HP Reports Fourth Quarter 2009 Results

Material Limitations Associated with Use of Non-GAAP Financial Measures

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

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

Items such as restructuring charges that are excluded from non-GAAP operating profit, non-GAAP operating margin, non-GAAP net earnings and non-GAAP diluted earnings per share can have a material impact on cash flows and earnings per share.
HP may not be able to liquidate immediately the long-term investments included in gross cash, which may limit the usefulness of gross cash as a liquidity measure.
Other companies may calculate non-GAAP operating profit, non-GAAP operating margin, non-GAAP net earnings, non-GAAP diluted earnings per share and gross cash differently than HP does, limiting the usefulness of those measures for comparative purposes.

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

HP compensates for the limitations on its use of non-GAAP operating profit, non-GAAP operating margin, non-GAAP net earnings, non-GAAP diluted earnings per share and gross cash by relying primarily on its GAAP results and using non-GAAP financial measures only supplementally. HP also provides robust and detailed reconciliations of each non-GAAP financial measure to its most directly comparable GAAP measure within this press release and in other written materials that include these non-GAAP financial measures, and HP encourages investors to review carefully those reconciliations.

Usefulness of Non-GAAP Financial Measures to Investors

HP believes that providing non-GAAP operating profit, non-GAAP operating margin, non-GAAP net earnings, non-GAAP diluted earnings per share and gross cash to investors in addition to the related GAAP measures provides investors with greater transparency to the information used by HP’s management in its financial and operational decision-making and allows investors to see HP’s results “through the eyes” of management. HP further believes that providing this information better enables HP’s investors to understand HP’s operating performance and to evaluate the efficacy of the methodology and information used by management to evaluate and measure such performance. Disclosure of these non-GAAP financial measures also facilitates comparisons of HP’s operating performance with the performance of other companies in HP’s industry that supplement their GAAP results with non-GAAP financial measures that are calculated in a similar manner.

HEWLETT-PACKARD COMPANY AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS (Unaudited) (In millions except per share amounts)
	Three months ended
	October 31, 2009^(c)			July 31, 2009^(c)			October 31, 2008

Net revenue	$	30,777		$	27,585		$	33,603

Costs and expenses^(a):
Cost of sales		23,475			21,031			25,853		^(d)
Research and development		704			667			842
Selling, general and administrative		2,966			2,874			3,506		^(d)
Amortization of purchased intangible assets		400			379			337
In-process research and development charges		1			-			32
Restructuring charges		38			362			251
Acquisition-related charges		60			59			41
Total costs and expenses		27,644			25,372			30,862

Earnings from operations		3,133			2,213			2,741

Interest and other, net		(132	)		(177	)		(98	)

Earnings before taxes		3,001			2,036			2,643

Provision for taxes ^(b)		589			365			531

Net earnings	$	2,412		$	1,671		$	2,112

Net earnings per share:
Basic	$	1.02		$	0.70		$	0.87
Diluted	$	0.99		$	0.69		$	0.84

Cash dividends declared per share	$	-		$	0.16		$	-

Weighted-average shares used to compute net earnings per share:
Basic		2,366			2,382			2,440
Diluted		2,433			2,436			2,516

(a) Stock-based compensation expense included under SFAS 123(R) was as follows:
Cost of sales	$	37		$	41		$	46
Research and development		10			12			17
Selling, general and administrative		86			94			94
Acquisition-related charges		1			3			-
Total costs and expenses	$	134		$	150		$	157

(b) Tax benefit from stock-based compensation	$	(41	)	$	(51	)	$	(37	)

(c) In the fourth quarter of fiscal 2009, HP early adopted Accounting Standards Update ("ASU") No. 2009-13, "Multiple-Deliverable Revenue Arrangements" and ASU No. 2009-14, "Certain Revenue Arrangements That Include Software Elements." As a result, fiscal 2009 net revenues and net earnings were higher by $255 million and $55 million, respectively. Fourth quarter fiscal 2009 net revenues and net earnings were higher by $82 million and $19 million, respectively. HP adopted these standards as of the beginning of fiscal 2009; therefore the previously reported quarterly results have been restated to reflect the impact of adoption.

