========


GAAP earnings
 from operations $2,116            $2,128            $1,510

Non-GAAP
 adjustments:
 Amortization of
  purchased
  intangible
  assets            183               212               153
 In-process
  research and
  development
  charges             -                19                 -
 Restructuring       (5)              453                 5
 Pension
  curtailments
  and pension
  settlements,
  net                 -              (508)                -
                 -------           -------           -------

Non-GAAP
 earnings from
 operations      $2,294            $2,304            $1,668
                 =======           =======           =======

GAAP operating
 margin               8%                8%                7%
Non-GAAP
 adjustments          1%                1%                1%
                 -------           -------           -------

Non-GAAP
 operating
 margin               9%                9%                8%
                 =======           =======           =======


(a) Beginning in fiscal 2007, HP no longer excludes gains or losses on
 investments when calculating financial measures presented on a non-
 GAAP basis.

               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)

                                 Nine                Nine
                                months   Diluted    months   Diluted
                                 ended    Earnings   ended    Earnings
                                July 31,    Per     July 31,    Per
                                  2007     Share      2006     Share
                               --------- --------- --------- ---------

GAAP net earnings              $ 5,100    $  1.87   $ 4,501   $ 1.57

Non-GAAP adjustments:
   Amortization of purchased
    intangible assets              596       0.22       451     0.16
   In-process research and
    development charges            186       0.07        52     0.02
   Restructuring                   407       0.15         6        -
   Pension curtailments and
    pension settlements, net      (517)     (0.19)        -        -
   Gains on investments(a)           -          -       (11)       -
   Adjustments for taxes          (114)     (0.05)     (127)   (0.05)
                               --------- --------- --------- ---------

Non-GAAP net earnings          $ 5,658    $  2.07   $ 4,872   $ 1.70
                               ========= ========= ========= =========


GAAP earnings from operations  $ 6,087              $ 4,659

Non-GAAP adjustments:
   Amortization of purchased
    intangible assets              596                  451
   In-process research and
    development charges            186                   52
   Restructuring                   407                    6
   Pension curtailments and
    pension settlements, net      (517)                   -
                               ---------           ---------

Non-GAAP earnings from
 operations                    $ 6,759              $ 5,168
                               =========           =========

GAAP operating margin                8%                   7%
Non-GAAP adjustments                 1%                   1%
                               ---------           ---------

Non-GAAP operating margin            9%                   8%
                               =========           =========


(a) Beginning in fiscal 2007, HP no longer excludes gains or losses on
 investments when calculating financial measures presented on a non-
 GAAP basis.

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


                                                July 31,   October 31,
                                                   2007        2006
                                               ----------- -----------
                                               (unaudited)

ASSETS

Current assets:
     Cash and cash equivalents                    $ 12,450    $ 16,400
     Short-term investments                             40          22
     Accounts receivable                            11,845      10,873
     Financing receivables                           2,476       2,440
     Inventory                                       8,006       7,750
     Other current assets                           10,544      10,779
                                               ----------- -----------

        Total current assets                        45,361      48,264
                                               ----------- -----------

Property, plant and equipment                        7,479       6,863

Long-term financing receivables and other
 assets                                              7,992       6,649

Goodwill and purchased intangible assets            24,309      20,205
                                               ----------- -----------

Total assets                                      $ 85,141    $ 81,981
                                               =========== ===========


LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
     Notes payable and short-term borrowings      $  3,667    $  2,705
     Accounts payable                               11,673      12,102
     Employee compensation and benefits              2,819       3,148
     Taxes on earnings                               1,816       1,905
     Deferred revenue                                4,983       4,309
     Accrued restructuring                             168         547
     Other accrued liabilities                      12,179      11,134
                                               ----------- -----------

        Total current liabilities                   37,305      35,850
                                               ----------- -----------

Long-term debt                                       4,945       2,490
Other liabilities                                    5,954       5,497

Stockholders' equity                                36,937      38,144
                                               ----------- -----------

Total liabilities and stockholders' equity        $ 85,141    $ 81,981
                                               =========== ===========

               HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
           CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
                             (Unaudited)
                            (In millions)


                                              Three months Nine months
                                                  ended       ended
                                               July 31,     July 31,
                                                  2007         2007
                                              ------------ -----------

Cash flows from operating activities:
   Net earnings                                $   1,778    $  5,100
   Adjustments to reconcile net earnings to
    net cash provided by operating
    activities:
     Depreciation and amortization                   685       2,006
     Stock-based compensation expense                144         461
     Provision for bad debt and inventory             85         272
     Gains on investments                             (5)        (28)
     In-process research and development
      charges                                          -         186
     Restructuring                                    (5)        407
     Pension curtailments and pension
      settlements, net                                 -        (517)
     Deferred taxes on earnings                       59         299
     Excess tax benefit from stock-based
      compensation                                  (165)       (340)
     Other, net                                      (80)       (124)

     Changes in assets and liabilities:
       Accounts and financing receivables           (310)       (965)
       Inventory                                    (800)       (503)
       Accounts payable                              168        (446)
       Taxes on earnings                              30         181
       Restructuring                                 (97)       (539)
       Other assets and liabilities                  380         556
                                              ------------ -----------
         Net cash provided by operating
          activities                               1,867       6,006
                                              ------------ -----------

Cash flows from investing activities:
     Investment in property, plant and
      equipment                                     (751)     (2,227)
     Proceeds from sale of property, plant
      and equipment                                  203         503
     Purchases of available-for-sale
      securities and other investments               (20)        (36)
     Maturities and sales of available-for-
      sale securities and other investments           58         403
     Payments made in connection with
      business acquisitions, net                     (57)     (4,893)
                                              ------------ -----------
        Net cash used in investing activities       (567)     (6,250)
                                              ------------ -----------

Cash flows from financing activities:
     Issuance of commercial paper and notes
      payable, net                                   278       2,324
     Issuance of debt                              2,035       4,106
     Payment of debt                              (2,021)     (3,382)
     Issuance of common stock under employee
      stock plans                                  1,177       2,393
     Repurchase of common stock                   (2,511)     (8,847)
     Excess tax benefit from stock-based
      compensation                                   165         340
     Dividends                                      (209)       (640)
                                              ------------ -----------
        Net cash used in financing activities     (1,086)     (3,706)
                                              ------------ -----------

Increase (decrease) in cash and cash
 equivalents                                         214      (3,950)
Cash and cash equivalents at beginning of
 period                                           12,236      16,400
                                              ------------ -----------
Cash and cash equivalents at end of period     $  12,450    $ 12,450
                                              ============ ===========

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

                                                Three months ended
                                            --------------------------
                                                      April
                                            July 31,    30,   July 31,
                                              2007     2007   2006(a)
                                            -------- -------- --------

Net revenue:

    Enterprise Storage and Servers          $ 4,547  $ 4,619  $ 4,133
    HP Services                               4,186    4,145    3,888
    HP Software                                 554      523      318
                                            -------- -------- --------
  Technology Solutions Group                  9,287    9,287    8,339
                                            -------- -------- --------
  Personal Systems Group                      8,894    8,663    6,917
  Imaging and Printing Group                  6,751    7,161    6,234
  HP Financial Services                         582      550      519
  Corporate Investments                         220      175      155
                                            -------- -------- --------
    Total Segments                           25,734   25,836   22,164
  Eliminations of intersegment net revenue
   and other                                   (357)    (302)    (274)
                                            -------- -------- --------

    Total HP Consolidated                   $25,377  $25,534  $21,890
                                            ======== ======== ========

Earnings from operations:

    Enterprise Storage and Servers          $   464  $   407  $   296
    HP Services                                 430      459      364
    HP Software                                  81       42       13
                                            -------- -------- --------
  Technology Solutions Group                    975      908      673
                                            -------- -------- --------
  Personal Systems Group                        519      417      275
  Imaging and Printing Group                    981    1,167      884
  HP Financial Services                          39       36       35
  Corporate Investments                          (5)     (18)     (33)
                                            -------- -------- --------
     Total Segments                           2,509    2,510    1,834

