EXHIBIT 99.1    

News release   

		HP Reports Second Quarter 2008 Results
Editorial Contacts: Robert Sherbin, HP +1 650 857 2381 robert.sherbin@hp.com Ryan J. Donovan, HP + 1 650 857 8410 ryan.j.donovan@hp.com Asa Svanstrom, HP + 1 650 857 2246 (Investors) asa.svanstrom@hp.com HP Media Hotline +1 866 266 7272 pr@hp.com www.hp.com/go/newsroom Hewlett-Packard Company 3000 Hanover Street Palo Alto, CA 94304 www.hp.com	• • • • •	Second quarter net revenue up 11%, or $2.7 billion, from a year earlier to $28.3 billion  Second quarter GAAP operating profit up 22% to $2.6 billion; $0.80 earnings per share, up from $0.65 a year earlier Second quarter non-GAAP operating profit up 22% to $2.8 billion; $0.87 earnings per share, up from $0.70 a year earlier Record cash flow from operations of $4.8 billion $2.8 billion of share repurchases

PALO ALTO, Calif., May 20, 2008 – HP today announced financial results for its second fiscal quarter ended April 30, 2008, with net revenue of $28.3 billion, up 11% from a year earlier and up 5% when adjusted for the effects of currency.
 
In the second quarter, GAAP operating profit was $2.6 billion and GAAP diluted earnings per share (EPS) was $0.80, up from $0.65 in the prior-year period. Non-GAAP operating profit was $2.8 billion, with non-GAAP diluted EPS of $0.87 up from $0.70 in the prior-year period. Non-GAAP financial information excludes $172 million of adjustments on an after-tax basis, or $0.07 per diluted share, related primarily to amortization of purchased intangibles.
 
"HP turned in another strong quarter, supported by improvement across our businesses. With 70 percent of revenue now coming from outside the U.S., we benefited from robust demand in emerging economies,” said Mark Hurd, HP chairman and chief executive officer. “The company's financial outlook demonstrates its strength in the global marketplace."

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

Information about HP’s use of non-GAAP financial information is provided under “Use of non-GAAP financial information” below.

Revenue in the Americas grew 4% on a year-over-year basis to $11.1 billion. Revenue grew 16% in Europe, the Middle East and Africa to $11.9 billion. Revenue grew 16% in Asia Pacific to $5.2 billion. When adjusted for the effects of currency, revenue in the Americas grew 2%, revenue in Europe, the Middle East and Africa grew 6%, and revenue in Asia Pacific grew 7%. Revenue from outside of the United States in the second quarter was 70% of the total, with revenue in the BRIC countries (Brazil, Russia, India and China) growing 26% over the prior-year period and accounting for 10% of total revenue.
 
Personal Systems Group
Personal Systems Group (PSG) revenue grew 16% year over year to $10.1 billion, with unit shipments up 21% on a year-over-year basis. Notebook revenue for the quarter grew 31% over the prior-year period, while desktop revenue was flat. Commercial client revenue grew 17% year over year, while Consumer client revenue increased 16%. Operating profit was $544 million, or 5.4% of revenue, up from $417 million, or 4.8% of revenue, in the prior-year period.
 
Imaging and Printing Group
Imaging and Printing Group (IPG) revenue grew 6% year over year to $7.6 billion. On a year-over-year basis, supplies revenue grew 8%, Commercial hardware revenue grew 6%, and Consumer hardware revenue declined 3%. Printer unit shipments increased 6% year over year, with Consumer printer hardware units up 4% and Commercial printer hardware units up 9%. Momentum in key growth initiatives continued, with solid growth in both the Graphic Arts and the Enterprise businesses. Operating profit was $1.2 billion, or 16.2% of revenue, versus $1.2 billion, or 16.3% of revenue, in the prior-year period.
 
Enterprise Storage and Servers
Enterprise Storage and Servers (ESS) reported revenue of $4.8 billion, up 4% over the prior-year period fueled by ESS blades, which grew 68%, and storage, which grew 14%. Storage revenue growth was fueled by the high-end XP line, which grew 21%, and the midrange EVA line, which grew 17%. On a year-over-year basis, Industry Standard Server revenue was flat. Business Critical Systems revenue increased 7%. Operating profit was $655 million, or 13.7% of revenue, up from $452 million, or 9.8% of revenue, in the prior-year period.
 