(d) For the prior year reporting period presented, certain pursuit-related costs previously reported as Cost of sales have been realigned retroactively to Selling, general and administrative expenses due to organizational realignments.

HEWLETT-PACKARD COMPANY AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS (In millions except per share amounts)
	Twelve months ended October 31,
	2009 ^(c)			2008
	(unaudited)

Net revenue	$	114,552		$	118,364

Costs and expenses ^(a) :
Cost of sales		87,524			89,699		^(d)
Research and development		2,819			3,543
Selling, general and administrative		11,613			13,326		^(d)
Amortization of purchased intangible assets		1,571			967
In-process research and development charges		7			45
Restructuring charges		640			270
Acquisition-related charges		242			41
Total costs and expenses		104,416			107,891

Earnings from operations		10,136			10,473

Interest and other, net		(721	)		-

Earnings before taxes		9,415			10,473

Provision for taxes ^(b)		1,755			2,144

Net earnings	$	7,660		$	8,329

Net earnings per share:
Basic	$	3.21		$	3.35
Diluted	$	3.14		$	3.25

Cash dividends declared per share	$	0.32		$	0.32

Weighted-average shares used to compute net earnings per share:
Basic		2,388			2,483
Diluted		2,437			2,567

(a) Stock-based compensation expense included under SFAS 123(R) was as follows:
Cost of sales	$	178		$	152
Research and development		57			72
Selling, general and administrative		374			382
Acquisition-related charges		26			-
Total costs and expenses	$	635		$	606

(b) Tax benefit from stock-based compensation	$	(199	)	$	(167	)

(c) In the fourth quarter of fiscal 2009, HP early adopted Accounting Standards Update ("ASU") No. 2009-13, "Multiple-Deliverable Revenue Arrangements" and ASU No. 2009-14, "Certain Revenue Arrangements That Include Software Elements." As a result, fiscal 2009 net revenues and net earnings were higher by $255 million and $55 million, respectively. Fourth quarter fiscal 2009 net revenues and net earnings were higher by $82 million and $19 million, respectively. HP adopted these standards as of the beginning of fiscal 2009; therefore the previously reported quarterly results have been restated to reflect the impact of adoption.

(d) For the prior year reporting period presented, certain pursuit-related costs previously reported as Cost of sales have been realigned retroactively to Selling, general and administrative expenses due to organizational realignments.

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 months ended October 31, 2009 ^(a)			Diluted earnings per share			Three months ended July 31, 2009 ^(a)			Diluted earnings per share			Three months ended October 31, 2008			Diluted earnings per share

GAAP net earnings	$	2,412		$	0.99		$	1,671		$	0.69		$	2,112		$	0.84

Non-GAAP adjustments:
Amortization of purchased intangible assets		400			0.16			379			0.16			337			0.13
In-process research and development charges		1			-			-			-			32			0.01
Restructuring charges		38			0.02			362			0.15			251			0.10
Acquisition-related charges		60			0.03			59			0.02			41			0.02
Adjustments for taxes		(147	)		(0.06	)		(232	)		(0.10	)		(179	)		(0.07	)

Non-GAAP net earnings	$	2,764		$	1.14		$	2,239		$	0.92		$	2,594		$	1.03


GAAP earnings from operations	$	3,133					$	2,213					$	2,741

Non-GAAP adjustments:
Amortization of purchased intangible assets		400						379						337
In-process research and development charges		1						-						32
Restructuring charges		38						362						251
Acquisition-related charges		60						59						41

Non-GAAP earnings from operations	$	3,632					$	3,013					$	3,402

GAAP operating margin		10	%					8	%					8	%
Non-GAAP adjustments		2	%					3	%					2	%

Non-GAAP operating margin		12	%					11	%					10	%

(a) In the fourth quarter of fiscal 2009, HP early adopted Accounting Standards Update ("ASU") No. 2009-13, "Multiple-Deliverable Revenue Arrangements" and ASU No. 2009-14, "Certain Revenue Arrangements That Include Software Elements." As a result, fiscal 2009 net revenues and GAAP net earnings were higher by $255 million and $55 million, respectively. Fourth quarter fiscal 2009 net revenues and GAAP net earnings were higher by $82 million and $19 million, respectively. HP adopted these standards as of the beginning of fiscal 2009; therefore the previously reported quarterly results have been restated to reflect the impact of adoption.

