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HP Q1 FY11 Earnings Announcement

HP Q1 FY11 Earnings Announcement

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HP Q1 FY1 Earnings 1 Announcement

February 22, 201 1 http://www.hp.com/investor/home
February 22, 2011 http://www.hp.com/investor/home

FORWARD LOOKING STATEMENTS
This presentation may contain forward-looking statements that involve risks, uncertainties and assumptions. If the risks or uncertainties ever materialize or the assumptions prove incorrect, the financial 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, earnings per share, tax provisions, cash flows, benefit obligations, share repurchases, currency exchange rates, the impact of acquisitions 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 current or future macroeconomic trends or events and the impact of those trends and events on HP and its financial performance; 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 the impact of macroeconomic and geopolitical trends and events; the competitive pressures faced by HP’s businesses; the development and transition of new products and services and the enhancement of existing products and services to meet customer needs and respond to emerging technological trends; the execution and performance of contracts by HP and its suppliers, customers and partners; the protection of HP’s intellectual property assets, including intellectual property licensed from third parties; integration and other risks associated with business combination and investment transactions; the hiring and retention of key employees; 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, 2010 and HP’s other filings with the Securities and Exchange Commission. As in prior periods, the financial information set forth in this presentation, including tax-related items, reflects estimates based on information available at this time. While HP believes these estimates to be meaningful, these amounts could differ materially from actual reported amounts in HP’s Form 10-Q for the fiscal quarter ended January 31, 201 In particular, determining HP’s actual tax balances and provisions as of 1. January 31, 201 requires extensive internal and external review of tax data (including consolidating and reviewing the tax 1 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.

2

February 22, 2011

http://www.hp.com/investor/home

USE OF NON-GAAP FINANCIAL INFORMATION

HP has included non-GAAP financial measures in this presentation to supplement HP’s consolidated condensed financial statements presented on a GAAP basis. Definitions of these non-GAAP financial measures and reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are included elsewhere in this presentation. HP’s management uses non-GAAP operating expense, non-GAAP OI&E, non-GAAP operating profit, non-GAAP net earnings, nonGAAP diluted earnings per share, and HP’s non-GAAP tax rate to evaluate and forecast HP’s performance before gains, losses or other charges that are considered by HP’s management to be outside of HP’s core business segment operating results. Gross cash, net cash and free cash flow are liquidity measures that provide useful information to management about the amount of cash available for investment in HP’s businesses, funding strategic acquisitions, repurchasing stock and other purposes. 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. 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 net earnings, non-GAAP diluted earnings per share and HP’s non-GAAP tax rate and therefore does not reflect the full economic effect of the loss in value of those intangible assets. In addition, items such as restructuring charges that are excluded from non-GAAP operating expense, non-GAAP operating profit, non-GAAP net earnings, non-GAAP diluted earnings per share and HP’s non-GAAP tax rate can have a material impact on cash flows and earnings per share. HP may not be able to liquidate the long-term investments included in gross cash immediately, which may limit the usefulness of gross cash as a liquidity measure. In addition, free cash flow does not represent the total increase or decrease in the cash balance for the period. The non-GAAP financial information that we provide also may differ from the non-GAAP information provided by other companies. We compensate for the limitations on our use of these non-GAAP financial measures by relying primarily on our GAAP financial statements and using non-GAAP financial measures only supplementally. We also provide robust and detailed reconciliations of each non-GAAP financial measure to the most directly comparable GAAP measure, and we encourage investors to review carefully those reconciliations. We believe that providing these non-GAAP financial measures 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. We further believe that providing this information better enables 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.

3

February 22, 2011

http://www.hp.com/investor/home

KEY MESSAGES
 Strong margins, earnings, and cash flow performance with 4% year over year revenue growth
    Expanded non-GAAP operating margins by 40 basis points year over year, excluding net impact from one-time gains primarily related to real estate, driven by gross margin expansion of 150 basis points Continued to invest in growth in higher margin categories, while maintaining operational efficiency Non-GAAP diluted earnings per share grew 27% year over year Cash flow from operations of $3.1 billion, up 28% year over year

 Continued strength in commercial hardware across HP
   ESSN continued to win in the datacenter with Industry Standard Servers revenue up 17%, Storage up 14%, and Networking’s switching and routing revenue up over 30% year over year IPG delivered another strong quarter with commercial printer units up 33% and commercial revenue up 13% year over year. Expanded market leadership in both laser and ink, with solid momentum in our new e-Print platform and commercial print solutions PSG commercial PC client revenue up 11% year over year

 Executed well in a challenging consumer PC market with margin expansion and share gains
  Gained worldwide market share sequentially across all PC categories – consumer, commercial, notebook and desktop Increased PSG operating profit 27% year over year, delivering a 6.4% operating margin in Q1 Solid long term signings and operating margin expansion Opportunity to improve short-term signings with more higher value services and add-on projects

