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HP Reports First Quarter 2008 Results
    --  First quarter net revenue up 13%, or $3.4 billion, from a year
        earlier to $28.5 billion

    --  First quarter GAAP operating profit up 42% to $2.6 billion;
        $0.80 earnings per share, up from $0.55 a year earlier

    --  First quarter non-GAAP operating profit up 31% to $2.8
        billion; $0.86 earnings per share, up from $0.65 a year
        earlier

    --  Cash flow from operations of $3.2 billion

    --  $3.3 billion of share repurchases

PALO ALTO, Calif.--(BUSINESS WIRE)--Feb. 19, 2008--HP (NYSE:HPQ) today announced financial results for its first fiscal quarter ended Jan. 31, 2008, with net revenue of $28.5 billion, up 13% from a year earlier and up 8% when adjusted for the effects of currency.

In the first quarter, GAAP operating profit was $2.6 billion and GAAP diluted earnings per share (EPS) was $0.80, up from $0.55 in the prior-year period. Non-GAAP operating profit was $2.8 billion, with non-GAAP diluted EPS of $0.86 up from $0.65 in the prior-year period. Non-GAAP financial information excludes $158 million of adjustments on an after-tax basis, or $0.06 per diluted share, related primarily to amortization of purchased intangibles.

"We are raising our guidance yet again, reflecting our confidence in anticipated cost reductions and share gains in key markets," said Mark Hurd, HP chairman and chief executive officer. "We added more than 2,000 sales positions in the past year through acquisitions and hiring. HP remains well positioned for profitable growth as we continue to focus on our numerous cost initiatives and improve our market coverage."

                              Q1 FY08       Q1 FY07        Y/Y
                            ---------------------------------------
Net revenue ($B)            $     28.5   $       25.1           13%
                            ------------ ------------- ------------
GAAP operating margin              9.2%           7.3%      1.9 pts
                            ------------ ------------- ------------
GAAP net earnings ($B)      $      2.1   $        1.5           38%
                            ------------ ------------- ------------
GAAP diluted EPS            $     0.80   $       0.55           45%
                            ------------ ------------- ------------
Non-GAAP operating margin          9.9%           8.6%      1.3 pts
                            ------------ ------------- ------------
Non-GAAP net earnings ($B)  $      2.3   $        1.8           25%
                            ------------ ------------- ------------
Non-GAAP diluted EPS        $     0.86   $       0.65           32%
                            ------------ ------------- ------------

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 8% on a year-over-year basis to $11.2 billion. Revenue grew 15% in Europe, the Middle East and Africa to $12.3 billion. Revenue grew 22% in Asia Pacific to $4.9 billion. When adjusted for the effects of currency, revenue in the Americas grew 7%, revenue in Europe, the Middle East and Africa grew 7%, and revenue in Asia Pacific grew 16%. Revenue from outside of the United States in the first quarter was 69%, with revenue in the BRIC countries (Brazil, Russia, India and China) growing 35% over the prior-year period and accounting for 9% of total revenue.

Personal Systems Group

Personal Systems Group (PSG) revenue grew 24% year over year to $10.8 billion, with unit shipments up 27% on a year-over-year basis. Notebook revenue for the quarter grew 37% over the prior-year period, while desktop revenue grew 15%. Commercial client revenue grew 22% year over year, while Consumer client revenue increased 29%. Operating profit was $628 million, or 5.8% of revenue, up from $414 million, or 4.7% of revenue, in the prior-year period.

Imaging and Printing Group

Imaging and Printing Group (IPG) revenue grew 4% year over year to $7.3 billion. On a year-over-year basis, supplies revenue grew 6%, Commercial hardware revenue grew 7% and Consumer hardware revenue declined 5%. Printer unit shipments increased 1% year over year, with Consumer printer hardware units down 2% and Commercial printer hardware units up 13%. 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 15.7% of revenue, up from $1.1 billion, or 15.3% of revenue, in the prior-year period.

Enterprise Storage and Servers

Enterprise Storage and Servers (ESS) reported revenue of $4.8 billion, up 9% over the prior-year period fueled by ESS blades, which grew 81%. On a year-over-year basis, industry-standard server revenue increased 11%. Storage revenue grew 10%, with revenue growth of 14% in the midrange EVA line. Business critical systems revenue increased 1%, with Integrity systems growth of 37% offset by declines in PA-RISC and Alpha. Operating profit was $673 million, or 14.0% of revenue, up from $453 million, or 10.2% of revenue, in the prior-year period.