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)

	Twelve months ended October 31, 2009 ^(a)			Diluted earnings per share			Twelve months ended October 31, 2008			Diluted earnings per share

GAAP net earnings	$	7,660		$	3.14		$	8,329		$	3.25

Non-GAAP adjustments:
Amortization of purchased intangible assets		1,571			0.65			967			0.38
In-process research and development charges		7			-			45			0.02
Restructuring charges		640			0.26			270			0.10
Acquisition-related charges		242			0.10			41			0.01
Adjustments for taxes		(727	)		(0.30	)		(350	)		(0.14	)

Non-GAAP net earnings	$	9,393		$	3.85		$	9,302		$	3.62


GAAP earnings from operations	$	10,136					$	10,473

Non-GAAP adjustments:
Amortization of purchased intangible assets		1,571						967
In-process research and development charges		7						45
Restructuring charges		640						270
Acquisition-related charges		242						41

Non-GAAP earnings from operations	$	12,596					$	11,796

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

Non-GAAP operating margin		11	%					10	%

(a) In the fourth quarter of fiscal 2009, HP early adopted Accounting Standards Update ("ASU") No. 2009-13, "Multiple-Deliverable Revenue Arrangements" and ASU No. 2009-14, "Certain Revenue Arrangements That Include Software Elements." As a result, fiscal 2009 net revenues and GAAP net earnings were higher by $255 million and $55 million, respectively. Fourth quarter fiscal 2009 net revenues and GAAP net earnings were higher by $82 million and $19 million, respectively. HP adopted these standards as of the beginning of fiscal 2009; therefore the previously reported quarterly results have been restated to reflect the impact of adoption.

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

	October 31, 2009		October 31, 2008
	(unaudited)

ASSETS

Current assets:
Cash and cash equivalents	$	13,279	$	10,153
Short-term investments		55		93
Accounts receivable		16,537		16,928
Financing receivables		2,675		2,314
Inventory		6,128		7,879
Other current assets		13,865		14,361

Total current assets		52,539		51,728

Property, plant and equipment		11,262		10,838

Long-term financing receivables and other assets		11,289		10,468

Goodwill and purchased intangible assets		39,709		40,297

Total assets	$	114,799	$	113,331


LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Notes payable and short-term borrowings	$	1,850	$	10,176
Accounts payable		14,809		14,917
Employee compensation and benefits		4,071		4,159
Taxes on earnings		910		869
Deferred revenue		6,182		6,287
Other accrued liabilities		15,181		16,531

Total current liabilities		43,003		52,939

Long-term debt		13,980		7,676
Other liabilities		17,299		13,774

Stockholders' equity		40,517		38,942

Total liabilities and stockholders' equity	$	114,799	$	113,331

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

	Three months ended October 31, 2009			Twelve months ended October 31, 2009

Cash flows from operating activities:
Net earnings ^(a)	$	2,412		$	7,660
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization		1,227			4,773
Stock-based compensation expense		134			635
Provision for bad debt and inventory		104			566
In-process research and development charges		1			7
Restructuring charges		38			640
Deferred taxes on earnings		107			379
Excess tax benefit from stock-based compensation		(95	)		(162	)
Other, net		(19	)		(20	)

Changes in assets and liabilities:
Accounts and financing receivables		(2,184	)		(549	)
Inventory		(311	)		1,532
Accounts payable		2,075			(153	)
Taxes on earnings		(146	)		557
Restructuring		(393	)		(1,237	)
Other assets and liabilities		483			(1,249	)
Net cash provided by operating activities		3,433			13,379

Cash flows from investing activities:
Investment in property, plant and equipment		(946	)		(3,695	)
Proceeds from sale of property, plant and equipment		94			495
Purchases of available-for-sale securities and other investments		(55	)		(160	)
Maturities and sales of available-for-sale securities and other investments		68			171
Payments made in connection with business acquisitions, net		(43	)		(391	)
Net cash used in investing activities		(882	)		(3,580	)

