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HP Reports First Quarter 2007 Results
    --  Net Revenue of $25.1 Billion, up $2.4 Billion Year-over-Year,
        or 11%

    --  GAAP Operating Profit of $1.8 Billion, or $0.55 Earnings Per
        Share, up from $0.42 in the Prior Year Period

    --  Non-GAAP Operating Profit of $2.2 Billion, or $0.65 Earnings
        Per Share, up from $0.48 in the Prior Year Period

    --  Announces Change to U.S. Defined Benefit Pension Plan; Offers
        Early Retirement Program

PALO ALTO, Calif.--(BUSINESS WIRE)--Feb. 20, 2007--HP (NYSE:HPQ) today announced financial results for its first fiscal quarter ended Jan. 31, 2007, with net revenue of $25.1 billion, representing growth of 11% year-over-year, or 7% when adjusted for the effects of currency.

GAAP operating profit was $1.8 billion and GAAP diluted earnings per share (EPS) was $0.55 per share, up from $0.42 in the prior year period. Non-GAAP operating profit was $2.2 billion, with non-GAAP diluted EPS of $0.65, up from $0.48 in the prior year period. Non-GAAP financial information excludes $279 million of adjustments on an after-tax basis, or $0.10 per diluted share, related primarily to the amortization of purchased intangibles and in process research and development charges related to acquisitions. GAAP and non-GAAP financial information include all stock-based compensation expense in both current and prior year periods.

"HP delivered a strong first quarter, with improved margins and solid revenue growth across our businesses," said Mark Hurd, HP chairman and chief executive officer. "We have a lot of work and opportunities ahead of us. I am confident we can continue to execute with discipline and deliver a year of strong financial returns."

                                Q1 FY07        Q1 FY06         Y/Y
--------------------------- --------------- -------------- -----------
Net revenue ($B)                     $25.1          $22.7          11%
--------------------------- --------------- -------------- -----------
GAAP operating margin                  7.3%           6.6%     0.7 pts
--------------------------- --------------- -------------- -----------
GAAP net earnings ($B)                $1.5           $1.2          26%
--------------------------- --------------- -------------- -----------
GAAP diluted EPS                     $0.55          $0.42          31%
--------------------------- --------------- -------------- -----------
Non-GAAP operating margin              8.6%           7.5%     1.1 pts
--------------------------- --------------- -------------- -----------
Non-GAAP net earnings ($B)            $1.8           $1.4          31%
--------------------------- --------------- -------------- -----------
Non-GAAP diluted EPS                 $0.65          $0.48          35%
--------------------------- --------------- -------------- -----------

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 6% to $10.4 billion, revenue in Europe, the Middle East and Africa grew 14% to $10.7 billion, and revenue in Asia Pacific grew 15% to $4.0 billion. When adjusted for the effects of currency, revenue in the Americas grew 6%, revenue in Europe, the Middle East and Africa grew 7%, and revenue in Asia Pacific grew 12%.

Personal Systems Group

Personal Systems Group (PSG) revenue grew 17% year-over-year to $8.7 billion, with unit shipments up 19% on a year-over-year basis. Notebook revenue grew 40% over the prior year period, while desktop revenue declined 1%. Commercial client revenue grew 8% year-over-year, while Consumer client revenue increased 28%. Operating profit was $414 million, or 4.7% of revenue, up from a profit of $293 million, or 3.9% of revenue, in the prior year period.

Imaging and Printing Group

Imaging and Printing Group (IPG) revenue grew 7% year-over-year to $7.0 billion. On a year-over-year basis, supplies revenue grew 11%, commercial hardware revenue grew 2% and consumer hardware revenue was flat. Printer unit shipments increased 18% year-over-year, with consumer printer hardware units up 16% and commercial printer hardware units up 21%. Momentum in key growth initiatives continued, with all-in-one unit shipments up 27% year-over-year, appliance photo printers up 49%, color laser printers up 35% and printer-based MFPs up 80%. HP Indigo Press printed page volume grew 40% over the prior year period. Operating profit was $1.1 billion, or 15.3% of revenue, up from a profit of $973 million, or 14.9% of revenue, in the prior year period.