HP Services

HP Services (HPS) revenue increased 11% year over year to $4.4 billion. Revenue in Outsourcing Services grew 15%, followed by Consulting and Integration and Technology Services, which grew 13% and 9%, respectively, over the prior-year period. Operating profit was $489 million, or 11.2% of revenue, up from $406 million, or 10.3% of revenue, in the prior-year period.

HP Software

HP Software revenue grew 11% over the prior-year period to $666 million, led by 19% growth in the Business Technology Optimization portfolio. Operating profit was $51 million, or 7.7% of revenue, up from $18 million, or 3.0% of revenue, in the prior-year period.

Financial Services

HP Financial Services (HPFS) reported revenue of $642 million, an increase of 17% year over year. Financing volume and net portfolio assets increased 5% and 14%, respectively, over the prior-year period. Operating margin was 6.7% of revenue, up from 5.9% in the comparable period last year.

Asset management

HP generated $3.2 billion in cash flow from operations for the quarter. Inventory ended the quarter at $7.9 billion, down 6 days over the prior year. Accounts receivable of $12.4 billion were up 2 days over the prior-year period. Accounts payable ended the quarter at $11.2 billion down 6 days from the prior-year period. HP's dividend payment of $0.08 per share in the first quarter resulted in cash usage of $206 million. HP utilized $3.3 billion of cash during the first quarter to repurchase approximately 72 million shares of common stock from the open market. HP exited the quarter with $10.1 billion in gross cash, which includes cash and cash equivalents of $9.9 billion, short-term investments of $73 million, and certain long-term investments of $116 million.

Outlook

HP estimates Q2 FY08 revenue will be approximately $27.7 billion to $27.9 billion.

Second quarter FY08 GAAP diluted EPS is expected to be approximately $0.77 to $0.78 and non-GAAP diluted EPS is expected to be approximately $0.83 to $0.84. Second 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 $113.5 billion to $114.0 billion.

FY08 GAAP diluted EPS is expected to be in the range of $3.26 to $3.30, and FY08 non-GAAP diluted EPS is expected to be in the range of $3.50 to $3.54. 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.

More detailed information about the reclassification of HP's Business Intelligence and Information Management businesses from HP Services and ESS to HP Software and the reclassification of revenue among business units within PSG and IPG is included in the tables that follow this release. These reclassifications do not impact HP's previously reported consolidated net revenue, earnings from operations, net earnings or EPS.

HP's Q1 FY08 earnings conference call is accessible via an audio webcast at www.hp.com/investor/q12008webcast.

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 $107.7 billion for the four fiscal quarters ended Jan. 31, 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 or other financial items; any statements of the plans, strategies, and objectives of management for future operations, including execution of cost reduction programs and restructuring plans; any statements concerning the expected development, performance or market share relating to products or services; any statements regarding pending investigations, claims or disputes; any statements of expectation or belief; and any statements of assumptions underlying any of the foregoing. Risks, uncertainties and assumptions include macroeconomic and geopolitical trends and events; execution and performance of contracts by suppliers, customers and partners; the challenge of managing asset levels, including inventory; the difficulty of aligning expense levels with revenue changes; assumptions related to pension and other post-retirement costs; expectations and assumptions relating to the execution and timing of cost reduction programs and restructuring plans; the resolution of pending investigations, claims and disputes; and other risks that are described in HP's 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. 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 January 31, 2008. In particular, determining HP's actual tax balances and provisions as of January 31, 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
                                   -----------------------------------
                                   January 31, October 31, January 31,
                                      2008        2007        2007
                                   ----------- ----------- -----------

Net revenue                        $   28,467  $   28,293  $   25,082

Costs and expenses(a):
    Cost of sales                      21,499      21,304      19,136
    Research and development              898         914         877
    Selling, general and
     administrative                     3,241       3,272       2,908
    Amortization of purchased
     intangible assets                    206         187         201
    In-process research and
     development charges                    -           4         167
    Restructuring                          10         (20)        (41)
    Pension curtailments and
     pension settlements, net               -           -          (9)
                                   ----------- ----------- -----------
            Total costs and
             expenses                  25,854      25,661      23,239
                                   ----------- ----------- -----------

Earnings from operations                2,613       2,632       1,843

Interest and other, net                    72          67         121
                                   ----------- ----------- -----------