Cash flows from financing activities:
Issuance (repayment) of commercial paper and notes payable, net		10			(6,856	)
Issuance of debt		22			6,800
Payment of debt		(1,529	)		(2,710	)
Issuance of common stock under employee stock plans		901			1,837
Repurchase of common stock		(2,102	)		(5,140	)
Excess tax benefit from stock-based compensation		95			162
Dividends		(190	)		(766	)
Net cash used in financing activities		(2,793	)		(6,673	)

(Decrease) increase in cash and cash equivalents		(242	)		3,126
Cash and cash equivalents at beginning of period		13,521			10,153
Cash and cash equivalents at end of period	$	13,279		$	13,279

(a) In the fourth quarter of fiscal 2009, HP early adopted Accounting Standards Update ("ASU") No. 2009-13, "Multiple-Deliverable Revenue Arrangements" and ASU No. 2009-14, "Certain Revenue Arrangements That Include Software Elements." As a result, fiscal 2009 net earnings were higher by $55 million. Fourth quarter fiscal 2009 net earnings were higher by $19 million. HP adopted these standards as of the beginning of fiscal 2009; therefore the previously reported quarterly results have been restated to reflect the impact of adoption.

HEWLETT-PACKARD COMPANY AND SUBSIDIARIES SEGMENT INFORMATION (Unaudited) (In millions)
	Three months ended
	October 31, 2009 ^(b)			July 31, 2009 ^(b)			October 31, 2008 ^(c)

Net revenue:

Services ^(a)	$	8,926		$	8,520		$	8,277
Enterprise Storage and Servers		4,218			3,735			5,059
HP Software		967			847			1,148
Technology Solutions Group		14,111			13,102			14,484
Personal Systems Group		9,862			8,441			11,179
Imaging and Printing Group		6,454			5,660			7,572
HP Financial Services		726			670			691
Corporate Investments		191			193			246
Total Segments		31,344			28,066			34,172
Eliminations of intersegment net revenue and other		(567	)		(481	)		(569	)

Total HP Consolidated	$	30,777		$	27,585		$	33,603

Earnings (Loss) from operations:

Services ^(a)	$	1,444		$	1,302		$	945
Enterprise Storage and Servers		481			381			705
HP Software		234			153			211
Technology Solutions Group		2,159			1,836			1,861
Personal Systems Group		460			387			616
Imaging and Printing Group		1,171			960			1,155
HP Financial Services		66			53			51
Corporate Investments		(8	)		(10	)		9
Total Segments		3,848			3,226			3,692

Corporate and unallocated costs and eliminations		(100	)		(81	)		(153	)
Unallocated costs related to stock-based compensation expense		(116	)		(132	)		(137	)
Amortization of purchased intangible assets		(400	)		(379	)		(337	)
In-process research and development charges		(1	)		-			(32	)
Restructuring charges		(38	)		(362	)		(251	)
Acquisition-related charges		(60	)		(59	)		(41	)
Interest and other, net		(132	)		(177	)		(98	)

Total HP Consolidated Earnings Before Taxes	$	3,001		$	2,036		$	2,643

(a) Includes the results of EDS which was acquired on August 26, 2008.

(b) In the fourth quarter of fiscal 2009, HP early adopted Accounting Standards Update ("ASU") No. 2009-13, "Multiple-Deliverable Revenue Arrangements" and ASU No. 2009-14, "Certain Revenue Arrangements That Include Software Elements." HP adopted these standards as of the beginning of fiscal 2009; therefore the previously reported quarterly segment results have been restated to reflect the impact of adoption. The adoption primarily impacted the Services and Enterprise Storage and Servers financial reporting segments.

(c) Certain fiscal 2009 organizational reclassifications have been reflected retroactively to provide improved visibility and comparability. For each of the quarters in fiscal year 2008, the reclassifications resulted in the transfer of revenue and operating profit among the Services, HP Software and Imaging and Printing Group financial reporting segments. In addition, certain previously allocated costs were reclassified to unallocated costs related to stock-based compensation expense. There was no impact on the previously reported financial results for the Enterprise Storage and Servers, Personal Systems Group, HP Financial Services and Corporate Investments segments.