Enterprise Storage and Servers

Enterprise Storage and Servers (ESS) reported revenue of $4.5 billion, up 5% over the prior year period. On a year-over-year basis, industry-standard server revenue increased 10%, with blade revenue up 45%. Storage revenue grew 3%, with revenue growth of 18% in the midrange EVA line offset by declines in the high-end array and tape businesses. Business critical systems revenue declined 6%, with Integrity systems growth of 75% offset by declines in PA-RISC and Alpha. Operating profit was $416 million, or 9.3% of revenue, up from a profit of $326 million, or 7.7% of revenue, in the prior year period.

HP Services

HP Services (HPS) revenue increased 5% year-over-year to $3.9 billion. Revenue in Technology Services grew 1% over the prior year period, while Consulting and Integration revenue up 10% and Outsourcing Services revenue up 11%. Operating profit was $414 million, or 10.5% of revenue, up from a profit of $293 million, or 7.8% of revenue, in the prior year period.

HP Software

HP Software revenue was $550 million, an increase of 81% year-over-year, reflecting strong momentum in the Mercury business, HP OpenView growth of 14% and revenue declines of 6% in HP OpenCall. Excluding the effects of the Mercury acquisition, which closed on Nov. 6, 2006, revenue increased 7% over the prior year period. As part of integration efforts, Mercury and OpenView offerings will be combined under a new leadership category of Business Technology Optimization (BTO) software solutions. Operating profit was $47 million, or 8.5% of revenue, up from a profit of $9 million, or 3.0% of revenue, in the prior year period.

Financial Services

HP Financial Services (HPFS) reported revenue of $547 million, an increase of 10% year-over-year. Financing volume and net portfolio assets increased 4% over the prior year period. Operating profit was $32 million, or 5.9% of revenue, down from a profit of $38 million, or 7.7% of revenue, in the prior year period.

Asset management

Inventory ended the quarter at $8.4 billion, up $630 million sequentially and $1.6 billion year-over-year. Accounts receivable decreased $470 million sequentially and increased $1.7 billion over the prior year period to $10.4 billion. Accounts payable decreased $742 million sequentially and grew $2.4 billion over the prior year period to $11.4 billion. HP's dividend payment of $0.08 per share in the first quarter resulted in cash usage of $218 million. HP utilized $2.3 billion of cash during the first quarter to repurchase approximately 57 million shares of common stock. In addition, HP received 13 million shares of common stock under the company's prepaid variable share purchase program. HP exited the quarter with $10.4 billion in gross cash, which includes cash and cash equivalents of $10.1 billion, short-term investments of $306 million, and certain long-term investments of $21 million.

Retirement plan modifications, early retirement offer

HP also announced that it will modify its defined-benefit pension plan for those employees currently accruing benefits under the program, effective Jan. 1, 2008. As a result of this action, the company estimates that it will receive a one-time pension curtailment gain of approximately $500 million. As part of the announcement, the company announced that it is offering an option for eligible employees to participate in an early retirement program. Employees not wishing to take advantage of the early retirement program will benefit from an increased company 401(k) match from 4% to 6%. The company expects the curtailment gain to offset the cost of the early retirement program. These changes do not affect pension benefits currently received by retirees and existing employees retain the benefits they have already earned.

Outlook

HP estimates Q2 FY07 revenue will be approximately $24.5 billion.

Second quarter FY07 GAAP diluted EPS is expected to be in the range of $0.57 to $0.58, and non-GAAP diluted EPS is expected to be in the range of $0.63 to $0.64. Non-GAAP diluted EPS estimates exclude after-tax costs of approximately $0.06 per share, related primarily to the amortization of purchased intangible assets.

HP estimates full year FY07 revenue will be approximately $98.0 billion to $99.0 billion.

FY07 GAAP diluted EPS expected to be in the range of $2.35 to $2.40, and FY07 non-GAAP diluted EPS is expected to be in the range of $2.60 to $2.65. 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 and in process research and development charges.