Earnings before taxes                   2,685       2,699       1,964

Provision for taxes(b)                    552         535         417
                                   ----------- ----------- -----------

Net earnings                       $    2,133  $    2,164  $    1,547
                                   =========== =========== ===========

Net earnings per share:
      Basic                        $     0.83  $     0.84  $     0.57
      Diluted                      $     0.80  $     0.81  $     0.55


Cash dividends declared per share  $     0.16  $        -  $     0.16

Weighted-average shares used to compute net earnings per share:
      Basic                             2,560       2,576       2,705
      Diluted                           2,655       2,678       2,801

(a) Stock-based compensation expense included under SFAS 123(R) was as
 follows:
      Cost of sales                $       36  $       40  $       45
      Research and development             20          18          19
      Selling, general and
       administrative                     101         110          99
                                   ----------- ----------- -----------
              Total costs and
               expenses            $      157  $      168  $      163

(b) Tax benefit from stock-based
 compensation                      $      (47) $      (54) $      (48)
               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
                     2008     share   2007     share   2007     share
                    ---------------- ---------------- ----------------

GAAP net earnings   $2,133   $ 0.80  $2,164   $ 0.81  $1,547   $ 0.55

Non-GAAP
 adjustments:
  Amortization of
   purchased
   intangible assets   206     0.08     187     0.07     201     0.07
  In-process
   research and
   development
   charges               -        -       4        -     167     0.06
  Restructuring         10        -     (20)   (0.01)    (41)   (0.02)
  Pension
   curtailments and
   pension
   settlements, net      -        -       -        -      (9)       -
  Adjustments for
   taxes               (58)   (0.02)    (39)   (0.01)    (39)   (0.01)
                    ------- -------- ------- -------- ------- --------

Non-GAAP net
 earnings           $2,291   $ 0.86  $2,296   $ 0.86  $1,826   $ 0.65
                    ======= ======== ======= ======== ======= ========


GAAP earnings from
 operations         $2,613           $2,632           $1,843

Non-GAAP
 adjustments:
  Amortization of
   purchased
   intangible assets   206              187              201
  In-process
   research and
   development
   charges               -                4              167
  Restructuring         10              (20)             (41)
  Pension
   curtailments and
   pension
   settlements, net      -                -               (9)
                    -------          -------          -------

Non-GAAP earnings
 from operations    $2,829           $2,803           $2,161
                    =======          =======          =======

GAAP operating
 margin                  9%               9%               7%
Non-GAAP adjustments     1%               1%               2%
                    -------          -------          -------

Non-GAAP operating
 margin                 10%              10%               9%
                    =======          =======          =======
               HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
                CONSOLIDATED CONDENSED BALANCE SHEETS
                            (In millions)

                                               January 31, October 31,
                                                  2008        2007
                                               ----------- -----------
                                               (unaudited)

ASSETS

Current assets:
     Cash and cash equivalents                 $     9,903 $    11,293
     Short-term investments                             73         152
     Accounts receivable                            12,384      13,420
     Financing receivables                           2,561       2,507
     Inventory                                       7,938       8,033
     Other current assets                           11,767      11,997
                                               ----------- -----------

        Total current assets                        44,626      47,402
                                               ----------- -----------

Property, plant and equipment                        7,804       7,798

Long-term financing receivables and other
 assets                                             10,325       7,647

Goodwill and purchased intangible assets            25,817      25,852
                                               ----------- -----------

Total assets                                   $    88,572 $    88,699
                                               =========== ===========


LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
     Notes payable and short-term borrowings   $     2,212 $     3,186
     Accounts payable                               11,162      11,787
     Employee compensation and benefits              2,657       3,465
     Taxes on earnings                                 420       1,891
     Deferred revenue                                5,314       5,025
     Accrued restructuring                              95         123
     Other accrued liabilities                      14,798      13,783
                                               ----------- -----------

        Total current liabilities                   36,658      39,260
                                               ----------- -----------

Long-term debt                                       5,099       4,997
Other liabilities                                    8,871       5,916

Stockholders' equity                                37,944      38,526
                                               ----------- -----------

Total liabilities and stockholders' equity     $    88,572 $    88,699
                                               =========== ===========
               HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
           CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
                             (Unaudited)
                            (In millions)

