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HP Reports Third Quarter 2012 Results

PALO ALTO, CA -- (Marketwire) -- Aug 22, 2012 -- HP (NYSE: HPQ)

HP third quarter fiscal 2012 financial performance

                                                                            
                                          Q3 FY12     Q3 FY11            Y/Y
GAAP net revenue ($B)                       $29.7       $31.2           (5%)
GAAP operating margin                     (29.7%)        8.1%    (37.8 pts.)
GAAP net (loss) earnings ($B)              ($8.9)        $1.9         (568%)
GAAP (loss) diluted EPS                   ($4.49)       $0.93         (583%)
Non-GAAP operating margin                    9.2%        9.8%     (0.6 pts.)
Non-GAAP net earnings ($B)                   $2.0        $2.3          (14%)
Non-GAAP diluted EPS                        $1.00       $1.10           (9%)
                                                                            

Information about HP's use of non-GAAP financial information is provided under "Use of non-GAAP financial information" below.

HP (NYSE: HPQ) today announced financial results for its third fiscal quarter ended July 31, 2012. For the quarter, net revenue of $29.7 billion was down 5% year over year and down 2% when adjusted for the effects of currency.

GAAP loss per share was $4.49, down from earnings per share (EPS) of $0.93 in the prior-year period. Non-GAAP diluted EPS was $1.00, down 9% from the prior-year period. Third quarter non-GAAP earnings information excludes after-tax costs of $10.8 billion, or $5.49 per diluted share, related to the amortization and impairment of purchased intangible assets, the impairment of goodwill, restructuring charges, acquisition-related charges and charges relating to the wind-down of certain retail publishing business activities, including the previously announced charges related to the impairment of goodwill within HP's Services segment, the restructuring program announced in May 2012, and the impairment of the purchased intangible asset associated with the "Compaq" trade name.

"HP is still in the early stages of a multi-year turnaround, and we're making decent progress despite the headwinds," said Meg Whitman, HP president and chief executive officer. "During the quarter we took important steps to focus on strategic priorities, manage costs, drive needed organizational change, and improve the balance sheet. We continue to deliver on what we say we will do."

Business Group Results

Asset Management
HP generated $2.8 billion in cash flow from operations in the third quarter. Inventory ended the quarter at $7.3 billion, with days of inventory up 1 day year over year to 29 days. Accounts receivable of $15.7 billion was down 4 days year over year to 48 days. Accounts payable ended the quarter at $12.6 billion, down 4 days from the prior-year period to 50 days. HP's dividend payment of $0.132 per share in the third quarter resulted in cash usage of $260 million. HP also utilized $365 million of cash during the quarter to repurchase approximately 16.5 million shares of common stock in the open market. HP exited the quarter with $9.9 billion in gross cash.

Outlook
For fiscal 2012, HP now estimates non-GAAP diluted EPS to be in the range of $4.05 to $4.07, at the low end of the previously provided outlook.

HP now estimates its fiscal 2012 GAAP loss per share to be in the range of $2.23 to $2.25.
Full year fiscal 2012 non-GAAP diluted EPS estimates exclude after-tax costs of approximately $6.30 per share, related primarily to the amortization and impairment of purchased intangible assets, the impairment of goodwill, restructuring charges and acquisition-related charges.

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 Q3 FY12 earnings conference call is accessible via an audio webcast at www.hp.com/investor/2012q3webcast.

About HP
HP creates new possibilities for technology to have a meaningful impact on people, businesses, governments and society. The world's largest technology company, HP brings together a portfolio that spans printing, personal computing, software, services and IT infrastructure to solve customer problems. More information about HP (NYSE: HPQ) is available at http://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 net revenue, non-GAAP operating profit, non-GAAP operating margin, non-GAAP net earnings, non-GAAP diluted earnings per share, gross cash and free cash flow. 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 revenue, operating profit, operating margin, net earnings, diluted earnings per share, cash and cash equivalents or cash flow from operations 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, earnings per share, tax provisions, cash flows, benefit obligations, share repurchases, currency exchange rates, the impact of acquisitions or other financial items; any projections of the amount, timing or impact of cost savings, restructuring charges, early retirement programs, workforce reductions or impairment charges; any statements of the plans, strategies and objectives of management for future operations, including the execution of restructuring plans and any resulting cost savings or revenue or profitability improvements; any statements concerning the expected development, performance, market share or competitive performance 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 and retirement programs; the execution, timing and results of restructuring plans, including estimates and assumptions related to the cost and the anticipated benefits of implementing those 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, 2011 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 April 30, 2012. 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 Form 10-Q for the fiscal quarter ended July 31, 2012. In particular, determining HP's actual tax balances and provisions as of July 31, 2012 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.