Second quarter and FY07 GAAP diluted EPS estimates do not reflect the impact of the retirement plan modifications and the voluntary early retirement program because the level of participation in the retirement program is uncertain.

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/hpinfo/investor/.

HP's Q1 FY07 earnings conference call is accessible via an audio webcast at www.hp.com/hpinfo/investor/financials/quarters/2007/q1webcast.html.

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 $94.1 billion for the four fiscal quarters ended Jan. 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, 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 any 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 from time to time in HP's Securities and Exchange Commission reports, including but not limited to the risks described in 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 Form 10-Q for the fiscal quarter ended January 31, 2007. In particular, determining HP's actual tax balances and provisions as of January 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
                                   -----------------------------------
                                   January 31, October 31, January 31,
                                      2007        2006        2006
                                   ----------- ----------- -----------

Net revenue                           $25,082     $24,555     $22,659

Costs and expenses(a):
  Cost of sales                        19,136      18,593      17,392
  Research and development                877         870         871
  Selling, general and
   administrative                       2,908       2,886       2,692
  Amortization of purchased
   intangible assets                      201         153         147
  In-process research and
   development charges                    167           -          50
  Restructuring                           (41)        152          15
  Pension curtailment                      (9)          -           -
                                   ----------- ----------- -----------
    Total costs and expenses           23,239      22,654      21,167
                                   ----------- ----------- -----------

Earnings from operations                1,843       1,901       1,492

Interest and other, net                   111         190          38
Gains (losses) on investments              10          14          (2)
                                   ----------- ----------- -----------

Earnings before taxes                   1,964       2,105       1,528

Provision for taxes(b)                    417         408         301
                                   ----------- ----------- -----------

Net earnings                           $1,547      $1,697      $1,227
                                   =========== =========== ===========

Net earnings per share:
  Basic                                 $0.57       $0.62       $0.43
  Diluted                               $0.55       $0.60       $0.42


Cash dividends declared per share       $0.16          $-       $0.16

Weighted-average shares used to compute net earnings per share:

  Basic                                 2,705       2,730       2,822
  Diluted                               2,801       2,816       2,893

(a) Stock-based compensation expense included under SFAS 123R was as
 follows:

  Cost of sales                           $45         $37         $39
  Research and development                 19          20          18
  Selling, general and
   administrative                          99          84          87
                                   ----------- ----------- -----------
    Total costs and expenses             $163        $141        $144

(b) Tax benefit from stock-based
 compensation                            $(44)       $(40)       $(43)
               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
                 January  Earnings October  Earnings January  Earnings
                   31,      Per      31,      Per      31,      Per
                  2007     Share    2006     Share    2006     Share
                 ------- --------- ------- --------- ------- ---------

GAAP net
 earnings        $1,547     $0.55  $1,697     $0.60  $1,227     $0.42

Non-GAAP
 adjustments:
  Amortization
   of purchased
   intangible
   assets           201      0.07     153      0.05     147      0.05
  In-process
   research and
   development
   charges          167      0.06       -         -      50      0.02
  Restructuring     (41)    (0.02)    152      0.05      15      0.01
  Pension
   curtailment       (9)        -       -         -       -         -
  (Gains) losses
   on
   investments
   (a)                -         -     (14)        -       2         -
  Adjustments
   for taxes        (39)    (0.01)    (83)    (0.02)    (48)    (0.02)
                 ------- --------- ------- --------- ------- ---------

Non-GAAP net
 earnings        $1,826     $0.65  $1,905     $0.68  $1,393     $0.48
                 ======= ========= ======= ========= ======= =========


GAAP earnings
 from operations $1,843            $1,901            $1,492
Non-GAAP
 adjustments:
  Amortization
   of purchased
   intangible
   assets           201               153               147
  In-process
   research and
   development
   charges          167                 -                50
  Restructuring     (41)              152                15
  Pension
   curtailment       (9)                -                 -
                 -------           -------           -------

Non-GAAP
 earnings from
 operations      $2,161            $2,206            $1,704
                 =======           =======           =======