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

Cash flows from operating activities:
   Net earnings                                $    2,133  $    1,547
   Adjustments to reconcile net earnings to net
    cash provided by (used in) operating
    activities:
     Depreciation and amortization                    749         643
     Stock-based compensation expense                 157         163
     Provision for bad debt and inventory              78          77
     In-process research and development
      charges                                           -         167
     Restructuring                                     10         (41)
     Pension curtailments and pension
      settlements, net                                  -          (9)
     Deferred taxes on earnings                       361          91
     Excess tax benefit from stock-based
      compensation                                    (88)       (100)
     Other, net                                         6         (13)

     Changes in assets and liabilities:
       Accounts and financing receivables           1,007         548
       Inventory                                       54        (698)
       Accounts payable                              (659)       (759)
       Taxes on earnings                              (92)        131
       Restructuring                                  (31)       (281)
       Other assets and liabilities                  (498)     (1,488)
                                               ----------- -----------
         Net cash provided by (used in)
          operating activities                      3,187         (22)
                                               ----------- -----------

Cash flows from investing activities:
     Investment in property, plant and
      equipment                                      (611)       (718)
     Proceeds from sale of property, plant and
      equipment                                        88         139
     Purchases of available-for-sale securities
      and other investments                           (20)        (13)
     Maturities and sales of available-for-sale
      securities and other investments                106          92
     Payments made in connection with business
      acquisitions, net                              (264)     (4,464)
                                               ----------- -----------
        Net cash used in investing activities        (701)     (4,964)
                                               ----------- -----------

Cash flows from financing activities:
     Issuance of commercial paper and notes
      payable, net                                   (899)      1,263
     Issuance of debt                                  16          69
     Payment of debt                                 (105)     (1,056)
     Issuance of common stock under employee
      stock plans                                     554         797
     Repurchase of common stock                    (3,324)     (2,312)
     Excess tax benefit from stock-based
      compensation                                     88         100
     Dividends                                       (206)       (218)
                                               ----------- -----------
        Net cash used in financing activities      (3,876)     (1,357)
                                               ----------- -----------

Decrease in cash and cash equivalents              (1,390)     (6,343)
Cash and cash equivalents at beginning of
 period                                            11,293      16,400
                                               ----------- -----------
Cash and cash equivalents at end of period     $    9,903  $   10,057
                                               =========== ===========
               HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
                         SEGMENT INFORMATION
                             (Unaudited)
                            (In millions)

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

Net revenue:

       Enterprise Storage and
        Servers                    $    4,820  $    5,108  $    4,421
       HP Services                      4,378       4,348       3,932
       HP Software                        666         759         598
                                   ----------- ----------- -----------
    Technology Solutions Group          9,864      10,215       8,951
                                   ----------- ----------- -----------
    Personal Systems Group             10,791      10,133       8,719
    Imaging and Printing Group          7,312       7,554       6,999
    HP Financial Services                 642         657         547
    Corporate Investments                 218         210         157
                                   ----------- ----------- -----------
       Total Segments                  28,827      28,769      25,373
    Eliminations of intersegment
     net revenue and other               (360)       (476)       (291)
                                   ----------- ----------- -----------

       Total HP Consolidated       $   28,467  $   28,293  $   25,082
                                   =========== =========== ===========

Earnings (Loss) from operations:

       Enterprise Storage and
        Servers                    $      673  $      736  $      453
       HP Services                        489         515         406
       HP Software                         51         145          18
                                   ----------- ----------- -----------
    Technology Solutions Group          1,213       1,396         877
                                   ----------- ----------- -----------
    Personal Systems Group                628         589         414
    Imaging and Printing Group          1,150       1,094       1,073
    HP Financial Services                  43          48          32
    Corporate Investments                   8          (5)        (29)
                                   ----------- ----------- -----------
       Total Segments                   3,042       3,122       2,367

       Corporate and unallocated
        costs and eliminations            (89)       (197)        (66)
       Unallocated costs related
        to stock-based
        compensation expense
                                         (124)       (122)       (140)
       Amortization of purchased
        intangible assets                (206)       (187)       (201)
       In-process research and
        development charges                 -          (4)       (167)
       Restructuring                      (10)         20          41
       Pension curtailments and
        pension settlements, net            -           -           9
       Interest and other, net             72          67         121
                                   ----------- ----------- -----------

Total HP Consolidated Earnings
 Before Taxes                      $    2,685  $    2,699  $    1,964
                                   =========== =========== ===========


