HP calculates basic earnings per share ("EPS") using net earnings and the weighted-average number of shares outstanding during the reporting period. Diluted EPS includes any dilutive effect of outstanding stock options, PRUs, restricted stock units and restricted stock.

The reconciliation of the numerators and denominators of the basic and diluted EPS calculations was as follows:

		Three months ended July 31				Nine months ended July 31

		2011		2010		2011		2010
		In millions, except per share amounts
Numerator:
	Net earnings⁽¹⁾	$	1,926	$	1,773	$	6,835	$	6,223

Denominator:
	Weighted-average shares used to compute basic EPS		2,054		2,322		2,129		2,342
	Dilutive effect of employee stock plans		26		54		32		56

	Weighted-average shares used to compute diluted EPS		2,080		2,376		2,161		2,398

Net earnings per share:
	Basic	$	0.94	$	0.76	$	3.21	$	2.66
	Diluted	$	0.93	$	0.75	$	3.16	$	2.60

HP excludes options with exercise prices that are greater than the average market price for HP's common stock from the calculation of diluted EPS because their effect would be anti-dilutive. For the three and nine months ended July 31, 2011, HP excluded from the calculation of diluted EPS options to purchase 26 million shares and 23 million shares, respectively, compared to 8 million shares and 5 million shares for the three and nine months ended July 31, 2010, respectively.

In addition, HP also excludes options whose combined exercise price, unamortized fair value and excess tax benefits are greater than the average market price for HP's common stock because their effect would be anti-dilutive. For the three and nine months ended July 31, 2011, HP excluded from the calculation of diluted EPS options to purchase an additional 1 million shares, compared to an additional 2 million shares and 3 million shares for the three and nine months ended July 31, 2010, respectively.