                                                                            
                  HEWLETT-PACKARD COMPANY AND SUBSIDIARIES                  
               CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS                
                                (Unaudited)                                 
                   (In millions except per share amounts)                   
                                                                            
                                                                            
                                                                            
                                                 Three months ended         
                                         ---------------------------------- 
                                          July 31,    April 30,   July 31,  
                                            2012        2012        2011    
                                         ----------  ----------  ---------- 
                                                                            
Net revenue                              $   29,669  $   30,693  $   31,189 
                                                                            
Costs and expenses:(a)                                                      
  Cost of sales                              22,820      23,541      23,901 
  Research and development                      854         850         812 
  Selling, general and administrative         3,366       3,540       3,430 
  Amortization of purchased intangible                                      
   assets                                       476         470         358 
  Impairment of goodwill and purchased                                      
   intangible assets                          9,188           -           - 
  Restructuring charges                       1,795          53         150 
  Acquisition-related charges                     3          17          18 
                                         ----------  ----------  ---------- 
    Total costs and expenses                 38,502      28,471      28,669 
                                         ----------  ----------  ---------- 
                                                                            
(Loss) earnings from operations              (8,833)      2,222       2,520 
                                                                            
Interest and other, net                        (224)       (243)       (121)
                                         ----------  ----------  ---------- 
                                                                            
(Loss) earnings before taxes                 (9,057)      1,979       2,399 
                                                                            
(Benefit) provision for taxes                  (200)        386         473 
                                         ----------  ----------  ---------- 
                                                                            
Net (loss) earnings                      $   (8,857) $    1,593  $    1,926 
                                         ==========  ==========  ========== 
                                                                            
Net (loss) earnings per share:                                              
  Basic                                  $    (4.49) $     0.80  $     0.94 
  Diluted                                $    (4.49) $     0.80  $     0.93 
                                                                            
Cash dividends declared per share        $     0.26  $        -  $     0.24 
                                                                            
Weighted-average shares used to compute                                     
 net (loss) earnings per share:                                             
  Basic                                       1,971       1,979       2,054 
  Diluted                                     1,971       1,987       2,080 
                                                                            
(a)  In connection with organizational realignments implemented in the first
     quarter of fiscal year 2012, 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.                                       
                                                                            
                                                                            
                                                                            
                  HEWLETT-PACKARD COMPANY AND SUBSIDIARIES                  
               CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS                
                                (Unaudited)                                 
                   (In millions except per share amounts)                   
                                                                            
                                                                            
                                                                            
                                                        Nine months ended   
                                                            July 31,        
                                                     ---------------------- 
                                                        2012        2011    
                                                     ----------  ---------- 
                                                                            
Net revenue                                          $   90,398  $   95,123 
                                                                            
Costs and expenses:(a)                                                      
  Cost of sales                                          69,674      72,114 
  Research and development                                2,490       2,425 
  Selling, general and administrative                    10,273       9,972 
  Amortization of purchased intangible assets             1,412       1,196 
  Impairment of goodwill and purchased intangible                           
   assets                                                 9,188           - 
  Restructuring charges                                   1,888         466 
  Acquisition-related charges                                42          68 
                                                     ----------  ---------- 
    Total costs and expenses                             94,967      86,241 
                                                     ----------  ---------- 
                                                                            
(Loss) earnings from operations                          (4,569)      8,882 
                                                                            
Interest and other, net                                    (688)       (294)
                                                     ----------  ---------- 
                                                                            
(Loss) earnings before taxes                             (5,257)      8,588 
                                                                            
Provision for taxes                                         539       1,753 
                                                     ----------  ---------- 
                                                                            
Net (loss) earnings                                  $   (5,796) $    6,835 
                                                     ==========  ========== 
                                                                            
Net (loss) earnings per share:                                              
  Basic                                              $    (2.93) $     3.21 
  Diluted                                            $    (2.93) $     3.16 
                                                                            
Cash dividends declared per share                    $     0.50  $     0.40 
                                                                            
Weighted-average shares used to compute net (loss)                          
 earnings per share:                                                        
  Basic                                                   1,977       2,129 
  Diluted                                                 1,977       2,161 
                                                                            
(a)  In connection with organizational realignments implemented in the first
     quarter of fiscal year 2012, 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.                                       
                                                                            
                                                                            
                                                                            
                  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               months               Three            
                 months     Diluted   ended     Diluted   months    Diluted 
                 ended     earnings    April   earnings   ended    earnings 
                July 31,      per      30,        per    July 31,     per   
                  2012       share     2012      share     2011      share  
                --------   --------  --------  --------  --------  -------- 
                                                                            
GAAP net (loss)                                                             
 earnings       $ (8,857)  $  (4.49) $  1,593  $   0.80  $  1,926  $   0.93 
                                                                            
Non-GAAP                                                                    
 adjustments:                                                               
  Amortization                                                              
   of purchased                                                             
   intangible                                                               
   assets            476       0.25       470      0.23       358      0.17 
  Impairment of                                                             
   goodwill and                                                             
   purchased                                                                
   intangible                                                               
   assets(a)       9,188       4.66         -         -         -         - 
  Restructuring                                                             
   charges         1,795       0.91        53      0.03       150      0.07 
  Acquisition-                                                              
   related                                                                  
   charges             3          -        17      0.01        18      0.01 
  Wind down of                                                              
   non-strategic                                                            
   businesses(b)     108       0.05       (36)    (0.02)        -         - 
  Adjustments                                                               
   for taxes(c)     (740)     (0.38)     (148)    (0.07)     (170)    (0.08)
                --------   --------  --------  --------  --------  -------- 
Non-GAAP net                                                                
 earnings       $  1,973   $   1.00  $  1,949  $   0.98  $  2,282  $   1.10 
                ========   ========  ========  ========  ========  ======== 
                                                                            
                                                                            
GAAP (loss)                                                                 
 earnings from                                                              
 operations     $ (8,833)            $  2,222            $  2,520           
                                                                            
