HP Reports Second Quarter 2007 Results

More information on HP's quarterly earnings, including additional financial analysis and an earnings overview presentation, is available on HP's Investor Relations website at www.hp.com/investor/home.

HP's Q2 FY07 earnings conference call is accessible via an audio webcast at www.hp.com/investor/q22007webcast.

About HP

HP focuses on simplifying technology experiences for all of its customers - from individual consumers to the largest businesses. With a portfolio that spans printing, personal computing, software, services and IT infrastructure, HP is among the world's largest IT companies, with revenue totaling $97.1 billion for the four fiscal quarters ended April 30, 2007. More information about HP is available at www.hp.com.

Use of non-GAAP financial information

To supplement HP's consolidated condensed financial statements presented on a GAAP basis, HP provides non-GAAP operating profit, non-GAAP operating margin, non-GAAP net earnings, non-GAAP diluted earnings per share and gross cash. HP also provides forecasts of non-GAAP diluted earnings per share. A reconciliation of the adjustments to GAAP results for this quarter and prior periods is included in the tables below. In addition, an explanation of the ways in which HP management uses these non-GAAP measures to evaluate its business, the substance behind HP management's decision to use these non-GAAP measures, the material limitations associated with the use of these non-GAAP measures, the manner in which HP management compensates for those limitations, and the substantive reasons why HP management believes that these non-GAAP measures provide useful information to investors is included under "Use of Non-GAAP Financial Measures" after the tables below. This additional non-GAAP financial information is not meant to be considered in isolation or as a substitute for operating profit, operating margin, net earnings, diluted earnings per share, or cash and cash equivalents prepared in accordance with GAAP.

Forward-looking statements

This news release contains forward-looking statements that involve risks, uncertainties and assumptions. If the risks or uncertainties ever materialize or the assumptions prove incorrect, the results of HP may differ materially from those expressed or implied by such forward-looking statements and assumptions. All statements other than statements of historical fact are statements that could be deemed forward-looking statements, including but not limited to any projections of revenue, margins, expenses, earnings, tax provisions, cash flows, benefit obligations, share repurchases or other financial items; any statements of the plans, strategies, and objectives of management for future operations, including execution of cost reduction programs and restructuring plans; any statements concerning the expected development, performance or market share relating to products or services; any statements regarding pending investigations, claims or disputes; any statements of expectation or belief; and any statements of assumptions underlying any of the foregoing. Risks, uncertainties and assumptions include macroeconomic and geopolitical trends and events; execution and performance of contracts by suppliers, customers and partners; the challenge of managing asset levels, including inventory; the difficulty of aligning expense levels with revenue changes; assumptions related to pension and other post-retirement costs; expectations and assumptions relating to the execution and timing of cost reduction programs and restructuring plans; the resolution of pending investigations, claims and disputes; and other risks that are described in HP's Quarterly Report on Form 10-Q for the fiscal quarter ended January 31, 2007 and HP's other filings with the Securities and Exchange Commission, including HP's Annual Report on Form 10-K for the fiscal year ended October 31, 2006. As in prior quarters, 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 April 30, 2007. In particular, determining HP's actual tax balances and provisions as of April 30, 2007 and for the fiscal quarter then ended requires extensive internal and external review of tax data (including consolidating and reviewing the tax provisions of numerous domestic and foreign entities) which is being completed in the ordinary course of preparing HP's Form 10-Q. HP assumes no obligation and does not intend to update these forward-looking statements.

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

(C) 2007 Hewlett-Packard Development Company, L.P. The information contained herein is subject to change without notice. HP shall not be liable for technical or editorial errors or omissions contained herein.
                (In millions except per share amounts)

                                          Three months ended
                                 April 30,    January 31,   April 30,
                                    2007         2007         2006
                                ------------ ------------- -----------

Net revenue                         $25,534       $25,082     $22,554

Costs and expenses(a):
     Cost of sales                   19,283        19,136      16,970
     Research and development           903           877         930
     Selling, general and
      administrative                  3,044         2,908       2,858
     Amortization of purchased
      intangible assets                 212           201         151
     In-process research and
      development charges                19           167           2
     Restructuring                      453           (41)        (14)
     Pension curtailments and
      pension settlements, net         (508)           (9)          -
                                ------------ ------------- -----------
          Total costs and
           expenses                  23,406        23,239      20,897
                                ------------ ------------- -----------

Earnings from operations              2,128                1,843              1,657

Interest  and  other,  net                                    87                      111                  157
Gains  on  investments                                          13                        10                      6
                                                                ------------  -------------  -----------

Earnings  before  taxes                                  2,228                  1,964              1,820

Provision  for  (benefit  from)
  taxes(b)                                                              453                      417                  (79)
                                                                ------------  -------------  -----------

Net  earnings                                                  $1,775                $1,547            $1,899
                                                                ============  =============  ===========

Net  earnings  per  share:
          Basic                                                        $0.67                  $0.57              $0.68
          Diluted                                                    $0.65                  $0.55              $0.66

Cash  dividends  declared  per
  share                                                                      $-                  $0.16                    $-

Weighted-average  shares  used  to  compute  net  earnings  per  share:
          Basic                                                        2,638                  2,705              2,809
          Diluted                                                    2,731                  2,801              2,887

(a)  Stock-based  compensation  expense  included  under  SFAS  123R  was  as
            Cost  of  sales                                          $42                      $45                  $33
            Research  and  development                      18                        19                    15
            Selling,  general  and
              administrative                                        94                        99                    76
                                                                ------------  -------------  -----------
                    Total  costs  and
                      expenses                                        $154                    $163                $124

(b)  Tax  benefit  from  stock-
  based  compensation                                        $(44)                  $(48)              $(39)

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