 Opportunity in Services to drive growth with more higher value-added solutions
 

 Investing to lead in cloud and connectivity
 
4

Launched several new Cloud solutions, leveraging HP’s converged infrastructure, enterprise-class security, and unique ability to manage hybrid IT environments Generated excitement with WebOS product announcements, including HP’s new Touchpad tablet
http://www.hp.com/investor/home

February 22, 2011

Q1 FY11 RESULTS OVERVIEW
Financial Summary
– Net revenue of $32.3B, up 4% Y/Y in reported and constant currency – Non-GAAP(1) diluted EPS of $1.36, up 27% Y/Y – GAAP diluted EPS of $1.17, up 26% Y/Y – Cash flow from operations of $3.1B – $2.3B in share repurchases and $175M in dividends

$ in millions Services Enterprise Servers, Storage and Networking HP Software Enterprise Business Personal Systems Group Imaging and Printing Group HP Financial Services Total HP
1. 2.
5
(2)

Q1 Revenue $8,607 $5,634 $697 $14,938 $10,449 $6,630 $827 $32,302

Growth Y/Y% (2%) 22% 5% 6% (1%) 7% 15% 4%

OP $ $1,375 $828 $123 $2,326 $672 $1,129 $79 $4,006
(1)

OP % of rev 16.0% 14.7% 17.6% 15.6% 6.4% 17.0% 9.6% 12.4%
(1)

OP $ Y/Y ($4) $221 ($49) $168 $142 $75 $12 $504
(1)

OP % Y/Y 0.3 pts 1.5 pts (8.3) pts 0.3 pts 1.4 pts 0.0 pts 0.3 pts 1.2 pts
(1)

All non-GAAP numbers have been adjusted to exclude certain items. A reconciliation of specific adjustments to GAAP results for this quarter and prior periods is included on slide 17 and in the GAAP to non-GAAP slides that appear as part of the supplemental slides of this presentation. A description of HP’s use of non-GAAP information is provided on slide 3 under “Use of non-GAAP Financial Information.” Includes Corporate Investments & Eliminations
February 22, 2011 http://www.hp.com/investor/home

Q1 FY11 REVENUE
By Segment By Region

Imaging & Printing Group 21%

Services 27% Enterprise Servers, Storage & Networking 17% HP Financial Services & Other 1%

U.S. 35%

44%, up 6% Y/Y

Americas

38%, FLAT Y/Y

EMEA

Personal Systems Group 32%

Canada/ Latin America 9%

Asia Pacific
18%, up 7% Y/Y

HP Software 2%
6 February 22, 2011 http://www.hp.com/investor/home

REVENUE & EPS PERFORMANCE
$36 $34 $32 $30 $28 $26 $24 $22 $20 $18 $16 $14 $12 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 $0.86 $0.87 $0.86 $1.03 $0.93 $0.86 $0.92 $1.14 $1.07 $1.09 $1.08 $1.33 $1.36 $1.50 $1.40 $1.30 $1.20 $1.10 $1.00 $0.90 $0.80 $0.70 $0.60 $0.50 $0.40 $0.30 $0.20 $0.10 $0.00

Revenue (in billions) $28.5 $28.3 $28.0 $33.6 $28.8 $27.4 $27.6 $30.8 $31.2 $30.8 $30.7 $33.3 $32.3 Non-GAAP EPS

7

February 22, 2011

http://www.hp.com/investor/home

REGIONAL REVENUE TRENDS
Americas
$16 $14
$ in billions
(including U.S.)

United States
20%
Y/Y revenue growth %

$12 $10
$ in billions

20%
Y/Y revenue growth %
Y/Y revenue growth %

15% 10% 5% 0% (5%) 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11

15% 10% 5% 0% (5%) 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11

$12 $10 $8 $6

$8 $6 $4 $2

$15 $12
$ in billions

EMEA

30%
Y/Y revenue growth %

$8 $6
$ in billions

Asia Pacific

25% 15% 5% (5%) (15%)

20% 10% 0%

$9 $6 $3 $0 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11

$4 $2 $0 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11

(10%) (20%)

8

February 22, 2011

http://www.hp.com/investor/home

Y/Y revenue growth % Y/Y constant currency revenue growth %

REVENUE GROWTH
25% 20%

Y/Y revenue growth (%) Y/Y revenue growth %

15% 10% 5% 0% (5%) (10%)

1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11

Constant currency 8.2% 4.5% 4.7% 15.6% 4.2% 2.9% 4.0% -5.0% 5.4% 8.4% 10.6% 8.8% 4.3% As reported 13.5% 10.7% 10.5% 18.8% 1.2% -3.1% -1.6% -8.4% 8.2% 12.7% 11.4% 8.1% 3.6%