Non-GAAP                                                                    
 adjustments:                                                               
  Amortization                                                              
   of purchased                                                             
   intangible                                                               
   assets            476                  470                 358           
  Impairment of                                                             
   goodwill and                                                             
   purchased                                                                
   intangible                                                               
   assets(a)       9,188                    -                   -           
  Restructuring                                                             
   charges         1,795                   53                 150           
  Acquisition-                                                              
   related                                                                  
   charges             3                   17                  18           
  Wind down of                                                              
   non-strategic                                                            
   businesses(b)     108                  (36)                  -           
                --------             --------            --------           
Non-GAAP                                                                    
 earnings from                                                              
 operations     $  2,737             $  2,726            $  3,046           
                ========             ========            ========           
                                                                            
GAAP operating                                                              
 margin              (30%)                  7%                  8%          
Non-GAAP                                                                    
 adjustments          39%                   2%                  2%          
                --------             --------            --------           
Non-GAAP                                                                    
 operating                                                                  
 margin                9%                   9%                 10%          
                ========             ========            ========           
                                                                            
(a)  Represents a goodwill impairment charge of $8 billion associated with  
     the Services segment and an intangible asset impairment charge of $1.2 
     billion associated with the "Compaq" trade name.                       
                                                                            
(b)  For the period ended July 31, 2012, represents primarily contract-     
     related charges, including inventory write-downs, related to winding   
     down certain retail publishing business activities within the Imaging  
     and Printing Group segment. For the period ended April 30, 2012,       
     includes primarily adjustments to expenses for supplier-related        
     obligations related to winding down the webOS device business.         
                                                                            
(c)  For the period ended July 31, 2012, adjustments for taxes is net of a  
     valuation allowance of $823 million provided for certain deferred tax  
     assets related to the Services segment.                                
                                                                            
                  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)                   
                                                                            
                                                                            
                                      Nine                 Nine             
                                     months     Diluted   months    Diluted 
                                     ended     earnings   ended    earnings 
                                    July 31,      per    July 31,     per   
                                      2012       share     2011      share  
                                    --------   --------  --------  -------- 
                                                                            
GAAP net (loss) earnings            $ (5,796)  $  (2.93) $  6,835  $   3.16 
                                                                            
Non-GAAP adjustments:                                                       
  Amortization of purchased                                                 
   intangible assets                   1,412       0.71     1,196      0.55 
  Impairment of goodwill and                                                
   purchased intangible assets(a)      9,188       4.65         -         - 
  Restructuring charges                1,888       0.95       466      0.22 
  Acquisition-related charges             42       0.02        68      0.03 
  Wind down of non-strategic                                                
   businesses(b)                          72       0.04         -         - 
  Adjustments for taxes(c)            (1,052)     (0.55)     (536)    (0.24)
                                    --------   --------  --------  -------- 
Non-GAAP net earnings               $  5,754   $   2.89  $  8,029  $   3.72 
                                    ========   ========  ========  ======== 
                                                                            
                                                                            
GAAP (loss) earnings from                                                   
 operations                         $ (4,569)            $  8,882           
                                                                            
Non-GAAP adjustments:                                                       
  Amortization of purchased                                                 
   intangible assets                   1,412                1,196           
  Impairment of goodwill and                                                
   purchased intangible assets(a)      9,188                    -           
  Restructuring charges                1,888                  466           
  Acquisition-related charges             42                   68           
  Wind down of non-strategic                                                
   businesses(b)                          72                    -           
                                    --------             --------           
Non-GAAP earnings from operations   $  8,033             $ 10,612           
                                    ========             ========           
                                                                            
GAAP operating margin                     (5%)                  9%          
Non-GAAP adjustments                      14%                   2%          
                                    --------             --------           
Non-GAAP operating margin                  9%                  11%          
                                    ========             ========           
                                                                            
(a)  Represents a goodwill impairment charge of $8 billion associated with  
     the Services segment and an intangible asset impairment charge of $1.2 
     billion associated with the "Compaq" trade name.                       
                                                                            
(b)  For the period ended July 31, 2012, represents primarily contract-     
     related charges, including inventory write-downs, related to winding   
     down certain retail publishing business activities within the Imaging  
     and Printing Group segment net of adjustments to expenses for supplier-
     related obligations related to winding down the webOS device business. 
                                                                            
(c)  For the period ended July 31, 2012, adjustments for taxes is net of a  
     valuation allowance of $823 million provided in the third fiscal       
     quarter for certain deferred tax assets related to the Services        
     segment.                                                               
                                                                            
                  HEWLETT-PACKARD COMPANY AND SUBSIDIARIES                  
                    CONSOLIDATED CONDENSED BALANCE SHEETS                   
                                (In millions)                               
                                                                            
                                                                            
                                                      July 31,   October 31,
                                                        2012         2011   
                                                    -----------  -----------
                                                    (unaudited)             
ASSETS                                                                      
                                                                            
Current assets:                                                             
  Cash and cash equivalents                         $     9,509  $     8,043
  Accounts receivable                                    15,686       18,224
  Financing receivables                                   3,116        3,162
  Inventory                                               7,292        7,490
  Other current assets                                   14,634       14,102
                                                    -----------  -----------
                                                                            
    Total current assets                                 50,237       51,021
                                                    -----------  -----------
                                                                            
Property, plant and equipment                            12,069       12,292
                                                                            
Long-term financing receivables and other assets         10,479       10,755
                                                                            
Goodwill and purchased intangible assets                 44,771       55,449
                                                    -----------  -----------
                                                                            
Total assets                                        $   117,556  $   129,517
                                                    ===========  ===========
                                                                            