GAAP operating
 margin               7%                8%                7%
Non-GAAP
 adjustments          2%                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
                CONSOLIDATED CONDENSED BALANCE SHEETS
                            (In millions)


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

ASSETS

Current assets:
  Cash and cash equivalents                       $10,057     $16,400
  Short-term investments                              306          22
  Accounts receivable                              10,403      10,873
  Financing receivable                              2,511       2,440
  Inventory                                         8,380       7,750
  Other current assets                             10,862      10,779
                                               ----------- -----------

    Total current assets                           42,519      48,264
                                               ----------- -----------

Property, plant and equipment                       7,045       6,863

Long-term financing receivables and other
 assets                                             7,392       6,649

Goodwill and purchased intangible assets           24,358      20,205
                                               ----------- -----------

Total assets                                      $81,314     $81,981
                                               =========== ===========


LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Notes payable and short-term borrowings          $3,337      $2,705
  Accounts payable                                 11,360      12,102
  Employee compensation and benefits                2,120       3,148
  Taxes on earnings                                 1,673       1,905
  Deferred revenue                                  4,750       4,309
  Accrued restructuring                               324         547
  Other accrued liabilities                        11,480      11,134
                                               ----------- -----------

    Total current liabilities                      35,044      35,850
                                               ----------- -----------

Long-term debt                                      2,438       2,490
Other liabilities                                   5,789       5,497

Stockholders' equity                               38,043      38,144
                                               ----------- -----------

Total liabilities and stockholders' equity        $81,314     $81,981
                                               =========== ===========
               HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
           CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
                             (Unaudited)
                            (In millions)

                                             Three Months Three Months
                                                 Ended        Ended
                                             January 31,  January 31,
                                                 2007         2006
                                             ------------ ------------

Cash flows from operating activities:
  Net earnings                                    $1,547       $1,227
  Adjustments to reconcile net earnings to
   net cash provided by operating
   activities:
    Depreciation and amortization                    643          563
    Stock-based compensation expense                 163          144
    Provision for bad debt and inventory              77          102
    (Gains) losses on investments                    (10)           2
    In-process research and development
     charges                                         167           50
    Restructuring                                    (41)          15
    Pension curtailment                               (9)           -
    Deferred taxes on earnings                        91           55
    Excess tax benefit from stock-based
     compensation                                   (100)         (65)
    Other, net                                        (3)          77
  Changes in assets and liabilities:
    Accounts and financing receivables               548        1,193
    Inventory                                       (698)          89
    Accounts payable                                (759)      (1,291)
    Taxes on earnings                                131          (72)
    Restructuring                                   (281)        (162)
    Other assets and liabilities                  (1,488)         (81)
                                             ------------ ------------
      Net cash (used in) provided by
       operating activities                          (22)       1,846
                                             ------------ ------------

Cash flows from investing activities:
    Investment in property, plant and
     equipment                                      (718)        (427)
    Proceeds from sale of property, plant
     and equipment                                   139          105
    Purchases of available-for-sale
     securities and other investments                (13)         (13)
    Maturities and sales of available-for-
     sale securities and other investments            92           21
    Payments made in connection with
     business acquisitions, net                   (4,464)        (653)
                                             ------------ ------------
      Net cash used in investing activities       (4,964)        (967)
                                             ------------ ------------

Cash flows from financing activities:
    Issuance (repayment) of commercial paper
     and notes payable, net                        1,263          (68)
    Issuance of debt                                  69           81
    Payment of debt                               (1,056)        (231)
    Issuance of common stock under employee
     stock plans                                     797          647
    Repurchase of common stock                    (2,312)      (1,401)
    Prepayment of common stock repurchases             -       (1,722)
    Excess tax benefit from stock-based
     compensation                                    100           65
    Dividends                                       (218)        (227)
                                             ------------ ------------
      Net cash used in financing activities       (1,357)      (2,856)
                                             ------------ ------------

Decrease in cash and cash equivalents             (6,343)      (1,977)
Cash and cash equivalents at beginning of
 period                                           16,400       13,911
                                             ------------ ------------
Cash and cash equivalents at end of period       $10,057      $11,934
                                             ============ ============
               HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
                         SEGMENT INFORMATION
                             (Unaudited)
                            (In millions)