9

February 22, 2011

http://www.hp.com/investor/home

SERVICES
In billions
$10.0 $8.0 $6.0 $4.0 $2.0 $0.0 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11

Revenue

In millions
$1,600 $1,400 $1,200 $1,000 $800 $600 $400 $200 $0

Operating profit
18% 16% 14% 12% 10% 8% 6% 4% 2% 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11

Q1 FY1 revenue by business 1
8% ITO Technology Services Application Services BPO

• Services revenue of $8.6B, down 2% Y/Y (down

1% Y/Y excluding ExcellerateHRO divestiture)

• Operating profit of $1.4B, 16.0% of revenue • ITO revenue down 1% Y/Y • Technology Services revenue down 1% Y/Y • Application Services revenue down 3% Y/Y • BPO revenue down 10% Y/Y (down 2% Y/Y,

19%

43% 30%
10 February 22, 2011 http://www.hp.com/investor/home

excluding the ExcellerateHRO divestiture)

OP % revenue

ENTERPRISE SERVERS,STORAGE AND NETWORKING (ESSN)
In billions
$6.0 $5.0 $4.0 $3.0 $2.0 $1.0 $0.0 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11

Revenue

In millions
$1,000 $900 $800 $700 $600 $500 $400 $300 $200 $100 $0

Operating profit
16% 14% 12% 10% 8% 6% 4% 2% 0%
OP % revenue

1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11

Q1 FY1 revenue by business 1
1 1% Industry Standard Servers (ISS) Business Critical Systems (BCS) Storage Works Division (SWD) HP Networking (HPN)

• ESSN revenue of $5.6B, up 22% Y/Y • Operating profit of $828M, 14.7% of revenue • ISS revenue up 17% Y/Y • BCS revenue flat Y/Y • Storage revenue up 14% Y/Y • Networking revenue up 183% Y/Y • ESS Blades revenue up 23% Y/Y

18%

10%
11 February 22, 2011

61%
http://www.hp.com/investor/home

HP SOFTWARE
In millions
$800

Revenue

In millions
$300 $250

Operating profit
35% 30%

$600

$400

$150 $100

20% 15% 10% 5% 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11

$200

$50
$0 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11

$0

Q1 FY1 revenue by type 1
16% 34% Licenses Support Services

• Software revenue of $697M, up 5% Y/Y • Operating profit of $123M, 17.6% of revenue • Licenses revenue up 3% Y/Y • Support revenue up 5% Y/Y • Services revenue up 9% Y/Y

50%
12 February 22, 2011 http://www.hp.com/investor/home

OP %revenue

$200

25%

PERSONAL SYSTEMS GROUP (PSG)
In billions
$12.0 $10.0 $8.0 $6.0 $4.0 $2.0 $0.0 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11

Revenue

In millions
$700 $600 $500 $400 $300 $200 $100 $0

Operating profit
7% 6% 5% 4% 3% 2% 1% 0%
OP % revenue

1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11

Q1 FY1 revenue by business 1
2% 5% Notebooks Desktops Workstations Other

• PSG revenue of $10.4B, down 1% Y/Y • Operating profit of $672M, 6.4% of revenue • Total units up 5% Y/Y • Notebook revenue down 5%, units up 4% Y/Y • Desktop & Workstation combined revenue up 5%,

units up 7% Y/Y

37%
13 February 22, 2011

56%
http://www.hp.com/investor/home

• Consumer client revenue down 12% Y/Y,

Commercial client revenue up 1 Y/Y 1%

IMAGING & PRINTING GROUP (IPG)
In billions
$8.0

Revenue

In millions

Operating profit
22%

$1,300

$6.0

$1,100

18%

$4.0

$900

14%

$2.0

$700

10%

$0.0 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11

$500 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11

6%

Q1 FY1 revenue by business 1
12% Supplies Commercial Consumer 22%

• IPG revenue of $6.6B, up 7% Y/Y • Operating profit of $1.1B, 17.0% of revenue • Supplies revenue up 7% Y/Y • Total printer hardware units up 13% Y/Y,

66%
14 February 22, 2011 http://www.hp.com/investor/home

Consumer printer hardware units up 7% Y/Y, Commercial printer hardware units up 33% Y/Y • Color LaserJet units up 20% Y/Y • Printer-based MFP units up 63% Y/Y • Indigo digital press page volume up 26% Y/Y

OP % of revenue

HP FINANCIAL SERVICES (HPFS)
In millions
$1,000

Revenue

In millions
$90 $75 $60

Operating profit
12% 10%

$800 $600

$45
$400 $200

6% 4% 2% 0% 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11

$30 $15 $0
1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11

$0

Q1 FY1 revenue by region 1
13% Americas EMEA Asia Pacific 29%

• HPFS revenue of $827M, up 15% Y/Y • Operating profit of $79M, 9.6% of revenue • Financing volume up 10% Y/Y • Net portfolio assets of $1 1.4B, up 14% Y/Y