                                                                            
LIABILITIES AND STOCKHOLDERS' EQUITY                                        
                                                                            
Current liabilities:                                                        
  Notes payable and short-term borrowings           $     5,681  $     8,083
  Accounts payable                                       12,554       14,750
  Employee compensation and benefits                      3,701        3,999
  Taxes on earnings                                         712        1,048
  Deferred revenue                                        7,598        7,449
  Other accrued liabilities                              14,673       15,113
                                                    -----------  -----------
                                                                            
    Total current liabilities                            44,919       50,442
                                                    -----------  -----------
                                                                            
Long-term debt                                           24,063       22,551
                                                                            
Other liabilities                                        16,564       17,520
                                                                            
Stockholders' equity:                                                       
  HP stockholders' equity                                31,601       38,625
  Non-controlling interests                                 409          379
                                                    -----------  -----------
                                                                            
    Total stockholders' equity                           32,010       39,004
                                                    -----------  -----------
                                                                            
Total liabilities and stockholders' equity          $   117,556  $   129,517
                                                    ===========  ===========
                                                                            
                                                                            
                                                                            

                  HEWLETT-PACKARD COMPANY AND SUBSIDIARIES                  
              CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS               
                                (Unaudited)                                 
                               (In millions)                                
                                                                            
                                                                            
                                                 Three months   Nine months 
                                                     ended         ended    
                                                   July 31,      July 31,   
                                                     2012          2012     
                                                 ------------  ------------ 
Cash flows from operating activities:                                       
  Net loss                                       $     (8,857) $     (5,796)
  Adjustments to reconcile net earnings to net                              
   cash provided by operating activities:                                   
    Depreciation and amortization                       1,306         3,894 
    Impairment of goodwill and purchased                                    
     intangible assets                                  9,188         9,188 
    Stock-based compensation expense                      150           494 
    Provision for bad debt and inventory                  107           254 
    Restructuring charges                               1,795         1,888 
    Deferred taxes on earnings                           (535)         (690)
    Excess tax benefit from stock-based                                     
     compensation                                           -           (12)
    Other, net                                             90           330 
                                                                            
    Changes in operating assets and liabilities:                            
    Accounts and financing receivables                    956         2,435 
    Inventory                                             (91)           (2)
    Accounts payable                                     (345)       (2,196)
    Taxes on earnings                                      14           (40)
    Restructuring                                        (198)         (472)
    Other assets and liabilities                         (734)       (2,763)
                                                 ------------  ------------ 
      Net cash provided by operating activities         2,846         6,512 
                                                 ------------  ------------ 
                                                                            
Cash flows from investing activities:                                       
  Investment in property, plant and equipment            (870)       (2,833)
  Proceeds from sale of property, plant and                                 
   equipment                                               97           321 
  Purchases of available-for-sale securities and                            
   other investments                                     (228)         (793)
  Maturities and sales of available-for-sale                                
   securities and other investments                       170           516 
  Payments made in connection with business                                 
   acquisitions, net of cash acquired                       -          (141)
  Proceeds from business divestiture, net                   6            87 
                                                 ------------  ------------ 
  Net cash used in investing activities                  (825)       (2,843)
                                                 ------------  ------------ 
                                                                            
Cash flows from financing activities:                                       
  Issuance (repayment) of commercial paper and                              
   notes payable, net                                     239        (2,553)
  Issuance of debt                                         48         5,100 
  Payment of debt                                        (561)       (3,222)
  Issuance of common stock under employee stock                             
   plans                                                   76           710 
  Repurchase of common stock                             (365)       (1,495)
  Excess tax benefit from stock-based                                       
   compensation                                             -            12 
  Cash dividends paid                                    (260)         (755)
                                                 ------------  ------------ 
  Net cash used in financing activities                  (823)       (2,203)
                                                 ------------  ------------ 
                                                                            
Increase in cash and cash equivalents                   1,198         1,466 
Cash and cash equivalents at beginning of period        8,311         8,043 
                                                 ------------  ------------ 
Cash and cash equivalents at end of period       $      9,509  $      9,509 
                                                 ============  ============ 
                                                                            
                                                                            
                                                                            
                  HEWLETT-PACKARD COMPANY AND SUBSIDIARIES                  
                            SEGMENT INFORMATION                             
                                (Unaudited)                                 
                               (In millions)                                
                                                                            
                                                 Three months ended         
                                         ---------------------------------- 
                                          July 31,    April 30,   July 31,  
                                            2012        2012        2011    
                                         ----------  ----------  ---------- 
                                                                            
Net revenue:(a)                                                             
                                                                            
  Personal Systems Group                 $    8,620  $    9,452  $    9,592 
  Services                                    8,754       8,831       9,030 
  Imaging and Printing Group                  6,017       6,132       6,183 
  Enterprise Servers, Storage and                                           
   Networking                                 5,143       5,211       5,348 
  Software                                      973         970         822 
  HP Financial Services                         935         968         932 
  Corporate Investments                          19          18         235 
                                         ----------  ----------  ---------- 
    Total segments                           30,461      31,582      32,142 
  Eliminations of intersegment net                                          
   revenue and other                           (792)       (889)       (953)
                                         ----------  ----------  ---------- 
                                                                            
    Total HP consolidated net revenue    $   29,669  $   30,693  $   31,189 
                                         ==========  ==========  ========== 
                                                                            