     Corporate and unallocated costs and
      eliminations                             (101)     (75)     (53)
     Unallocated costs related to stock-
      based compensation expense               (114)    (131)    (113)
     Amortization of purchased intangible
      assets                                   (183)    (212)    (153)
     In-process research and development
      charges                                     -      (19)       -
     Restructuring                                5     (453)      (5)
     Pension curtailments and pension
      settlements, net                            -      508        -
     Interest and other, net                    165       87      221
     Gains on investments                         5       13        7
                                            -------- -------- --------

    Total HP Consolidated Earnings Before
     Taxes                                  $ 2,286  $ 2,228  $ 1,738
                                            ======== ======== ========


(a) Certain fiscal 2007 organizational realignments have been
 reflected retroactively to provide improved visibility and
 comparability. For each of the quarters in fiscal year 2006, the
 realignments primarily resulted in revenue movement within business
 units within the ESS and HPS segments. There was no impact to total
 segment revenue.

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

                                                     Nine months ended
                                                          July 31
                                                     -----------------
                                                        2007   2006(a)
                                                     -------- --------

Net revenue:

    Enterprise Storage and Servers                   $13,619  $12,638
    HP Services                                       12,279   11,537
    HP Software                                        1,627      952
                                                     -------- --------
  Technology Solutions Group                          27,525   25,127
                                                     -------- --------
  Personal Systems Group                              26,276   21,343
  Imaging and Printing Group                          20,911   19,503
  HP Financial Services                                1,679    1,533
  Corporate Investments                                  552      406
                                                     -------- --------
    Total Segments                                    76,943   67,912
  Eliminations of intersegment net revenue and other    (950)    (809)
                                                     -------- --------

    Total HP Consolidated                            $75,993  $67,103
                                                     ======== ========

Earnings from operations:

    Enterprise Storage and Servers                   $ 1,287  $   944
    HP Services                                        1,303    1,002
    HP Software                                          170       25
                                                     -------- --------
  Technology Solutions Group                           2,760    1,971
                                                     -------- --------
  Personal Systems Group                               1,350      816
  Imaging and Printing Group                           3,221    2,898
  HP Financial Services                                  107      112
  Corporate Investments                                  (52)    (115)
                                                     -------- --------
     Total Segments                                    7,386    5,682

     Corporate and unallocated costs and
      eliminations                                      (242)    (175)
     Unallocated costs related to stock-based
      compensation expense                              (385)    (339)
     Amortization of purchased intangible assets        (596)    (451)
     In-process research and development charges        (186)     (52)
     Restructuring                                      (407)      (6)
     Pension curtailments and pension settlements,
      net                                                517        -
     Interest and other, net                             363      416
     Gains on investments                                 28       11
                                                     -------- --------

    Total HP Consolidated Earnings Before Taxes      $ 6,478  $ 5,086
                                                     ======== ========


(a) Certain fiscal 2007 organizational realignments have been
 reflected retroactively to provide improved visibility and
 comparability. For fiscal year 2006, the realignments primarily
 resulted in revenue movement within business units within the ESS and
 HPS segments. There was no impact to total segment revenue.

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

                                                Three months ended
                                            --------------------------
                                                      April
                                            July 31,    30,   July 31,
                                              2007     2007   2006(a)
                                            -------- -------- --------

Net revenue:

     Industry Standard Servers              $ 2,814  $ 2,818  $ 2,427
     Business Critical Systems                  811      862      833
     Storage                                    922      939      873
                                            -------- -------- --------
    Enterprise Storage and Servers            4,547    4,619    4,133
                                            -------- -------- --------
     Technology Services                      2,164    2,155    2,064
     Outsourcing Services(b)                  1,234    1,195    1,116
     Consulting and Integration                 788      795      708
                                            -------- -------- --------
    HP Services                               4,186    4,145    3,888
                                            -------- -------- --------
     OpenView                                   481      434      215
     OpenCall and Other                          73       89      103
                                            -------- -------- --------
    HP Software                                 554      523      318
                                            -------- -------- --------
  Technology Solutions Group                  9,287    9,287    8,339
                                            -------- -------- --------
     Desktops                                 3,924    3,904    3,515
     Notebooks                                4,253    4,084    2,768
     Workstations                               441      402      339
     Handhelds                                  105      105      136
     Other                                      171      168      159
                                            -------- -------- --------
  Personal Systems Group                      8,894    8,663    6,917
                                            -------- -------- --------
     Commercial Hardware                      1,738    1,786    1,632
     Consumer Hardware                          982      996      893
     Supplies                                 4,017    4,367    3,693
     Other                                       14       12       16
                                            -------- -------- --------
  Imaging and Printing Group                  6,751    7,161    6,234
                                            -------- -------- --------
  HP Financial Services                         582      550      519
  Corporate Investments                         220      175      155
                                            -------- -------- --------
     Total Segments                          25,734   25,836   22,164
                                            -------- -------- --------

  Eliminations of intersegment net revenue
   and other                                   (357)    (302)    (274)
                                            -------- -------- --------

    Total HP Consolidated                   $25,377  $25,534  $21,890
                                            ======== ======== ========


(a) Certain fiscal 2007 organizational realignments have been
 reflected retroactively to provide improved visibility and
 comparability. For each of the quarters in fiscal year 2006, the
 realignments primarily resulted in revenue movement within business
 units within the ESS and HPS segments. There was no impact to total
 segment revenue.

(b) Reflects name change from Managed Services to Outsourcing Services
 effective in fiscal 2007.

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

                                                     Nine months ended
                                                          July 31
                                                     -----------------
                                                        2007   2006(a)
                                                     -------- --------

Net revenue:

     Industry Standard Servers                       $ 8,321  $ 7,288
     Business Critical Systems                         2,521    2,659
     Storage                                           2,777    2,691
                                                     -------- --------
    Enterprise Storage and Servers                    13,619   12,638
                                                     -------- --------
     Technology Services                               6,412    6,231
     Outsourcing Services(b)                           3,554    3,197
     Consulting and Integration                        2,313    2,109
                                                     -------- --------
    HP Services                                       12,279   11,537
                                                     -------- --------
     OpenView                                          1,372      648
     OpenCall and Other                                  255      304
                                                     -------- --------
    HP Software                                        1,627      952
                                                     -------- --------
  Technology Solutions Group                          27,525   25,127
                                                     -------- --------
     Desktops                                         11,640   10,938
     Notebooks                                        12,481    8,537
     Workstations                                      1,248    1,006
     Handhelds                                           393      481
     Other                                               514      381
                                                     -------- --------
  Personal Systems Group                              26,276   21,343
                                                     -------- --------
     Commercial Hardware                               5,213    5,026
     Consumer Hardware                                 3,205    3,131
     Supplies                                         12,453   11,302
     Other                                                40       44
                                                     -------- --------
  Imaging and Printing Group                          20,911   19,503
                                                     -------- --------
  HP Financial Services                                1,679    1,533
  Corporate Investments                                  552      406
                                                     -------- --------
     Total Segments                                   76,943   67,912
                                                     -------- --------

  Eliminations of intersegment net revenue and other    (950)    (809)
                                                     -------- --------

    Total HP Consolidated                            $75,993  $67,103
                                                     ======== ========


(a) Certain fiscal 2007 organizational realignments have been
 reflected retroactively to provide improved visibility and
 comparability. For fiscal year 2006, the realignments primarily
 resulted in revenue movement within business units within the ESS and
 HPS segments. There was no impact to total segment revenue.

(b) Reflects name change from Managed Services to Outsourcing Services
 effective in fiscal 2007.