58%
15 February 22, 2011 http://www.hp.com/investor/home

OP %revenue

8%

Non-GAAP FINANCIAL INFORMATION
(1)
In millions except per share amounts

Q1 FY1 1
$32,302 24,408 3,888(2) 4,006(2) (97)(2) 3,909(2) 879(2) 3,030(2) $1.36(2) 9.4% 12.1% 100% 75.6% 12.0%(2) 12.4%(2)

Q4 FY10
$33,278 24,995 4,278 4,005 (81) 3,924 860 3,064 $1.33 9.2% 1 1.8% 100% 75.1% 12.9% 12.0%

Q1FY10
$31,177 24,027 3,648 3,502 (199) 3,303 709 2,594 $1.07 8.3% 10.6% 100% 77.1% 1 1.7% 1 1.2%

Revenue Cost of sales Total OpEx Operating profit Interest & other, net Pre-tax earnings Income tax Net earnings EPS
1.

All non-GAAP numbers have been adjusted to exclude certain items. A reconciliation of specific adjustments to GAAP results for this quarter and prior periods is included on slide 17 and in the GAAP to non-GAAP slides that appear as part of the supplemental slides of this presentation. A description of HP’s use of non-GAAP information is provided on slide 3 under “Use of non-GAAP Financial Information.” At the time of HP’s Q4 FY10 earnings announcement, HP disclosed that in Q1 FY11 it expected to realize a one-time gain of approximately 4 cents per share primarily related to the disposition of real estate. Included in HP’s Q1 FY11 results is a net one-time gain of 5 cents per share primarily related to the disposition of real estate, reflected as a one–time credit of $250 million or 80 basis points to operating expense offset by an $80 million charge to OI&E and a higher effective tax rate.
February 22, 2011 http://www.hp.com/investor/home

2

16

Q1 FY11 GAAP to non-GAAP BRIDGE
In millions except per share amounts

GAAP

Amort. of Purchased Intangibles

Restructuring

Acquisition related charges

Non-GAAP

Revenue Cost of sales Total OpEx Operating profit Interest & other, net Pre-tax earnings Income tax Tax rate Net earnings EPS

$32,302 24,408 4,500 3,394 (97) 3,297 692 21.0% 2,605 $1.17
425 129 158 48 29 10 (425) 425 (158) 158 (29) 29

$32,302 24,408 3,888 4,006 (97) 3,909 879 22.5% 3,030 $1.36

17

February 22, 2011

http://www.hp.com/investor/home

GROSS CASH & NET CASH
In billions
$15.0

$10.0

$5.0

$0.0

($5.0)

($10.0)

($15.0) Gross cash Net cash (2) Net cash excl. HPFS Debt
1. 2. 3.
18
(3) (1)

1Q09 $11.3 ($8.7) ($1.8)

2Q09 $13.0 ($5.3) $1.8

3Q09 $13.7 ($3.2) $4.3

4Q09 $13.4 ($2.1) $6.0

1Q10 $13.7 ($1.8) $6.6

2Q10 $14.3 ($3.0) $5.6

3Q10 $14.8 ($4.7) $4.0

4Q10 $11.0 ($10.6) ($1.5)

1Q11 $10.0 ($9.9) ($0.4)

Includes cash and cash equivalents, short-term investments, and certain liquid long-term investments Net cash is defined as gross cash less total company debt including the effect of hedging Net cash excl HPFS debt = HP net cash plus HPFS net debt
http://www.hp.com/investor/home

February 22, 2011

CASH FLOW
In billions
$16.0 $14.6 $14.0 $12.0 $10.2 $8.4 $8.0 $7.1 $13.4 $11.9

$12.0 $9.6

$10.0

$6.0

$4.0

$3.1

$2.7

$2.0

$0.0 FY07 FY08 FY09 Cash flow from operations
1. Free cash flow = cash flow from operations less net capital expenditures
19 February 22, 2011 http://www.hp.com/investor/home

FY10 Free cash flow
(1)

FY11 YTD

STOCK REPURCHASE
Quarterly trends
In billions
$4.0

FY07 – FY1 1
In billions In millions
300 $12

$3.5

$8.6B remaining in stock repurchase authorization at the end of Q1 FY1 1

$10

250

$3.0

$8
$2.5

200

$6
$2.0

150

$1.5

$4

100

$1.0

$2

50

$0.5

$0 FY07

(1)