Earnings before taxes:(a)                                                   
                                                                            
  Personal Systems Group                 $      409  $      524  $      567 
  Services                                      959         997       1,240 
  Imaging and Printing Group                    949         808         879 
  Enterprise Servers, Storage and                                           
   Networking                                   562         585         690 
  Software                                      175         172         160 
  HP Financial Services                          97          96          88 
  Corporate Investments                         (58)        (49)       (334)
                                         ----------  ----------  ---------- 
    Total segment earnings from                                             
     operations                               3,093       3,133       3,290 
                                                                            
  Corporate and unallocated costs and                                       
   eliminations                                (314)       (203)       (114)
  Unallocated costs related to stock-                                       
   based compensation expense                  (150)       (168)       (130)
  Amortization of purchased intangible                                      
   assets                                      (476)       (470)       (358)
  Impairment of goodwill and purchased                                      
   intangible assets                         (9,188)          -           - 
  Restructuring charges                      (1,795)        (53)       (150)
  Acquisition-related charges                    (3)        (17)        (18)
  Interest and other, net                      (224)       (243)       (121)
                                         ----------  ----------  ---------- 
                                                                            
    Total HP consolidated (loss) earnings                                   
     before taxes                        $   (9,057) $    1,979  $    2,399 
                                         ==========  ==========  ========== 
                                                                            
(a)  Certain fiscal 2012 organizational reclassifications have been         
     reflected retroactively to provide improved visibility and             
     comparability. For each of the quarters in fiscal year 2011, the       
     reclassifications resulted in the transfer of revenue and operating    
     profit among the Services, Imaging and Printing Group, Enterprise      
     Servers, Storage and Networking, Software and Corporate Investments    
     financial reporting segments. Reclassifications between segments       
     included the transfer of the Indigo Scitex support and the LaserJet and
     enterprise solutions trade support businesses from Services to the     
     Imaging and Printing Group, the transfer of the business intelligence  
     services business from Corporate Investments to Services, the transfer 
     of the information management services business from Software to       
     Services, and the transfer of the TippingPoint business from Enterprise
     Servers, Storage and Networking to Software. There was no impact on the
     previously reported financial results for the Personal Systems Group   
     and HP Financial Services segments.                                    
                                                                            
                                                                            
                                                                            
                  HEWLETT-PACKARD COMPANY AND SUBSIDIARIES                  
                            SEGMENT INFORMATION                             
                                (Unaudited)                                 
                               (In millions)                                
                                                                            
                                                        Nine months ended   
                                                            July 31,        
                                                     ---------------------- 
                                                        2012        2011    
                                                     ----------  ---------- 
                                                                            
Net revenue:(a)                                                             
                                                                            
  Personal Systems Group                             $   26,945  $   29,456 
  Services                                               26,211      26,475 
  Imaging and Printing Group                             18,407      19,757 
  Enterprise Servers, Storage and Networking             15,372      16,463 
  Software                                                2,889       2,344 
  HP Financial Services                                   2,853       2,644 
  Corporate Investments                                      95         339 
                                                     ----------  ---------- 
    Total Segments                                       92,772      97,478 
  Eliminations of intersegment net revenue and other     (2,374)     (2,355)
                                                     ----------  ---------- 
                                                                            
    Total HP consolidated net revenue                $   90,398  $   95,123 
                                                     ==========  ========== 
                                                                            
Earnings before taxes:(a)                                                   
                                                                            
  Personal Systems Group                             $    1,397  $    1,772 
  Services                                                2,861       3,993 
  Imaging and Printing Group                              2,518       3,134 
  Enterprise Servers, Storage and Networking              1,709       2,280 
  Software                                                  509         438 
  HP Financial Services                                     284         250 
  Corporate Investments                                    (155)       (711)
                                                     ----------  ---------- 
    Total segment earnings from operations                9,123      11,156 
                                                                            
  Corporate and unallocated costs and eliminations         (670)       (118)
  Unallocated costs related to stock-based                                  
   compensation expense                                    (492)       (426)
  Amortization of purchased intangible assets            (1,412)     (1,196)
  Impairment of goodwill and purchased intangible                           
   assets                                                (9,188)          - 
  Restructuring charges                                  (1,888)       (466)
  Acquisition-related charges                               (42)        (68)
  Interest and other, net                                  (688)       (294)
                                                     ----------  ---------- 
                                                                            
    Total HP consolidated (loss) earnings before                            
     taxes                                           $   (5,257) $    8,588 
                                                     ==========  ========== 
                                                                            
(a)  Certain fiscal 2012 organizational reclassifications have been         
     reflected retroactively to provide improved visibility and             
     comparability. For each of the quarters in fiscal year 2011, the       
     reclassifications resulted in the transfer of revenue and operating    
     profit among the Services, Imaging and Printing Group, Enterprise      
     Servers, Storage and Networking, Software and Corporate Investments    
     financial reporting segments. Reclassifications between segments       
     included the transfer of the Indigo Scitex support and the LaserJet and
     enterprise solutions trade support businesses from Services to the     
     Imaging and Printing Group, the transfer of the business intelligence  
     services business from Corporate Investments to Services, the transfer 
     of the information management services business from Software to       
     Services, and the transfer of the TippingPoint business from Enterprise
     Servers, Storage and Networking to Software. There was no impact on the
     previously reported financial results for the Personal Systems Group   
     and HP Financial Services segments.                                    
                                                                            
                                                                            
                                                                            