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


                                                   Three months ended
                                                  --------------------
                                                  July   April  July
                                                    31,    30,    31,
                                                   2007   2007   2006
                                                  ------ ------ ------

Numerator:
  Net earnings                                    $1,778 $1,775 $1,375
  Adjustment for interest expense on zero-coupon
   subordinated convertible notes, net of taxes        1      2      1
                                                  ------ ------ ------

  Net earnings, adjusted                          $1,779 $1,777 $1,376
                                                  ====== ====== ======

Denominator:
  Weighted-average shares used to compute basic
   EPS                                             2,600  2,638  2,768
  Effect of dilutive securities:
    Dilution from employee stock plans                89     85     63
    Zero-coupon subordinated convertible notes         8      8      8
                                                  ------ ------ ------
  Dilutive potential common shares                    97     93     71
                                                  ------ ------ ------

  Weighted-average shares used to compute diluted
   EPS                                             2,697  2,731  2,839
                                                  ====== ====== ======

Net earnings per share:
  Basic(a)                                        $ 0.68 $ 0.67 $ 0.50
  Diluted(b)                                      $ 0.66 $ 0.65 $ 0.48



(a) HP's basic earnings per share was calculated based on net earnings
 and the weighted-averagenumber 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.

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


                                                         Nine months
                                                             ended
                                                            July 31
                                                         -------------
                                                           2007   2006
                                                         ------ ------


Numerator:
  Net earnings                                           $5,100 $4,501
  Adjustment for interest expense on zero coupon
   subordinated convertible notes, net of taxes               5      5
                                                         ------ ------

  Net earnings, adjusted                                 $5,105 $4,506
                                                         ====== ======

Denominator:
  Weighted-average shares used to compute
    basic EPS                                             2,648  2,799
  Effect of dilutive securities:
    Dilution from employee stock plans                       78     63
    Zero-coupon subordinated convertible notes                8      8
                                                         ------ ------
  Dilutive potential common shares                           86     71
                                                         ------ ------

  Weighted-average shares used to compute diluted EPS     2,734  2,870
                                                         ====== ======

Net earnings per share:
  Basic(a)                                               $ 1.93 $ 1.61
  Diluted(b)                                             $ 1.87 $ 1.57





(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.

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




                                                   Three months ended
                                                  --------------------
                                                  July   April  July
                                                    31,    30,    31,
                                                   2007   2007   2006
                                                  ------ ------ ------

Numerator:
  Non-GAAP net earnings                           $1,912 $1,920 $1,483
  Adjustment for interest expense on zero-coupon
   subordinated convertible notes, net of taxes        1      2      1
                                                  ------ ------ ------

  Non-GAAP net earnings, adjusted                 $1,913 $1,922 $1,484
                                                  ====== ====== ======

Denominator:
  Weighted-average shares used to compute basic
   EPS                                             2,600  2,638  2,768
  Effect of dilutive securities:
    Dilution from employee stock plans                89     85     63
    Zero-coupon subordinated convertible notes         8      8      8
                                                  ------ ------ ------
  Dilutive potential common shares                    97     93     71
                                                  ------ ------ ------

  Weighted-average shares used to compute diluted
   EPS                                             2,697  2,731  2,839
                                                  ====== ====== ======

Non-GAAP net earnings per share:
  Basic(a)                                         $0.74  $0.73  $0.54
  Diluted(b)                                       $0.71  $0.70  $0.52


(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.

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


                                                         Nine months
                                                             ended
                                                            July 31
                                                         -------------
                                                           2007   2006
                                                         ------ ------

Numerator:
  Non-GAAP net earnings                                  $5,658 $4,872
  Adjustment for interest expense on zero-coupon
   subordinated convertible notes, net of taxes               5      5
                                                         ------ ------

  Non-GAAP net earnings, adjusted                        $5,663 $4,877
                                                         ====== ======

Denominator:
  Weighted-average shares used to compute basic EPS       2,648  2,799
  Effect of dilutive securities:
    Dilution from employee stock plans                       78     63
    Zero-coupon subordinated convertible notes                8      8
                                                         ------ ------
  Dilutive potential common shares                           86     71
                                                         ------ ------

  Weighted-average shares used to compute diluted EPS     2,734  2,870
                                                         ====== ======

Non-GAAP net earnings per share:
  Basic(a)                                               $ 2.14 $ 1.74
  Diluted(b)                                             $ 2.07 $ 1.70






(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 EPS 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.

SOURCE: HP

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
www.hp.com/go/newsroom
www.hp.com