FY08 $9.6 216

FY09 $5.1 132

FY10 $11.0 240

FY11 YTD $2.3 54

0

$0.0 Stock repurchase

1Q09 2Q09 3Q09 4Q09 1Q10 $1.2 $0.8 $1.0 $2.1 $2.7

2Q10 3Q10 4Q10 1Q11 $1.8 $2.6 $4.0 $2.3

Stock repurchase Shares received

$11.5 271

1. In Q1 FY06, HP entered into a prepaid variable share purchase program. $1.7 billion in cash was used in Q1 FY06 to fully fund this plan. See our Form 10-Q for the period ended January 31, 2006 for more information. HP completed all repurchases under this plan in March 2007 and received a total of 53M shares.
20 February 22, 2011 http://www.hp.com/investor/home

FY09 & FY10 reclassification
FY09
In millions
Revenue

FY10
Revised Amount
$126,033 95,956 2,959 12,718 1,484

Revised Amount
$114,552 87,489 2,819 11,648 1,578

Previously Reported
$114,552 87,524 2,819 11,613 1,578

Variance
$(35) 35 -

Previously Reported
$126,033 96,089 2,959 12,585 1,484

Variance
$(133) 133 -

Cost of Sales R&D SG&A Amortization of purchased intangibles Restructuring charges Acquisition related charges Total cost Earnings from operations Interest and other, net Earnings before tax Provision for taxes Net earnings
21 February 22, 2011

640 242 104,416 10,136 (721) 9,415 1,755
$7,660

640 242 104,416 10,136 (721) 9,415 1,755
$7,660

$-

1,144 293 114,554 11,479 (505) 10,974 2,213 $8,761

1,144 293 114,554 11,479 (505) 10,974 2,213 $8,761

$-

In connection with organizational realignments implemented in the first quarter of fiscal 2011, certain costs previously reported as Cost of Sales have been reclassified as Selling, General and Administrative expenses to better align those costs with the functional areas that benefit from those expenditures.
http://www.hp.com/investor/home

FY11 Inter-segment reclassification
FY09
In millions
Net Revenue

FY10
Variance $687 762 (917) (577) 45 58 139 47 (244) $Segment Services ESSN HP Software Corporate Investments Revised Amount Previously Reported Variance $594 1,705 (857) (1,517) 75 52 423 23 (498) $-

Segment Services ESSN HP Software Corporate Investments

Revised Amount $35,380 16,121 2,655 191

Previously Reported $34,693 15,359 3,572 768 (1,829) 52,563 5,044 1,518 684 (56) $7,190

$35,529 $34,935 20,356 2,729 346 18,651 3,586 1,863 (2,554) 56,481 5,609 2,402 759 132 $8,902

Eliminations (1,784) & other Total
Operating Profit

Eliminations (2,479) & other Total Services ESSN HP Software Corporate Investments Total 56,481 5,661 2,825 782 (366) $8,902

52,563 5,102 1,657 731 (300) $7,190

Services ESSN HP Software Corporate Investments Total

HP has reflected fiscal 2011 organizational realignments on a backward-looking basis to provide improved visibility and comparability.
22 February 22, 2011 http://www.hp.com/investor/home

FY11 Intra-segment reclassification
FY09
Revised Amount In millions
Net Revenue

FY10

Segment
ITO TS Application Services HP Networking BTO Other Software HP Software Notebooks Desktops Handhelds Other PSG Corp Investments Eliminations & other Total

Previously Reported
$15,554 9,719 6,194 2,385 1,187 20,210 12,864 172 798 768 (1,829) $68,022

Variance
($991) 946 732 762 (2,385) (1,187) 2,655 13 28 (172) 131 (577) 45 $-

Segment
ITO TS Application Services HP Networking BTO Other Software HP Software Notebooks Desktops Handhelds Other PSG Corp Investments Eliminations & other Total

Revised Previously Amount Reported Variance
$14,942 10,627 6,792 1,705 2,729 22,602 15,519 834 346 (2,479) $73,617 $15,963 ($1,021) 9,681 6,123 2,440 1,146 22,545 15,478 87 845 1,863 (2,554) $73,617 946 669 1,705 (2,440) (1,146) 2,729 57 41 (87) (11) (1,517) 75 $-

$14,563 10,665 6,926 762 2,655 20,223 12,892 929 191 (1,784) $68,022

23

February 22, 2011

http://www.hp.com/investor/home

HP has reflected fiscal 2011 organizational realignments on a backward-looking basis to provide improved visibility and comparability.

OUTLOOK
Q2 FY1 guidance 1
Revenue GAAP EPS Non-GAAP EPS(1) $31.4B – $31.6B $0.99 - $1.01 $1.19– $1.21

Full year FY1 guidance 1
Revenue GAAP EPS Non-GAAP EPS(2) $130.0B - $131.5B $4.46 – $4.54 $5.20 – $5.28

1. 2.