                 HEWLETT-PACKARD COMPANY AND SUBSIDIARIES                   
                    SEGMENT / BUSINESS UNIT INFORMATION                     
                                (Unaudited)                                 
                               (In millions)                                
                                                                            
                                                              Growth rate   
                                    Three months ended            (%)       
                              -----------------------------  -------------  
                              July 31,  April 30,  July 31,                 
                                2012       2012      2011     Q/Q     Y/Y   
                              --------  ---------  --------  -----   -----  
                                                                            
Net revenue:(a)                                                             
                                                                            
  Personal Systems Group                                                    
    Notebooks                 $  4,416  $   4,900  $  5,082    (10%)   (13%)
    Desktops                     3,486      3,827     3,777     (9%)    (8%)
    Workstations                   526        537       547     (2%)    (4%)
    Other                          192        188       186      2%      3% 
                              --------  ---------  --------                 
      Total Personal Systems                                                
       Group                     8,620      9,452     9,592     (9%)   (10%)
                              --------  ---------  --------                 
                                                                            
  Services                                                                  
    Infrastructure Technology                                               
     Outsourcing                 3,665      3,669     3,899      0%     (6%)
    Technology Services          2,634      2,638     2,671      0%     (1%)
    Application and Business                                                
     Services(b)                 2,455      2,524     2,460     (3%)     0% 
                              --------  ---------  --------                 
      Total Services             8,754      8,831     9,030     (1%)    (3%)
                              --------  ---------  --------                 
                                                                            
  Imaging and Printing Group                                                
    Supplies                     4,005      4,060     4,143     (1%)    (3%)
    Commercial Hardware          1,445      1,479     1,388     (2%)     4% 
    Consumer Hardware              567        593       652     (4%)   (13%)
                              --------  ---------  --------                 
      Total Imaging and                                                     
       Printing Group            6,017      6,132     6,183     (2%)    (3%)
                              --------  ---------  --------                 
                                                                            
  Enterprise Servers, Storage                                               
   and Networking                                                           
    Industry Standard Servers    3,187      3,186     3,302      0%     (3%)
    Storage                        924        990       976     (7%)    (5%)
    Business Critical Systems      385        421       459     (9%)   (16%)
    Networking                     647        614       611      5%      6% 
                              --------  ---------  --------                 
      Total Enterprise                                                      
       Servers, Storage and                                                 
       Networking                5,143      5,211     5,348     (1%)    (4%)
                              --------  ---------  --------                 
                                                                            
  Software                         973        970       822      0%     18% 
                              --------  ---------  --------                 
                                                                            
  HP Financial Services            935        968       932     (3%)     0% 
                              --------  ---------  --------                 
                                                                            
  Corporate Investments             19         18       235      6%    (92%)
                              --------  ---------  --------                 
    Total segments              30,461     31,582    32,142     (4%)    (5%)
                              --------  ---------  --------                 
                                                                            
  Elimination of intersegment                                               
   net revenue and other          (792)      (889)     (953)   (11%)   (17%)
                              --------  ---------  --------                 
                                                                            
    Total HP consolidated net                                               
     revenue                  $ 29,669  $  30,693  $ 31,189     (3%)    (5%)
                              ========  =========  ========                 
                                                                            
                                                                            
(a)  Certain fiscal 2012 organizational reclassifications have been         
     reflected retroactively to provide improved visibility and             
     comparability. For each of the quarters in fiscal year 2011, the       
     reclassifications resulted in the transfer of revenue among the        
     Services, Imaging and Printing Group, Enterprise Servers, Storage and  
     Networking, Software and Corporate Investments financial reporting     
     segments. Reclassifications between segments included the transfer of  
     Indigo Scitex support and the LaserJet and enterprise solutions trade  
     support businesses from Services to the Imaging and Printing Group, the
     transfer of the business intelligence services business from Corporate 
     Investments to Services, the transfer of the information management    
     services business from Software to Services, and the transfer of the   
     TippingPoint business from Enterprise Servers, Storage and Networking  
     to Software. In addition, revenue was transferred among the business   
     units within the Services segment. There was no impact on the          
     previously reported financial results for the Personal Systems Group   
     and HP Financial Services segments.                                    
                                                                            
(b)  The former Application Services, Business Process Outsourcing and Other
     Services business units were consolidated into a new Application and   
     Business Services business unit in fiscal 2012.                        
                                                                            
                                                                            
                                                                            
                  HEWLETT-PACKARD COMPANY AND SUBSIDIARIES                  
                    SEGMENT / BUSINESS UNIT INFORMATION                     
                                (Unaudited)                                 
                               (In millions)                                
                                                                            
                                                       Nine months ended    
                                                           July 31,         
                                                   ------------------------ 
                                                                            
                                                       2012         2011    
                                                   -----------  ----------- 
                                                                            
Net revenue:(a)                                                             
                                                                            
  Personal Systems Group                                                    
    Notebooks                                      $    14,258  $    15,929 
    Desktops                                            10,519       11,314 
    Workstations                                         1,598        1,623 
    Other                                                  570          590 
                                                   -----------  ----------- 
      Total Personal Systems Group                      26,945       29,456 
                                                   -----------  ----------- 
                                                                            
  Services                                                                  
    Infrastructure Technology Outsourcing               11,035       11,329 
    Technology Services                                  7,834        7,814 
    Application and Business Services(b)                 7,342        7,332 
                                                   -----------  ----------- 
      Total Services                                    26,211       26,475 
                                                   -----------  ----------- 
                                                                            