HP Services
HP Services (HPS) revenue increased 12% year over year to $4.6 billion. Revenue in Technology Services grew 10% with Outsourcing Services and Consulting and Integration up 14% and 15%, respectively, compared with the prior-year period. Operating profit was $508 million, or 11.0% of revenue, up from $449 million, or 10.9% of revenue, in the prior-year period.
 
HP Software
HP Software revenue grew 28% compared with the prior-year period to $727 million, led by 36% growth in the Business Technology Optimization portfolio. Operating profit was $93 million, or 12.8% of revenue, up from $7 million, or 1.2% of revenue, in the prior-year period.

Financial Services
HP Financial Services (HPFS) reported revenue of $685 million, an increase of 25% year over year. Financing volume and net portfolio assets increased 15% and 14%, respectively, over the prior-year period. Operating margin was 6.9% of revenue, up from 6.5% in the comparable period last year.
 
Asset management
HP generated $4.8 billion in cash flow from operations for the quarter. Inventory ended the quarter at $7.7 billion, down 2 days over the prior year. Accounts receivable of $13.6 billion was up 2 days over the prior-year period. Accounts payable ended the quarter at $12.4 billion down 1 day from the prior-year period. HP’s dividend payment of $0.08 per share in the second quarter resulted in cash usage of $197 million. HP utilized $2.8 billion of cash during the second quarter to repurchase approximately 66 million shares of common stock from the open market. HP exited the quarter with $11.8 billion in gross cash, which includes cash and cash equivalents of $11.6 billion, short-term investments of $56 million, and certain long-term investments of $117 million.
 
Outlook
HP estimates Q3 FY08 revenue will be approximately $27.3 billion to $27.4 billion.
 
Third quarter FY08 GAAP diluted EPS is expected to be approximately $0.76 to $0.77 and non-GAAP diluted EPS is expected to be approximately $0.82 to $0.83. Third quarter FY08 non-GAAP diluted EPS estimates exclude after-tax costs of approximately $0.06 per share, related primarily to the amortization of purchased intangibles.
 
HP estimates FY08 revenue will be approximately $114.2 billion to $114.4 billion, up from previous guidance of $113.5 billion to $114.0 billion.
 
FY08 GAAP diluted EPS is expected to be in the range of $3.30 to $3.34, and FY08 non-GAAP diluted EPS is expected to be in the range of $3.54 to $3.58. FY08 non-GAAP diluted EPS estimates exclude after-tax costs of approximately $0.24 per share, related primarily to the amortization of purchased intangibles.
 
More information on HP’s quarterly earnings, including additional financial analysis and an earnings overview presentation, is available on HP’s Investor Relations website at www.hp.com/investor/home.

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

About HP
HP focuses on simplifying technology experiences for all of its customers – from individual consumers to the largest businesses. With a portfolio that spans printing, personal computing, software, services and IT infrastructure, HP is among the world’s largest IT companies, with revenue totaling $110.4 billion for the four fiscal quarters ended April 30, 2008. More information about HP (NYSE: HPQ) is available at www.hp.com.
 
Use of non-GAAP financial information
To supplement HP’s consolidated condensed financial statements presented on a GAAP basis, HP provides non-GAAP operating profit, non-GAAP operating margin, non-GAAP net earnings, non-GAAP diluted earnings per share and gross cash. HP also provides

forecasts of non-GAAP diluted earnings per share. A reconciliation of the adjustments to GAAP results for this quarter and prior periods is included in the tables below. In addition, an explanation of the ways in which HP management uses these non-GAAP measures to evaluate its business, the substance behind HP management’s decision to use these non-GAAP measures, the material limitations associated with the use of these non-GAAP measures, the manner in which HP management compensates for those limitations, and the substantive reasons why HP management believes that these non-GAAP measures provide useful information to investors is included under “Use of Non-GAAP Financial Measures” after the tables below. This additional non-GAAP financial information is not meant to be considered in isolation or as a substitute for operating profit, operating margin, net earnings, diluted earnings per share, or cash and cash equivalents prepared in accordance with GAAP.
 