                                           Three months ended
                                   -----------------------------------
                                   January 31, October 31, January 31,
                                      2007       2006(a)     2006(a)
                                   ----------- ----------- -----------

Net revenue:

    Enterprise Storage and Servers     $4,453      $4,670      $4,240
    HP Services                         3,948       4,080       3,757
    HP Software                           550         349         304
                                   ----------- ----------- -----------
  Technology Solutions Group            8,951       9,099       8,301
                                   ----------- ----------- -----------
  Personal Systems Group                8,719       7,823       7,449
  Imaging and Printing Group            6,999       7,283       6,545
  HP Financial Services                   547         545         496
  Corporate Investments                   157         160         129
                                   ----------- ----------- -----------
    Total Segments                     25,373      24,910      22,920
  Eliminations of intersegment net
   revenue and other                     (291)       (355)       (261)
                                   ----------- ----------- -----------

    Total HP Consolidated             $25,082     $24,555     $22,659
                                   =========== =========== ===========

Earnings from operations:

    Enterprise Storage and Servers       $416        $502        $326
    HP Services                           414         505         293
    HP Software                            47          60           9
                                   ----------- ----------- -----------
  Technology Solutions Group              877       1,067         628
                                   ----------- ----------- -----------
  Personal Systems Group                  414         336         293
  Imaging and Printing Group            1,073       1,080         973
  HP Financial Services                    32          35          38
  Corporate Investments                   (29)        (36)        (33)
                                   ----------- ----------- -----------
    Total Segments                      2,367       2,482       1,899

  Corporate and unallocated costs
   and eliminations                       (66)       (156)        (72)
  Unallocated costs related to
   stock-based compensation
   expense                               (140)       (120)       (123)
  Amortization of purchased
   intangible assets                     (201)       (153)       (147)
  In-process research and
   development charges                   (167)          -         (50)
  Restructuring                            41        (152)        (15)
  Pension curtailment                       9           -           -
  Interest and other, net                 111         190          38
  Gains (losses) on investments            10          14          (2)
                                   ----------- ----------- -----------

    Total HP Consolidated Earnings
     Before Taxes                      $1,964      $2,105      $1,528
                                   =========== =========== ===========

(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 / BUSINESS UNIT INFORMATION
                             (Unaudited)
                            (In millions)

                                           Three months ended
                                   -----------------------------------
                                   January 31, October 31, January 31,
                                      2007       2006(a)     2006(a)
                                   ----------- ----------- -----------

Net revenue:

      Industry Standard Servers        $2,689      $2,694      $2,448
      Business Critical Systems           848         997         906
      Storage                             916         979         886
                                   ----------- ----------- -----------
    Enterprise Storage and Servers      4,453       4,670       4,240
                                   ----------- ----------- -----------
      Technology Services               2,093       2,117       2,081
      Outsourcing Services(b)           1,125       1,185       1,011
      Consulting and Integration          730         778         665
                                   ----------- ----------- -----------
    HP Services                         3,948       4,080       3,757
                                   ----------- ----------- -----------
      OpenView                            457         251         205
      OpenCall and Other                   93          98          99
                                   ----------- ----------- -----------
    HP Software                           550         349         304
                                   ----------- ----------- -----------
  Technology Solutions Group            8,951       9,099       8,301
                                   ----------- ----------- -----------
      Desktops                          3,812       3,675       3,854
      Notebooks                         4,144       3,463       2,954
      Workstations                        405         362         329
      Handhelds                           183         139         216
      Other                               175         184          96
                                   ----------- ----------- -----------
  Personal Systems Group                8,719       7,823       7,449
                                   ----------- ----------- -----------
      Commercial Hardware               1,689       1,873       1,655
      Consumer Hardware                 1,227       1,296       1,223
      Supplies                          4,069       4,100       3,652
      Other                                14          14          15
                                   ----------- ----------- -----------
  Imaging and Printing Group            6,999       7,283       6,545
                                   ----------- ----------- -----------
  HP Financial Services                   547         545         496
  Corporate Investments                   157         160         129
                                   ----------- ----------- -----------
      Total Segments                   25,373      24,910      22,920
                                   ----------- ----------- -----------