Q2 FY11 non-GAAP diluted earnings per share estimates exclude after-tax costs of approximately $0.20 per share, related primarily to the amortization of purchased intangible assets, restructuring charges and acquisition-related charges. Full year FY11 non-GAAP diluted earnings per share estimates exclude after-tax costs of approximately $0.74 per share, related primarily to the amortization of purchased intangible assets, restructuring charges and acquisition-related charges.
February 22, 2011 http://www.hp.com/investor/home

24

SUPPLEMENTAL SLIDES

February 22, 2011

http://www.hp.com/investor/home

INVENTORY & ACCOUNTS RECEIVABLE
Inventory
In billions
$9.0 11.0%

Accounts receivable
In billions
$20.0 20.0%

$18.5
$18.0

$8.0

$7.6 $7.2 $6.6 $5.9 $6.1 $6.4 $6.7

10.0%
$16.0

$16.5 $14.8 $14.7 $14.7 $14.5 $14.8 $15.6

$16.6

18.0% 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0%

$7.0

$6.5

9.0%

$14.0 $12.0 $10.0

$6.0

$5.7

8.0%

$5.0

7.0%

$8.0 $6.0 $4.0

$4.0

6.0%

$3.0

5.0%

$2.0 $0.0
Receivables % of Rev

$2.0
Invent ory % of Rev

1Q09 $7.6 6.4%

2Q09 $5.7 4.9%

3Q09 $5.9 5.0%

4Q09 $6.1 5.3%

1Q10 $6.6 5.7%

2Q10 $6.4 5.4%

3Q10 $7.2 5.8%

4Q10 $6.5 5.1%

1Q11 $6.7 5.3%

4.0%

1Q09 $14.8 12.4%

2Q09 $14.7 12.4%

3Q09 $14.7 12.6%

4Q09 $16.5 14.4%

1Q10 $14.5 12.4%

2Q10 $14.8 12.3%

3Q10 $15.6 12.6%

4Q10 $18.5 14.7%

1Q11 $16.6 13.0%

26

February 22, 2011

http://www.hp.com/investor/home

PP&E & ACCOUNTS PAYABLE
Net PP&E
In billions
$13.0 $11.8 12%

Accounts payable
In billions
$15.0

$14.8 $13.6

$14.9 $14.4 $13.4 $13.5

$11.2 $11.3 $11.2 $11.2 $11.0 $10.8 $10.8

$11.5

$11.6

$13.0
10%

$12.8 $11.8

$11.4

$11.0
$9.0 8%

$9.0

$7.0

6%

$7.0

$5.0
PP&E % of Rev

1Q09 $10.8 9.1%

2Q09 $10.8 9.2%

3Q09 $11.2 9.5%

4Q09 $11.3 9.8%

1Q10 $11.2 9.5%

2Q10 $11.2 9.3%

3Q10 $11.5 9.3%

4Q10 $11.8 9.3%

1Q11 $11.6 9.1%

4%

$5.0
Payables

1Q09 $11.8

2Q09 $11.4

3Q09 $12.8

4Q09 $14.8

1Q10 $13.6

2Q10 $13.4

3Q10 $14.9

4Q10 $14.4

1Q11 $13.5

27

February 22, 2011

http://www.hp.com/investor/home

WORKING CAPITAL METRICS
Days

60

50

40

30

20 Days receivables Days inventory Days payable
28 February 22, 2011

1Q09 46 31 48

2Q09 48 25 49

3Q09 48 25 55

4Q09 48 23 57

1Q10 42 25 51

2Q10 43 25 51

3Q10 46 28 57

4Q10 50 23 52

1Q11 46 25 50

http://www.hp.com/investor/home

HPFS SUPPLEMENTAL DATA
In millions

Q1 FY1 1
$404

Q1 FY10
$330

Q4 FY10
$376

Depreciation (1)

Net capital expenditures (1)

$465

$409

$539

Sequential increase (decrease) in net financing receivables
1.

$145

$129

$433

Depreciation and net capital expenditures are shown net of inter-company eliminations.