Forward-looking statements
This news release contains forward-looking statements that involve risks, uncertainties and assumptions. If the risks or uncertainties ever materialize or the assumptions prove incorrect, the results of HP may differ materially from those expressed or implied by such forward-looking statements and assumptions. All statements other than statements of historical fact are statements that could be deemed forward-looking statements, including but not limited to any projections of revenue, margins, expenses, earnings, tax provisions, cash flows, benefit obligations, share repurchases, acquisition synergies or other financial items; any statements of the plans, strategies, and objectives of management for future operations, including execution of cost reduction programs and restructuring and integration plans; any statements concerning the expected development, performance or market share relating to products or services; any statements regarding pending business combination transactions; any statements regarding pending investigations, claims or disputes; any statements of expectation or belief; and any statements of assumptions underlying any of the foregoing. Risks, uncertainties and assumptions include macroeconomic and geopolitical trends and events; execution and performance of contracts by suppliers, customers and partners; the challenge of managing asset levels, including inventory; the difficulty of aligning expense levels with revenue changes; assumptions related to pension and other post-retirement costs; expectations and assumptions relating to the execution and timing of cost reduction programs and restructuring and integration plans; the possibility that the expected benefits of pending business combination transactions may not materialize as expected or that the transactions may not be timely completed; the resolution of pending investigations, claims and disputes; and other risks that are described in HP’s Annual Report on Form 10-K for the fiscal year ended October 31, 2007 and HP’s other filings with the Securities and Exchange Commission, including HP’s Quarterly Report on Form 10-Q for the fiscal quarter ended January 31, 2008. As in prior periods, the financial information set forth in this release, including tax-related items, reflects estimates based on information available at this time. While HP believes these estimates to be meaningful, these amounts could differ materially from actual reported amounts in HP’s Quarterly Report on Form 10-Q for the fiscal quarter ended April 30, 2008. In particular, determining HP’s actual tax balances and provisions as of April 30, 2008 requires extensive internal and external review of tax data (including consolidating and reviewing the tax provisions of numerous domestic and foreign entities), which is being completed in the ordinary course of preparing HP’s Form 10-Q. HP assumes no obligation and does not intend to update these forward-looking statements.

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

© 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.
5/2008
 

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

	Three months ended
	April 30,			January 31,			April 30,
	2008			2008			2007
Net revenue	$	28,262		$	28,467		$	25,534
Costs and expenses(a):
Cost of sales		21,261			21,499			19,283
Research and development		908			898			903
Selling, general and administrative		3,275			3,241			3,044
Amortization of purchased intangible assets		211			206			212
In-process research and development charges		13			--			19
Restructuring		4			10			453
Pension curtailments and pension settlements, net		--			--			(508	)
Total costs and expenses		25,672			25,854			23,406
Earnings from operations		2,590			2,613			2,128
Interest and other, net		3			72			100
Earnings before taxes		2,593			2,685			2,228
Provision for taxes(b)		536			552			453
Net earnings	$	2,057		$	2,133		$	1,775
Net earnings per share:
Basic	$	0.83		$	0.83		$	0.67
Diluted	$	0.80		$	0.80		$	0.65
Cash dividends declared per share	$	--		$	0.16		$	--
Weighted-average shares used to compute net earnings per share:
Basic		2,473			2,560			2,638
Diluted		2,557			2,655			2,731
(a)  Stock-based compensation expense included under SFAS 123(R) was as follows:
Cost of sales	$	36		$	36		$	42
Research and development		19			20			18
Selling, general and administrative		97			101			94
Total costs and expenses	$	152		$	157		$	154
(b)  Tax benefit from stock-based compensation	$	(45	)	$	(47	)	$	(44	)