HEWLETT-PACKARD COMPANY AND SUBSIDIARIES SEGMENT INFORMATION (Unaudited) (In millions)
	Twelve months ended October 31,
	2009 ^(b)			2008 ^(c)
Net revenue:

Services ^(a)	$	34,693		$	20,977
Enterprise Storage and Servers		15,359			19,400
HP Software		3,572			4,220
Technology Solutions Group		53,624			44,597
Personal Systems Group		35,305			42,295
Imaging and Printing Group		24,011			29,614
HP Financial Services		2,673			2,698
Corporate Investments		768			965
Total Segments		116,381			120,169
Eliminations of intersegment net revenue and other		(1,829	)		(1,805	)

Total HP Consolidated	$	114,552		$	118,364

Earnings (Loss) from operations:

Services ^(a)	$	5,044		$	2,518
Enterprise Storage and Servers		1,518			2,577
HP Software		684			499
Technology Solutions Group		7,246			5,594
Personal Systems Group		1,661			2,375
Imaging and Printing Group		4,310			4,559
HP Financial Services		206			192
Corporate Investments		(56	)		49
Total Segments		13,367			12,769

Corporate and unallocated costs and eliminations		(219	)		(461	)
Unallocated costs related to stock-based compensation expense		(552	)		(512	)
Amortization of purchased intangible assets		(1,571	)		(967	)
In-process research and development charges		(7	)		(45	)
Restructuring charges		(640	)		(270	)
Acquisition-related charges		(242	)		(41	)
Interest and other, net		(721	)		-

Total HP Consolidated Earnings Before Taxes	$	9,415		$	10,473

(a) Includes the results of EDS which was acquired on August 26, 2008.

(b) In the fourth quarter of fiscal 2009, HP early adopted Accounting Standards Update ("ASU") No. 2009-13, "Multiple-Deliverable Revenue Arrangements" and ASU No. 2009-14, "Certain Revenue Arrangements That Include Software Elements." HP adopted these standards as of the beginning of fiscal 2009; therefore the previously reported quarterly segment results have been restated to reflect the impact of adoption. The adoption primarily impacted the Services and Enterprise Storage and Servers financial reporting segments.

(c) Certain fiscal 2009 organizational reclassifications have been reflected retroactively to provide improved visibility and comparability. For each of the quarters in fiscal year 2008, the reclassifications resulted in the transfer of revenue and operating profit among the Services, HP Software and Imaging and Printing Group financial reporting segments. In addition, certain previously allocated costs were reclassified to unallocated costs related to stock-based compensation expense. There was no impact on the previously reported financial results for the Enterprise Storage and Servers, Personal Systems Group, HP Financial Services and Corporate Investments segments.

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

	Three months ended
	October 31, 2009 ^(b)			July 31, 2009 ^(b)			October 31, 2008 ^(c)

Net revenue:

Infrastructure technology outsourcing	$	4,084		$	3,967		$	3,531
Technology services		2,493			2,404			2,657
Application services		1,538			1,399			1,427
Business process outsourcing		778			711			604
Other		33			39			58
Services ^(a)		8,926			8,520			8,277
Industry standard servers		2,669			2,316			2,977
Storage		918			824			1,147
Business critical systems		631			595			935
Enterprise Storage and Servers		4,218			3,735			5,059
Business technology optimization		660			563			786
Other software		307			284			362
HP Software		967			847			1,148
Technology Solutions Group		14,111			13,102			14,484
Notebooks		5,794			4,803			6,270
Desktops		3,481			3,098			4,149
Workstations		342			299			470
Handhelds		36			32			79
Other		209			209			211
Personal Systems Group		9,862			8,441			11,179
Supplies		4,430			3,949			4,808
Commercial Hardware		1,261			1,085			1,846
Consumer Hardware		763			626			918
Imaging and Printing Group		6,454			5,660			7,572
HP Financial Services		726			670			691
Corporate Investments		191			193			246
Total Segments		31,344			28,066			34,172

Eliminations of intersegment net revenue and other		(567	)		(481	)		(569	)

Total HP Consolidated	$	30,777		$	27,585		$	33,603


(a) Includes the results of EDS, which was acquired on August 26, 2008. The businesses included in the former consulting and integration business unit were divided among the application services and technology services business units and the HP software segment. The businesses included in the former outsourcing services business unit were divided among the infrastructure technology outsourcing and business process outsourcing business units. The infrastructure technology outsourcing, application services and business process outsourcing business units were added with the technology services business unit, and these four business units now comprise the Services segment.