29

February 22, 2011

http://www.hp.com/investor/home

FY10 GAAP to non-GAAP BRIDGE
In millions except per share amounts

GAAP

Amort. of Purchased Intangibles

Restructuring

Acquisition related charges

Non-GAAP

Revenue Cost of sales Total OpEx Operating profit Interest & other, net Pre-tax earnings Income tax Tax rate Net earnings EPS

$126,033 95,956 18,598 1 1,479 (505) 10,974 2,213 20.2% 8,761 $3.69
1,484 391 1,144 342 293 83 (1,484) 1,484 (1,144) 1,144 (293) 293

$126,033 95,956 15,677 14,400 (505) 13,895 3,029 21.8% 10,866 $4.58

30

February 22, 2011

http://www.hp.com/investor/home

Q4 FY10 GAAP to non-GAAP BRIDGE
In millions except per share amounts

GAAP

Amort. of Purchased Intangibles

Restructuring

Acquisition related charges

Non-GAAP

Revenue Cost of sales Total OpEx Operating profit Interest & other, net Pre-tax earnings Income tax Tax rate Net earnings EPS

$33,278 24,995 4,988 3,295 (81) 3,214 676 21.0% 2,538 $1.10
424 98 235 68 51 18 (424) 424 (235) 235 (51) 51

$33,278 24,995 4,278 4,005 (81) 3,924 860 21.9% 3,064 $1.33

31

February 22, 2011

http://www.hp.com/investor/home

Q3 FY10 GAAP to non-GAAP BRIDGE
In millions except per share amounts

GAAP

Amort. of Purchased Intangibles

Restructuring

Acquisition related charges

Non-GAAP

Revenue Cost of sales Total OpEx Operating profit Interest & other, net Pre-tax earnings Income tax Tax rate Net earnings EPS
32 February 22, 2011

$30,729 23,365 5,041 2,323 (134) 2,189 416 19.0% 1,773 $0.75
http://www.hp.com/investor/home

$30,729 23,365
(383) 383 (598) 598 (127) 127

3,933 3,431 (134)

383 100

598 175

127 31

3,297 722 21.9% 2,575 $1.08

Q2 FY10 GAAP to non-GAAP BRIDGE
In millions except per share amounts

GAAP

Amort. of Purchased Intangibles

Restructuring

Acquisition related charges

Non-GAAP

Revenue Cost of sales Total OpEx Operating profit Interest & other, net Pre-tax earnings Income tax Tax rate Net earnings EPS
33 February 22, 2011

$30,849 23,569 4,422 2,858 (91) 2,767 567 20.5% 2,200 $0.91
http://www.hp.com/investor/home

$30,849 23,569
(347) 347 (180) 180 (77) 77

3,818 3,462 (91)

347 92

180 57

77 22

3,371 738 21.9% 2,633 $1.09

Q1 FY10 GAAP to non-GAAP BRIDGE
In millions except per share amounts

GAAP

Amort. of Purchased Intangibles

Restructuring

Acquisition related charges

Non-GAAP

Revenue Cost of sales Total OpEx Operating profit Interest & other, net Pre-tax earnings Income tax Tax rate Net earnings EPS
34 February 22, 2011

$31,177 24,027 4,147 3,003 (199) 2,804 554 19.8% 2,250 $0.93
http://www.hp.com/investor/home

$31,177 24,027
(330) 330 (131) 131 (38) 38

3,648 3,502 (199)

330 101

131 42

38 12

3,303 709 21.5% 2,594 $1.07

FY09 GAAP to non-GAAP BRIDGE
In millions except per share amounts

GAAP

Amort. of Purchased Intangibles

Restructuring

Acquisition related charges

Non-GAAP

Revenue Cost of sales Total OpEx Operating profit Interest & other, net Pre-tax earnings Income tax Tax rate Net earnings EPS

$1 14,552 87,489 16,927 10,136 (721) 9,415 1,755 18.6% 7,660 $3.14
1,578 451 640 197 242 79 (1,578) 1,578 (640) 640 (242) 242

$1 14,552 87,489 14,467 12,596 (721) 1 1,875 2,482 20.9% 9,393 $3.85

35

February 22, 2011

http://www.hp.com/investor/home

Q4 FY09 GAAP to non-GAAP BRIDGE
In millions except per share amounts

GAAP

Amort. of Purchased Intangibles

Restructuring

Acquisition related charges

Non-GAAP

Revenue Cost of sales Total OpEx Operating profit Interest & other, net Pre-tax earnings Income tax Tax rate Net earnings EPS

$30,777 23,466 4,178 3,133 (132) 3,001 589 19.6% 2,412 $0.99
401 117 38 11 60 19 (401) 401 (38) 38 (60) 60

$30,777 23,466 3,679 3,632 (132) 3,500 736 21.0% 2,764 $1.14

36

February 22, 2010

http://www.hp.com/investor/home

Q3 FY09 GAAP to non-GAAP BRIDGE
In millions except per share amounts

GAAP

Amort. of Purchased Intangibles

Restructuring

Acquisition related charges

Non-GAAP

Revenue Cost of sales Total OpEx Operating profit Interest & other, net Pre-tax earnings Income tax Tax rate Net earnings EPS

$27,585 21,022 4,350 2,213 (177) 2,036 365 17.9% 1,671 $0.69
379 105 362 108 59 19 (379) 379 (362) 362 (59) 59