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

	Six months ended
	April 30,			April 30,
	2008			2007
Net revenue	$	56,729		$	50,616
Costs and expenses(a):
Cost of sales		42,760			38,419
Research and development		1,806			1,780
Selling, general and administrative		6,516			5,952
Amortization of purchased intangible assets		417			413
In-process research and development charges		13			186
Restructuring		14			412
Pension curtailments and pension settlements, net		--			(517	)
Total costs and expenses		51,526			46,645
Earnings from operations		5,203			3,971
Interest and other, net		75			221
Earnings before taxes		5,278			4,192
Provision for taxes(b)		1,088			870
Net earnings	$	4,190		$	3,322
Net earnings per share:
Basic	$	1.67		$	1.24
Diluted	$	1.61		$	1.20
Cash dividends declared per share	$	0.16		$	0.16
Weighted-average shares used to compute net earnings per share:
Basic		2,516			2,672
Diluted		2,603			2,763
(a)  Stock-based compensation expense included under SFAS 123(R) was as follows:
Cost of sales	$	72		$	87
Research and development		39			37
Selling, general and administrative		198			193
Total costs and expenses	$	309		$	317
(b)  Tax benefit from stock-based compensation	$	(92	)	$	(92	)

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

	Three						Three						Three
	months			Diluted			months			Diluted			months			Diluted
	ended			earnings			ended			earnings			ended			earnings
	April 30,			per			January 31,			per			April 30,			per
	2008			share			2008			share			2007			share
GAAP net earnings	$	2,057		$	0.80		$	2,133		$	0.80		$	1,775		$	0.65
Non-GAAP adjustments:
Amortization of purchased intangible assets		211			0.08			206			0.08			212			0.08
In-process research and development
charges		13			0.01			--			--			19			0.01
Restructuring		4			--			10			--			453			0.16
Pension curtailments and pension
settlements, net		--			--			--			--			(508	)		(0.19	)
Adjustments for taxes		(56	)		(0.02	)		(58	)		(0.02	)		(31	)		(0.01	)
Non-GAAP net earnings	$	2,229		$	0.87		$	2,291		$	0.86		$	1,920		$	0.70
GAAP earnings from operations	$	2,590					$	2,613					$	2,128
Non-GAAP adjustments:
Amortization of purchased intangible assets		211						206						212
In-process research and development
charges		13						--						19
Restructuring		4						10						453
Pension curtailments and pension
settlements, net		--						--						(508	)
Non-GAAP earnings from operations	$	2,818					$	2,829					$	2,304
GAAP operating margin		9	%					9	%					8	%
Non-GAAP adjustments		1	%					1	%					1	%
Non-GAAP operating margin		10	%					10	%					9	%

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

	Six months			Diluted			Six months			Diluted
	ended			earnings			ended			earnings
	April 30,			per			April 30,			per
	2008			share			2007			share
GAAP net earnings	$	4,190		$	1.61		$	3,322		$	1.20
Non-GAAP adjustments:
Amortization of purchased intangible assets		417			0.16			413			0.15
In-process research and development charges		13			--			186			0.07
Restructuring		14			0.01			412			0.15
Pension curtailments and pension settlements, net		--			--			(517	)		(0.19	)
Adjustments for taxes		(114	)		(0.04	)		(70	)		(0.02	)
Non-GAAP net earnings	$	4,520		$	1.74		$	3,746		$	1.36
GAAP earnings from operations	$	5,203					$	3,971
Non-GAAP adjustments:
Amortization of purchased intangible assets		417						413
In-process research and development charges		13						186
Restructuring		14						412
Pension curtailments and pension settlements, net		--						(517	)
Non-GAAP earnings from operations	$	5,647					$	4,465
GAAP operating margin		9	%					8	%
Non-GAAP adjustments		1	%					1	%
Non-GAAP operating margin		10	%					9	%

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

	April 30,		October 31,
	2008		2007
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	11,591	$	11,293
Short-term investments		56		152
Accounts receivable		13,558		13,420
Financing receivables		2,589		2,507
Inventory		7,678		8,033
Other current assets		11,577		11,997
Total current assets		47,049		47,402
Property, plant and equipment		7,906		7,798
Long-term financing receivables and other assets		10,318		7,647
Goodwill and purchased intangible assets		26,531		25,852
Total assets	$	91,804	$	88,699
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and short-term borrowings	$	711	$	3,186
Accounts payable		12,425		11,787
Employee compensation and benefits		3,103		3,465
Taxes on earnings		798		1,891
Deferred revenue		5,446		5,025
Other accrued liabilities		14,663		13,906
Total current liabilities		37,146		39,260
Long-term debt		7,688		4,997
Other liabilities		8,817		5,916
Stockholders' equity		38,153		38,526
Total liabilities and stockholders' equity	$	91,804	$	88,699