  Eliminations of intersegment net
   revenue and other                     (291)       (355)       (261)
                                   ----------- ----------- -----------

      Total HP Consolidated           $25,082     $24,555     $22,659
                                   =========== =========== ===========


(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
                CALCULATION OF NET EARNINGS PER SHARE
                             (Unaudited)
                (In millions except per share amounts)



                                           Three months ended
                                   -----------------------------------
                                   January 31, October 31, January 31,
                                      2007        2006        2006
                                   ----------- ----------- -----------

Numerator:
  Net earnings                         $1,547      $1,697      $1,227
  Adjustment for interest expense
   on zero-coupon subordinated
   convertible notes, net of taxes          2           2           2
                                   ----------- ----------- -----------

  Net earnings, adjusted               $1,549      $1,699      $1,229
                                   =========== =========== ===========

Denominator:
  Weighted-average shares used to
   compute basic EPS                    2,705       2,730       2,822
  Effect of dilutive securities:
    Dilution from employee stock
     plans                                 88          78          64
    Zero-coupon subordinated
     convertible notes                      8           8           7
                                   ----------- ----------- -----------
  Dilutive potential common shares         96          86          71
                                   ----------- ----------- -----------

  Weighted-average shares used to
   compute diluted EPS                  2,801       2,816       2,893
                                   =========== =========== ===========

Net earnings per share:
  Basic(a)                              $0.57       $0.62       $0.43
  Diluted(b)                            $0.55       $0.60       $0.42


(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
                                   -----------------------------------
                                   January 31, October 31, January 31,
                                      2007        2006        2006
                                   ----------- ----------- -----------

Numerator:
  Non-GAAP net earnings                $1,826      $1,905      $1,393
  Adjustment for interest expense
   on zero-coupon subordinated
   convertible notes, net of taxes          2           2           2
                                   ----------- ----------- -----------

  Non-GAAP net earnings, adjusted      $1,828      $1,907      $1,395
                                   =========== =========== ===========

Denominator:
  Weighted-average shares used to
   compute basic EPS                    2,705       2,730       2,822
  Effect of dilutive securities:
    Dilution from employee stock
     plans                                 88          78          64
    Zero-coupon subordinated
     convertible notes                      8           8           7
                                   ----------- ----------- -----------
  Dilutive potential common shares         96          86          71
                                   ----------- ----------- -----------

  Weighted-average shares used to
   compute diluted EPS                  2,801       2,816       2,893
                                   =========== =========== ===========

Non-GAAP net earnings per share:
  Basic(a)                              $0.68       $0.70       $0.49
  Diluted(b)                            $0.65       $0.68       $0.48


(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 gains 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 as well as any gains or losses on investments recorded for periods ending on or before October 31, 2006. 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. 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 of $9 million 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). Because pension
        curtailment gains are inconsistent in amount and frequency, HP
        believes that eliminating these gains 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.

    --  HP's investments consist principally of time deposits, other
        debt securities and equity securities of publicly traded and
        privately held companies. HP sells investments or adjusts the
        value of investments from time to time based on market
        conditions and, in the case of investments in equity
        securities, the strategic value of such investments. HP's
        activities in this regard are included in its GAAP
        presentation of net income and net earnings per share. Because
        the amount and timing of these gains or losses and adjustments
        are unpredictable, HP eliminated these gains or losses and
        adjustments for purposes of calculating non-GAAP net earnings
        and non-GAAP diluted earnings per share for periods ending on
        or before October 31, 2006. Beginning in fiscal 2007, HP no
        longer excludes gains or losses on investments when
        calculating non-GAAP net earnings and non-GAAP diluted
        earnings per share, as the amounts of those gains and losses
        have been immaterial in recent periods.

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 our 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.

CONTACT: 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

SOURCE: Hewlett-Packard Company