$27,585 21,022 3,550 3,013 (177) 2,836 597 21.1% 2,239 $0.92

37

February 22, 2011

http://www.hp.com/investor/home

Q2 FY09 GAAP to non-GAAP BRIDGE
In millions except per share amounts

GAAP

Amort. of Purchased Intangibles

Restructuring

Acquisition related charges

Non-GAAP

Revenue Cost of sales Total OpEx Operating profit Interest & other, net Pre-tax earnings Income tax Tax rate Net earnings EPS

$27,383 20,937 4,153 2,293 (180) 2,1 13 392 18.6% 1,721 $0.71
380 112 94 31 75 24 (380) 380 (94) 94 (75) 75

$27,383 20,937 3,604 2,842 (180) 2,662 559 21.0% 2,103 $0.86

38

February 22, 2011

http://www.hp.com/investor/home

Q1 FY09 GAAP to non-GAAP BRIDGE
In millions except per share amounts

GAAP

Amort. of Purchased Intangibles

Restructuring

Acquisition related charges

Non-GAAP

Revenue Cost of sales Total OpEx Operating profit Interest & other, net Pre-tax earnings Income tax Tax rate Net earnings EPS

$28,807 22,064 4,246 2,497 (232) 2,265 409 18.1% 1,856 $0.75
418 117 146 47 48 17 (418) 418 (146) 146 (48) 48

$28,807 22,064 3,634 3,109 (232) 2,877 590 20.5% 2,287 $0.93

39

February 22, 2011

http://www.hp.com/investor/home

FY08 GAAP to non-GAAP BRIDGE
In millions except per share amounts

GAAP

Amort. of Purchased Intangibles

Restructuring

Acquisition related charges

Non-GAAP

Revenue Cost of sales Total OpEx Operating profit Interest & other, net Pre-tax earnings Income tax Tax rate Net earnings EPS

$1 18,364 89,699 18,192 10,473 10,473 2,144 20.5% 8,329 $3.25
1,012 262 270 74 41 14 (1,012) 1,012 (270) 270 (41) 41

$1 18,364 89,699 16,869 1 1,796 1 1,796 2,494 21.1% 9,302 $3.62

40

February 22, 2011

http://www.hp.com/investor/home

Q4 FY08 GAAP to non-GAAP BRIDGE
In millions except per share amounts

GAAP

Amort. of Purchased Intangibles

Restructuring

Acquisition related charges

Non-GAAP

Revenue Cost of sales Total OpEx Operating profit Interest & other, net Pre-tax earnings Income tax Tax rate Net earnings EPS

$33,603 25,853 5,009 2,741 (98) 2,643 531 20.1% 2,1 12 $0.84
369 96 251 69 41 14 (369) 369 (251) 251 (41) 41

$33,603 25,853 4,348 3,402 (98) 3,304 710 21.5% 2,594 $1.03

41

February 22, 2011

http://www.hp.com/investor/home

Q3 FY08 GAAP to non-GAAP BRIDGE
In millions except per share amounts

GAAP

Amort. of Purchased Intangibles

Restructuring

Non-GAAP

Revenue Cost of sales Total OpEx Operating profit Interest & other, net Pre-tax earnings Income tax Tax rate Net earnings EPS

$28,032 21,197 4,306 2,529 23 2,552 525 20.6% 2,027 $0.80
213 56 5 1 (213) 213 (5) 5

$28,032 21,197 4,088 2,747 23 2,770 582 21.0% 2,188 $0.86

42

February 22, 2011

http://www.hp.com/investor/home

Q2 FY08 GAAP to non-GAAP BRIDGE
In millions except per share amounts

GAAP

Amort. of Purchased Intangibles

Restructuring

Non-GAAP

Revenue Cost of sales Total OpEx Operating profit Interest & other, net Pre-tax earnings Income tax Tax rate Net earnings EPS

$28,262 21,205 4,467 2,590 3 2,593 536 20.7% 2,057 $0.80
224 55 4 1 (224) 224 (4) 4

$28,262 21,205 4,239 2,818 3 2,821 592 21.0% 2,229 $0.87

43

February 22, 2011

http://www.hp.com/investor/home

Q1 FY08 GAAP to non-GAAP BRIDGE
In millions except per share amounts

GAAP

Amort. of Purchased Intangibles

Restructuring

Non-GAAP

Revenue Cost of sales Total OpEx Operating profit Interest & other, net Pre-tax earnings Income tax Tax rate Net earnings EPS

$28,467 21,444 4,410 2,613 72 2,685 552 20.6% 2,133 $0.80
(206) 206 (10) 10

$28,467 21,444 4,194 2,829 72 2,901 610 21.0% 2,291 $0.86

206 55

10 3

44

February 22, 2011

http://www.hp.com/investor/home

February 22, 2011

http://www.hp.com/investor/home

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