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

	Three months ended				Six months ended
	April 30, 2008				April 30, 2008
Cash flows from operating activities:
Net earnings	$	2,057			$	4,190
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization		760				1,509
Stock-based compensation expense		152				309
Provision for bad debt and inventory		107				185
In-process research and development charges		13				13
Restructuring		4				14
Deferred taxes on earnings		625				986
Excess tax benefit from stock-based compensation		(75		)		(163	)
Other, net		(29		)		(23	)
Changes in assets and liabilities:
Accounts and financing receivables		(1,205		)		(198	)
Inventory		232				286
Accounts payable		1,217				558
Taxes on earnings		(278		)		(370	)
Restructuring		(24		)		(55	)
Other assets and liabilities		1,209				711
Net cash provided by operating activities		4,765				7,952
Cash flows from investing activities:
Investment in property, plant and equipment		(704		)		(1,315	)
Proceeds from sale of property, plant and equipment		105				193
Purchases of available-for-sale securities and other investments		(58		)		(78	)
Maturities and sales of available-for-sale securities and other
investments			85			191
Payments made in connection with business acquisitions, net		(1,001		)		(1,265	)
Net cash used in investing activities		(1,573		)		(2,274	)
Cash flows from financing activities:
Issuance of commercial paper and notes payable, net		(999		)		(1,898	)
Issuance of debt		3,002				3,018
Payment of debt		(903		)		(1,008	)
Issuance of common stock under employee stock plans		363				917
Repurchase of common stock		(2,845		)		(6,169	)
Excess tax benefit from stock-based compensation		75				163
Dividends		(197		)		(403	)
Net cash used in financing activities		(1,504		)		(5,380	)
Increase in cash and cash equivalents		1,688				298
Cash and cash equivalents at beginning of period		9,903				11,293
Cash and cash equivalents at end of period	$	11,591			$	11,591

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

	Three months ended
	April 30,			January 31,			April 30,
	2008			2008			2007(a)
Net revenue:
Enterprise Storage and Servers	$	4,780		$	4,820		$	4,594
HP Services		4,627			4,378			4,125
HP Software		727			666			568
Technology Solutions Group		10,134			9,864			9,287
Personal Systems Group		10,071			10,791			8,663
Imaging and Printing Group		7,591			7,312			7,161
HP Financial Services		685			642			550
Corporate Investments		230			218			175
Total Segments		28,711			28,827			25,836
Eliminations of intersegment net revenue and other		(449	)		(360	)		(302	)
Total HP Consolidated	$	28,262		$	28,467		$	25,534
Earnings (Loss) from operations:
Enterprise Storage and Servers	$	655		$	673		$	452
HP Services		508			489			449
HP Software		93			51			7
Technology Solutions Group		1,256			1,213			908
Personal Systems Group		544			628			417
Imaging and Printing Group		1,230			1,150			1,167
HP Financial Services		47			43			36
Corporate Investments		6			8			(18	)
Total Segments		3,083			3,042			2,510
Corporate and unallocated costs and eliminations		(134	)		(89	)		(75	)
Unallocated costs related to stock-based
compensation expense		(131	)		(124	)		(131	)
Amortization of purchased intangible assets		(211	)		(206	)		(212	)
In-process research and development charges		(13	)		--			(19	)
Restructuring		(4	)		(10	)		(453	)
Pension curtailments and pension settlements, net		--			--			508
Interest and other, net		3			72			100
Total HP Consolidated Earnings Before Taxes	$	2,593		$	2,685		$	2,228