(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
                                   -----------------------------------
                                   January 31, October 31, January 31,
                                      2008       2007(a)     2007(a)
                                   ----------- ----------- -----------

Net revenue:

          Industry standard
           servers                 $    2,988  $    3,059  $    2,689
          Business critical
           systems                        855       1,034         846
          Storage                         977       1,015         886
                                   ----------- ----------- -----------
      Enterprise Storage and
       Servers                          4,820       5,108       4,421
                                   ----------- ----------- -----------
          Technology services           2,241       2,229       2,062
          Outsourcing services          1,303       1,271       1,129
          Consulting and
           integration                    834         848         741
                                   ----------- ----------- -----------
      HP Services                       4,378       4,348       3,932
                                   ----------- ----------- -----------
          Business technology
           optimization(b)                548         620         460
          Other(b)                        118         139         138
                                   ----------- ----------- -----------
      HP Software                         666         759         598
                                   ----------- ----------- -----------
    Technology Solutions Group          9,864      10,215       8,951
                                   ----------- ----------- -----------
          Notebooks                     5,664       5,164       4,146
          Desktops                      4,401       4,222       3,821
          Workstations                    467         473         405
          Handhelds                        89         108         191
          Other                           170         166         156
                                   ----------- ----------- -----------
    Personal Systems Group             10,791      10,133       8,719
                                   ----------- ----------- -----------
          Commercial Hardware           1,726       1,880       1,616
          Consumer Hardware             1,180       1,251       1,241
          Supplies                      4,399       4,423       4,142
          Other                             7           -           -
                                   ----------- ----------- -----------
    Imaging and Printing Group          7,312       7,554       6,999
                                   ----------- ----------- -----------
    HP Financial Services                 642         657         547
    Corporate Investments                 218         210         157
                                   ----------- ----------- -----------
          Total Segments               28,827      28,769      25,373
                                   ----------- ----------- -----------

    Eliminations of intersegment
     net revenue and other               (360)       (476)       (291)
                                   ----------- ----------- -----------

          Total HP Consolidated    $   28,467  $   28,293  $   25,082
                                   =========== =========== ===========

(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
                                   -----------------------------------
                                   January 31, October 31, January 31,
                                      2008        2007        2007
                                   ----------- ----------- -----------

Numerator:
      Net earnings                 $     2,133 $     2,164      $1,547
      Adjustment for interest
       expense on zero-coupon
       subordinated convertible
       notes, net of taxes                   2           2           2
                                   ----------- ----------- -----------

      Net earnings, adjusted       $     2,135 $     2,166      $1,549
                                   =========== =========== ===========

Denominator:
      Weighted-average shares used
       to compute basic EPS              2,560       2,576       2,705
      Effect of dilutive
       securities:
        Dilution from employee
         stock plans                        87          94          88
        Zero-coupon subordinated
         convertible notes                   8           8           8
                                   ----------- ----------- -----------
      Dilutive potential common
       shares                               95         102          96
                                   ----------- ----------- -----------

      Weighted-average shares used
       to compute diluted EPS            2,655       2,678       2,801
                                   =========== =========== ===========

Net earnings per share:
      Basic(a)                     $      0.83 $      0.84      $ 0.57
      Diluted(b)                   $      0.80 $      0.81      $ 0.55

(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,
                                      2008        2007        2007
                                   ----------- ----------- -----------

Numerator:
      Non-GAAP net earnings        $     2,291 $     2,296      $1,826
      Adjustment for interest
       expense on zero-coupon
       subordinated convertible
       notes, net of taxes                   2           2           2
                                   ----------- ----------- -----------

      Non-GAAP net earnings,
       adjusted                    $     2,293 $     2,298      $1,828
                                   =========== =========== ===========

Denominator:
      Weighted-average shares used
       to compute basic EPS              2,560       2,576       2,705
      Effect of dilutive
       securities:
        Dilution from employee
         stock plans                        87          94          88
        Zero-coupon subordinated
         convertible notes                   8           8           8
                                   ----------- ----------- -----------
      Dilutive potential common
       shares                               95         102          96
                                   ----------- ----------- -----------

      Weighted-average shares used
       to compute diluted EPS            2,655       2,678       2,801
                                   =========== =========== ===========

Non-GAAP net earnings per share:
      Basic(a)                     $      0.89 $      0.89      $ 0.68
      Diluted(b)                   $      0.86 $      0.86      $ 0.65

(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.

CONTACT: HP
Bob 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: HP