(b) In the fourth quarter of fiscal 2009, HP early adopted Accounting Standards Update ("ASU") No. 2009-13, "Multiple-Deliverable Revenue Arrangements" and ASU No. 2009-14, "Certain Revenue Arrangements That Include Software Elements." HP adopted these standards as of the beginning of fiscal 2009; therefore the previously reported quarterly segment results have been restated to reflect the impact of adoption. The adoption primarily impacted the Services and Enterprise Storage and Servers financial reporting segments.

(c) Certain fiscal 2009 organizational reclassifications have been reflected retroactively to provide improved visibility and comparability. For each of the quarters in fiscal year 2008, the reclassifications resulted in the transfer of revenue among the Services, HP Software and Imaging and Printing Group financial reporting segments. In addition, revenue was transferred among the business units within the Services, HP Software, Imaging and Printing Group, and Personal Systems Group segments. There was no impact on the previously reported financial results for the Enterprise Storage and Servers, HP Financial Services and Corporate Investments segments.

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

	Twelve months ended October 31,
	2009 ^(b)			2008 ^(c)

Net revenue:

Infrastructure technology outsourcing	$	15,751		$	7,488
Technology services		9,789			10,297
Application services		6,032			2,411
Business process outsourcing		2,941			723
Other		180			58
Services ^(a)		34,693			20,977
Industry standard servers		9,296			11,657
Storage		3,473			4,205
Business critical systems		2,590			3,538
Enterprise Storage and Servers		15,359			19,400
Business technology optimization		2,385			2,792
Other software		1,187			1,428
HP Software		3,572			4,220
Technology Solutions Group		53,624			44,597
Notebooks		20,210			22,657
Desktops		12,864			16,643
Workstations		1,261			1,885
Handhelds		172			360
Other		798			750
Personal Systems Group		35,305			42,295
Supplies		16,532			18,472
Commercial Hardware		4,778			7,422
Consumer Hardware		2,701			3,720
Imaging and Printing Group		24,011			29,614
HP Financial Services		2,673			2,698
Corporate Investments		768			965
Total Segments		116,381			120,169

Eliminations of intersegment net revenue and other		(1,829	)		(1,805	)

Total HP Consolidated	$	114,552		$	118,364

(a) Includes the results of EDS, which was acquired on August 26, 2008. The businesses included in the former consulting and integration business unit were divided among the application services and technology services business units and the HP software segment. The businesses included in the former outsourcing services business unit were divided among the infrastructure technology outsourcing and business process outsourcing business units. The infrastructure technology outsourcing, application services and business process outsourcing business units were added with the technology services business unit, and these four business units now comprise the Services segment.

(b) In the fourth quarter of fiscal 2009, HP early adopted Accounting Standards Update ("ASU") No. 2009-13, "Multiple-Deliverable Revenue Arrangements" and ASU No. 2009-14, "Certain Revenue Arrangements That Include Software Elements." HP adopted these standards as of the beginning of fiscal 2009; therefore the previously reported quarterly segment results have been restated to reflect the impact of adoption. The adoption primarily impacted the Services and Enterprise Storage and Servers financial reporting segments.

(c) Certain fiscal 2009 organizational reclassifications have been reflected retroactively to provide improved visibility and comparability. For each of the quarters in fiscal year 2008, the reclassifications resulted in the transfer of revenue among the Services, HP Software and Imaging and Printing Group financial reporting segments. In addition, revenue was transferred among the business units within the Services, HP Software, Imaging and Printing Group, and Personal Systems Group segments. There was no impact on the previously reported financial results for the Enterprise Storage and Servers, HP Financial Services and Corporate Investments segments.