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

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

	Six months ended April 30,
	2008			2007(a)
Net revenue:
Enterprise Storage and Servers	$	9,600		$	9,015
HP Services		9,005			8,057
HP Software		1,393			1,166
Technology Solutions Group		19,998			18,238
Personal Systems Group		20,862			17,382
Imaging and Printing Group		14,903			14,160
HP Financial Services		1,327			1,097
Corporate Investments		448			332
Total Segments		57,538			51,209
Eliminations of intersegment net revenue and other		(809	)		(593	)
Total HP Consolidated	$	56,729		$	50,616
Earnings (Loss) from operations:
Enterprise Storage and Servers	$	1,328		$	905
HP Services		997			855
HP Software		144			25
Technology Solutions Group		2,469			1,785
Personal Systems Group		1,172			831
Imaging and Printing Group		2,380			2,240
HP Financial Services		90			68
Corporate Investments		14			(47	)
Total Segments		6,125			4,877
Corporate and unallocated costs and eliminations		(223	)		(141	)
Unallocated costs related to stock-based compensation expense		(255	)		(271	)
Amortization of purchased intangible assets		(417	)		(413	)
In-process research and development charges		(13	)		(186	)
Restructuring		(14	)		(412	)
Pension curtailments and pension settlements, net		--			517
Interest and other, net		75			221
Total HP Consolidated Earnings Before Taxes	$	5,278		$	4,192

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

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

	Three months ended
	April 30,			January 31,			April 30,
	2008			2008			2007(a)
Net revenue:
Industry standard servers	$	2,818		$	2,988		$	2,818
Business critical systems		919			855			862
Storage		1,043			977			914
Enterprise Storage and Servers		4,780			4,820			4,594
Technology services		2,331			2,241			2,120
Outsourcing services		1,370			1,303			1,200
Consulting and integration		926			834			805
HP Services		4,627			4,378			4,125
Business technology optimization(b)		593			548			437
Other(b)		134			118			131
HP Software		727			666			568
Technology Solutions Group		10,134			9,864			9,287
Notebooks		5,373			5,664			4,086
Desktops		3,921			4,401			3,913
Workstations		494			467			402
Handhelds		102			89			116
Other		181			170			146
Personal Systems Group		10,071			10,791			8,663
Commercial Hardware		1,811			1,726			1,709
Consumer Hardware		974			1,180			1,008
Supplies		4,812			4,399			4,444
Other		(6	)		7			--
Imaging and Printing Group		7,591			7,312			7,161
HP Financial Services		685			642			550
Corporate Investments		230			218			175
Total Segments		28,711			28,827			25,836
Eliminations of intersegment net revenue and other		(449	)		(360	)		(302	)
Total HP Consolidated	$	28,262		$	28,467		$	25,534

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

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

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

	Six months ended April 30,
	2008			2007(a)
Net revenue:
Industry standard servers	$	5,806		$	5,507
Business critical systems		1,774			1,708
Storage		2,020			1,800
Enterprise Storage and Servers		9,600			9,015
Technology services		4,572			4,182
Outsourcing services		2,673			2,329
Consulting and integration		1,760			1,546
HP Services		9,005			8,057
Business technology optimization(b)		1,141			897
Other(b)		252			269
HP Software		1,393			1,166
Technology Solutions Group		19,998			18,238
Notebooks		11,037			8,232
Desktops		8,322			7,734
Workstations		961			807
Handhelds		191			307
Other		351			302
Personal Systems Group		20,862			17,382
Commercial Hardware		3,537			3,325
Consumer Hardware		2,154			2,249
Supplies		9,211			8,586
Other		1			--
Imaging and Printing Group		14,903			14,160
HP Financial Services		1,327			1,097
Corporate Investments		448			332
Total Segments		57,538			51,209
Eliminations of intersegment net revenue and other		(809	)		(593	)
Total HP Consolidated	$	56,729		$	50,616

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

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

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

	Three months ended
	April 30,		January 31,		April 30,
	2008		2008		2007
Numerator:
Net earnings	$	2,057	$	2,133	$	1,775
Adjustment for interest expense on zero-coupon
subordinated convertible notes, net of taxes		1		2		2
Net earnings, adjusted	$	2,058	$	2,135	$	1,777
Denominator:
Weighted-average shares used to compute basic EPS		2,473		2,560		2,638
Effect of dilutive securities:
Dilution from employee stock plans		79		87		85
Zero-coupon subordinated convertible notes		5		8		8
Dilutive potential common shares		84		95		93
Weighted-average shares used to compute diluted EPS		2,557		2,655		2,731
Net earnings per share:
Basic(a)	$	0.83	$	0.83	$	0.67
Diluted(b)	$	0.80	$	0.80	$	0.65