  Imaging and Printing Group                                                
    Supplies                                            12,144       13,113 
    Commercial Hardware                                  4,413        4,489 
    Consumer Hardware                                    1,850        2,155 
                                                   -----------  ----------- 
      Total Imaging and Printing Group                  18,407       19,757 
                                                   -----------  ----------- 
                                                                            
  Enterprise Servers, Storage and Networking                                
    Industry Standard Servers                            9,445       10,137 
    Storage                                              2,869        2,968 
    Business Critical Systems                            1,211        1,560 
    Networking                                           1,847        1,798 
                                                   -----------  ----------- 
      Total Enterprise Servers, Storage and                                 
       Networking                                       15,372       16,463 
                                                   -----------  ----------- 
                                                                            
  Software                                               2,889        2,344 
                                                   -----------  ----------- 
                                                                            
  HP Financial Services                                  2,853        2,644 
                                                   -----------  ----------- 
                                                                            
  Corporate Investments                                     95          339 
                                                   -----------  ----------- 
    Total segments                                      92,772       97,478 
                                                   -----------  ----------- 
                                                                            
  Elimination of intersegment net revenue and other     (2,374)      (2,355)
                                                   -----------  ----------- 
                                                                            
    Total HP consolidated net revenue              $    90,398  $    95,123 
                                                   ===========  =========== 
                                                                            
                                                                            
(a)  Certain fiscal 2012 organizational reclassifications have been         
     reflected retroactively to provide improved visibility and             
     comparability. For each of the quarters in fiscal year 2011, the       
     reclassifications resulted in the transfer of revenue among the        
     Services, Imaging and Printing Group, Enterprise Servers, Storage and  
     Networking, Software and Corporate Investments financial reporting     
     segments. Reclassifications between segments included the transfer of  
     Indigo Scitex support and the LaserJet and enterprise solutions trade  
     support businesses from Services to the Imaging and Printing Group, the
     transfer of the business intelligence services business from Corporate 
     Investments to Services, the transfer of the information management    
     services business from Software to Services, and the transfer of the   
     TippingPoint business from Enterprise Servers, Storage and Networking  
     to Software. In addition, revenue was transferred among the business   
     units within the Services segment. There was no impact on the          
     previously reported financial results for the Personal Systems Group   
     and HP Financial Services segments.                                    
                                                                            
(b)  The former Application Services, Business Process Outsourcing and Other
     Services business units were consolidated into a new Application and   
     Business Services business unit in fiscal 2012.                        
                                                                            
                                                                            
                                                                            
                  HEWLETT-PACKARD COMPANY AND SUBSIDIARIES                  
               SEGMENT NON-GAAP OPERATING MARGIN SUMMARY DATA               
                                (Unaudited)                                 
                               (In millions)                                
                                                                            
                                                                            
                                                                            
                                  Three months       Change in Operating    
                                     ended               Margin (pts)       
                                 -------------    ------------------------- 
                                   July 31,                                 
                                      2012           Q/Q           Y/Y      
                                 -------------    ---------   ------------- 
                                                                            
Non-GAAP operating margin:(a)                                               
  Personal Systems Group                   4.7%    (0.8 pts)       (1.2 pts)
  Services                                11.0%    (0.3 pts)       (2.7 pts)
  Imaging and Printing Group              15.8%     2.6 pts         1.6 pts 
  Enterprise Servers, Storage and                                           
   Networking                             10.9%    (0.3 pts)       (2.0 pts)
  Software                                18.0%     0.3 pts        (1.5 pts)
  HP Financial Services                   10.4%     0.5 pts         1.0 pts 
  Corporate Investments                 (357.9%)  114.3 pts      (215.8 pts)
    Total segments                        10.1%     0.3 pts        (0.1 pts)
                                                                            
    Total HP consolidated non-                                              
     GAAP operating margin                 9.2%     0.3 pts        (0.6 pts)
                                                                            
                                                                            
(a)  Certain fiscal 2012 organizational reclassifications have been         
     reflected retroactively to provide improved visibility and             
     comparability. For each of the quarters in fiscal year 2011, the       
     reclassifications resulted in the transfer of revenue and operating    
     profit among the Services, Imaging and Printing Group, Enterprise      
     Servers, Storage and Networking, Software and Corporate Investments    
     financial reporting segments. Reclassifications between segments       
     included the transfer of Indigo Scitex support and the LaserJet and    
     enterprise solutions trade support businesses from Services to the     
     Imaging and Printing Group, the transfer of the business intelligence  
     services business from Corporate Investments to Services, the transfer 
     of the information management services business from Software to       
     Services, and the transfer of the TippingPoint business from Enterprise
     Servers, Storage and Networking to Software. There was no impact on the
     previously reported financial results for the Personal Systems Group   
     and HP Financial Services segments.                                    
                                                                            
                                                                            
                                                                            
                  HEWLETT-PACKARD COMPANY AND SUBSIDIARIES                  
                    CALCULATION OF NET EARNINGS PER SHARE                   
                                 (Unaudited)                                
                   (In millions except per share amounts)                   
                                                                            
                                                                            
                                                   Three months ended       
                                           ---------------------------------
                                            July 31,    April 30,  July 31, 
                                              2012        2012       2011   
                                           ----------  ---------- ----------
                                                                            
