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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., May 20, 2008 (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."


                                          ---------- --------- -------
                                           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%
 ---------------------------------------- ---------- --------- -------

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.

               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)

               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%
                    =======          =======          =======

               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%
                            ==========            ==========

               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
                                               =========== ===========

               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
                                               ============ ==========

               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.

               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.

               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.








               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.

               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.

               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.

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.

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
Asa Svanstrom, +1-650-857-2246 (Investors)
asa.svanstrom@hp.com
www.hp.com/go/newsroom