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

	Three months ended
	October 31, 2009 ^(c)		July 31, 2009 ^(c)		October 31, 2008

Numerator:
Net earnings	$	2,412	$	1,671	$	2,112
Adjustment for interest expense on zero-coupon subordinated convertible notes, net of taxes		-		-		-

Net earnings, adjusted	$	2,412	$	1,671	$	2,112

Denominator:
Weighted-average shares used to compute basic EPS		2,366		2,382		2,440
Effect of dilutive securities:
Dilution from employee stock plans		67		54		76
Zero-coupon subordinated convertible notes		-		-		-
Dilutive potential common shares		67		54		76

Weighted-average shares used to compute diluted EPS		2,433		2,436		2,516

Net earnings per share:
Basic ^(a)	$	1.02	$	0.70	$	0.87
Diluted ^(b)	$	0.99	$	0.69	$	0.84

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

(b) The diluted earnings per share included additional dilution from potential issuance of common stock, such as stock issuable pursuant to exercise of stock options and vesting of restricted stock units, except when such issuances would be anti-dilutive.

(c) In the fourth quarter of fiscal 2009, HP early adopted Accounting Standards Update ("ASU") No. 2009-13, "Multiple-Deliverable Revenue Arrangements" and ASU No. 2009-14, "Certain Revenue Arrangements That Include Software Elements." As a result, fiscal 2009 net revenues and net earnings were higher by $255 million and $55 million, respectively. Fourth quarter fiscal 2009 net revenues and net earnings were higher by $82 million and $19 million, respectively. HP adopted these standards as of the beginning of fiscal 2009; therefore the previously reported quarterly results have been restated to reflect the impact of adoption.

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

	Twelve months ended October 31,
	2009 ^(c)		2008
	(unaudited)

Numerator:
Net earnings	$	7,660	$	8,329
Adjustment for interest expense on zero-coupon subordinated convertible notes, net of taxes		-		3

Net earnings, adjusted	$	7,660	$	8,332

Denominator:
Weighted-average shares used to compute basic EPS		2,388		2,483
Effect of dilutive securities:
Dilution from employee stock plans		49		81
Zero-coupon subordinated convertible notes		-		3
Dilutive potential common shares		49		84

Weighted-average shares used to compute diluted EPS		2,437		2,567

Net earnings per share:
Basic ^(a)	$	3.21	$	3.35
Diluted ^(b)	$	3.14	$	3.25

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

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

(c) In the fourth quarter of fiscal 2009, HP early adopted Accounting Standards Update ("ASU") No. 2009-13, "Multiple-Deliverable Revenue Arrangements" and ASU No. 2009-14, "Certain Revenue Arrangements That Include Software Elements." As a result, fiscal 2009 net revenues and net earnings were higher by $255 million and $55 million, respectively. Fourth quarter fiscal 2009 net revenues and net earnings were higher by $82 million and $19 million, respectively. HP adopted these standards as of the beginning of fiscal 2009; therefore the previously reported quarterly results have been restated to reflect the impact of adoption.

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

	Three months ended
	October 31, 2009 ^(c)		July 31, 2009 ^(c)		October 31, 2008

Numerator:
Non-GAAP net earnings	$	2,764	$	2,239	$	2,594
Adjustment for interest expense on zero-coupon subordinated convertible notes, net of taxes		-		-		-

Non-GAAP net earnings, adjusted	$	2,764	$	2,239	$	2,594

Denominator:
Weighted-average shares used to compute basic EPS		2,366		2,382		2,440
Effect of dilutive securities:
Dilution from employee stock plans		67		54		76
Zero-coupon subordinated convertible notes		-		-		-
Dilutive potential common shares		67		54		76

Weighted-average shares used to compute diluted EPS		2,433		2,436		2,516

Non-GAAP net earnings per share:
Basic ^(a)	$	1.17	$	0.94	$	1.06
Diluted ^(b)	$	1.14	$	0.92	$	1.03

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

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

(c) In the fourth quarter of fiscal 2009, HP early adopted Accounting Standards Update ("ASU") No. 2009-13, "Multiple-Deliverable Revenue Arrangements" and ASU No. 2009-14, "Certain Revenue Arrangements That Include Software Elements." As a result, fiscal 2009 net revenues and Non-GAAP net earnings were higher by $255 million and $55 million, respectively. Fourth quarter fiscal 2009 net revenues and Non-GAAP net earnings were higher by $82 million and $19 million, respectively. HP adopted these standards as of the beginning of fiscal 2009; therefore the previously reported quarterly results have been restated to reflect the impact of adoption.