Numerator:                                                                  
  GAAP net (loss) earnings                 $   (8,857) $    1,593 $    1,926
                                           ==========  ========== ==========
                                                                            
  Non-GAAP net earnings                    $    1,973  $    1,949 $    2,282
                                           ==========  ========== ==========
                                                                            
Denominator:                                                                
  Weighted-average shares used to compute                                   
   basic net (loss) earnings per share and                                  
   diluted net (loss) per share                 1,971       1,979      2,054
  Dilutive effect of employee stock plans           4           8         26
                                           ----------  ---------- ----------
    Weighted-average shares used to compute                                 
     diluted net earnings per share             1,975       1,987      2,080
                                           ==========  ========== ==========
                                                                            
GAAP net (loss) earnings per share:                                         
  Basic                                    $    (4.49) $     0.80 $     0.94
  Diluted(a)                               $    (4.49) $     0.80 $     0.93
                                                                            
Non-GAAP net earnings per share:                                            
  Basic                                    $     1.00  $     0.98 $     1.11
  Diluted(b)                               $     1.00  $     0.98 $     1.10
                                                                            
                                                                            
(a)  GAAP diluted net earnings per share reflects any dilutive effect of    
     outstanding stock options, performance-based restricted units,         
     restricted stock units and restricted stock, but that effect is        
     excluded when calculating GAAP diluted net (loss) per share because it 
     would be anti-dilutive.                                                
                                                                            
(b)  Non-GAAP diluted net earnings per share reflects any dilutive effect of
     outstanding stock options, performance-based restricted units,         
     restricted stock units and restricted stock.                           
                                                                            
                                                                            
                                                                            
                  HEWLETT-PACKARD COMPANY AND SUBSIDIARIES                  
                    CALCULATION OF NET EARNINGS PER SHARE                   
                                 (Unaudited)                                
                   (In millions except per share amounts)                   
                                                                            
                                                                            
                                                        Nine months ended   
                                                            July 31,        
                                                    ------------------------
                                                                            
                                                        2012         2011   
                                                    -----------  -----------
                                                                            
                                                                            
Numerator:                                                                  
  GAAP net (loss) earnings                          $    (5,796) $     6,835
                                                    ===========  ===========
                                                                            
  Non-GAAP net earnings                             $     5,754  $     8,029
                                                    ===========  ===========
                                                                            
Denominator:                                                                
  Weighted-average shares used to compute basic net                         
   (loss) earnings per share and diluted net (loss)                         
   per share                                              1,977        2,129
  Dilutive effect of employee stock plans                    15           32
                                                    -----------  -----------
    Weighted-average shares used to compute diluted                         
     net earnings per share                               1,992        2,161
                                                    ===========  ===========
                                                                            
GAAP net (loss) earnings per share:                                         
  Basic                                             $     (2.93) $      3.21
  Diluted(a)                                        $     (2.93) $      3.16
                                                                            
Non-GAAP net earnings per share:                                            
  Basic                                             $      2.91  $      3.77
  Diluted(b)                                        $      2.89  $      3.72
                                                                            
                                                                            
(a)  GAAP diluted net earnings per share reflects any dilutive effect of    
     outstanding stock options, performance-based restricted units,         
     restricted stock units and restricted stock, but that effect is        
     excluded when calculating GAAP diluted net (loss) per share because it 
     would be anti-dilutive.                                                
                                                                            
(b)  Non-GAAP diluted net earnings per share reflects any dilutive effect of
     outstanding stock options, performance-based restricted units,         
     restricted stock units and restricted stock.                           
                                                                            

Use of Non-GAAP Financial Measures
To supplement HP's consolidated condensed financial statements presented on a GAAP basis, HP provides non-GAAP net revenue, non-GAAP operating profit, non-GAAP operating margin, non-GAAP net earnings, non-GAAP diluted earnings per share, gross cash and free cash flow. 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 net revenue is net revenue. 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. The GAAP measure most directly comparable to free cash flow is cash flow from operations. 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 net revenue reflects the elimination of contra revenue associated with sales incentive programs implemented in the fourth fiscal quarter of 2011 in connection with the wind down of HP's webOS device business, net of webOS device revenue for the period. Non-GAAP operating profit and non-GAAP operating margin are defined to exclude the effects of any restructuring charges, charges relating to the impairment of goodwill and purchased intangible assets, charges relating to the amortization of purchased intangible assets, and acquisition-related 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:

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. Free cash flow is defined as cash flow from operations less net capital expenditures. HP's management uses gross cash and free cash flow 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 and free cash flow 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. Because free cash flow includes the effect of capital expenditures that are not reflected in GAAP cash flow from operations, HP believes that free cash flow provides a more accurate and complete assessment of HP's liquidity and capital resources.

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:

Compensation for Limitations Associated with Use of Non-GAAP Financial Measures
HP compensates for the limitations on its use of non-GAAP net revenue, non-GAAP operating profit, non-GAAP operating margin, non-GAAP net earnings, non-GAAP diluted earnings per share, gross cash and free cash flow 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 net revenue, non-GAAP operating profit, non-GAAP operating margin, non-GAAP net earnings, non-GAAP diluted earnings per share, gross cash and free cash flow 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.

© 2012 Hewlett-Packard Development Company, L.P. The information contained herein is subject to change without notice. The only warranties for HP products and services are set forth in the express warranty statements accompanying such products and services. Nothing herein should be construed as constituting an additional warranty. HP shall not be liable for technical or editorial errors or omissions contained herein.

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