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

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

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

	Six months ended April 30,
	2008		2007
Numerator:
Net earnings	$	4,190	$	3,322
Adjustment for interest expense on zero-coupon
subordinated convertible notes, net of taxes		3		4
Net earnings, adjusted	$	4,193	$	3,326
Denominator:
Weighted-average shares used to compute basic EPS		2,516		2,672
Effect of dilutive securities:
Dilution from employee stock plans		81		83
Zero-coupon subordinated convertible notes		6		8
Dilutive potential common shares		87		91
Weighted-average shares used to compute diluted EPS		2,603		2,763
Net earnings per share:
Basic(a)	$	1.67	$	1.24
Diluted(b)	$	1.61	$	1.20

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

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

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

	Three months ended
	April 30,		January 31,		April 30,
	2008		2008		2007
Numerator:
Non-GAAP net earnings	$	2,229	$	2,291	$	1,920
Adjustment for interest expense on zero-coupon
subordinated convertible notes, net of taxes		1		2		2
Non-GAAP net earnings, adjusted	$	2,230	$	2,293	$	1,922
Denominator:
Weighted-average shares used to compute basic EPS		2,473		2,560		2,638
Effect of dilutive securities:
Dilution from employee stock plans		79		87		85
Zero-coupon subordinated convertible notes		5		8		8
Dilutive potential common shares		84		95		93
Weighted-average shares used to compute diluted EPS		2,557		2,655		2,731
Non-GAAP net earnings per share:
Basic(a)	$	0.90	$	0.89	$	0.73
Diluted(b)	$	0.87	$	0.86	$	0.70

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

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

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

	Six months ended April 30,
	2008		2007
Numerator:
Non-GAAP net earnings	$	4,520	$	3,746
Adjustment for interest expense on zero-coupon subordinated		3		4
convertible notes, net of taxes
Non-GAAP net earnings, adjusted	$	4,523	$	3,750
Denominator:
Weighted-average shares used to compute basic EPS		2,516		2,672
Effect of dilutive securities:
Dilution from employee stock plans		81		83
Zero-coupon subordinated convertible notes		6		8
Dilutive potential common shares		87		91
Weighted-average shares used to compute diluted EPS		2,603		2,763
Non-GAAP net earnings per share:
Basic(a)	$	1.80	$	1.40
Diluted(b)	$	1.74	$	1.36

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

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

Use of Non-GAAP Financial Measures

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

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

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

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

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

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

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

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

Material Limitations Associated with Use of Non-GAAP Financial Measures

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

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

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

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

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

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

HP compensates for the limitations on its use of non-GAAP operating profit, non-GAAP operating margin, non-GAAP net earnings, non-GAAP diluted earnings per share and gross cash by relying primarily on its GAAP results and using non-GAAP financial measures only supplementally. HP also provides robust and detailed reconciliations of each non-GAAP financial measure to its most directly comparable GAAP measure within this press release and in other written materials that include these non-GAAP financial measures, and HP encourages investors to review carefully those reconciliations.
 
Usefulness of Non-GAAP Financial Measures to Investors
 
HP believes that providing non-GAAP operating profit, non-GAAP operating margin, non-GAAP net earnings, non-GAAP diluted earnings per share and gross cash to investors in addition to the related GAAP measures provides investors with greater transparency to the information used by HP’s management in its financial and operational decision-making and allows investors to see HP’s results “through the eyes” of management. HP further believes that providing this information better enables HP’s investors to understand HP’s operating performance and to evaluate the efficacy of the methodology and information used by management to evaluate and measure such performance. Disclosure of these non-GAAP financial measures also facilitates comparisons of HP’s operating performance with the performance of other companies in HP’s industry that supplement their GAAP results with non-GAAP financial measures that are calculated in a similar manner.