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

	Twelve months ended October 31,
	2009 ^(c)		2008

Numerator:
Non-GAAP net earnings	$	9,393	$	9,302
Adjustment for interest expense on zero-coupon subordinated convertible notes, net of taxes		-		3

Non-GAAP net earnings, adjusted	$	9,393	$	9,305

Denominator:
Weighted-average shares used to compute basic EPS		2,388		2,483
Effect of dilutive securities:
Dilution from employee stock plans		49		81
Zero-coupon subordinated convertible notes		-		3
Dilutive potential common shares		49		84

Weighted-average shares used to compute diluted EPS		2,437		2,567

Non-GAAP net earnings per share:
Basic ^(a)	$	3.93	$	3.75
Diluted ^(b)	$	3.85	$	3.62

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

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

(c) In the fourth quarter of fiscal 2009, HP early adopted Accounting Standards Update ("ASU") No. 2009-13, "Multiple-Deliverable Revenue Arrangements" and ASU No. 2009-14, "Certain Revenue Arrangements That Include Software Elements." As a result, fiscal 2009 net revenues and Non-GAAP net earnings were higher by $255 million and $55 million, respectively. Fourth quarter fiscal 2009 net revenues and Non-GAAP net earnings were higher by $82 million and $19 million, respectively. HP adopted these standards as of the beginning of fiscal 2009; therefore the previously reported quarterly results have been restated to reflect the impact of adoption.

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

	Three months ended
	July 31, 2009 ^(a) (Restated)			April 30, 2009 ^(a) (Restated)			January 31, 2009 ^(a) (Restated)

Net revenue	$	27,585		$	27,383		$	28,807

Costs and expenses:
Cost of sales		21,031			20,945			22,073
Research and development		667			716			732
Selling, general and administrative		2,874			2,880			2,893
Amortization of purchased intangible assets		379			380			412
In-process research and development charges		-			-			6
Restructuring charges		362			94			146
Acquisition-related charges		59			75			48
Total costs and expenses		25,372			25,090			26,310


Earnings from operations		2,213			2,293			2,497

Interest and other, net		(177	)		(180	)		(232	)

Earnings before taxes		2,036			2,113			2,265

Provision for taxes		365			392			409

Net earnings	$	1,671		$	1,721		$	1,856

Net earnings per share:
Basic	$	0.70		$	0.72		$	0.77
Diluted	$	0.69		$	0.71		$	0.75

Cash dividends declared per share	$	0.16		$	-		$	0.16

Weighted-average shares used to compute net earnings per share:
Basic		2,382			2,394			2,410
Diluted		2,436			2,438			2,464

Impact from adoption of ASU No. 2009-13 and ASU No. 2009-14 was as follows:
Net Revenue	$	134		$	32		$	7
Cost of Sales		95			26			4
Earnings before taxes		39			6			3
Net earnings	$	29		$	5		$	2
Net earnings per share	$	0.02		$	0.01		$	-

(a) In the fourth quarter of fiscal 2009, HP early adopted Accounting Standards Update ("ASU") No. 2009-13, "Multiple-Deliverable Revenue Arrangements" and ASU No. 2009-14, "Certain Revenue Arrangements That Include Software Elements." As a result, fiscal 2009 net revenues and net earnings were higher by $255 million and $55 million, respectively. Fourth quarter fiscal 2009 net revenues and net earnings were higher by $82 million and $19 million, respectively. HP adopted these standards as of the beginning of fiscal 2009; therefore the previously reported quarterly results have been restated to reflect the impact of adoption.

Use of Non-GAAP Financial Measures

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