HP Reports Q1 2007 Results

HP estimates full year FY07 revenue will be approximately $98.0 billion to $99.0 billion.

FY07 GAAP diluted EPS expected to be in the range of $2.35 to $2.40, and FY07 non-GAAP diluted EPS is expected to be in the range of $2.60 to $2.65. FY07 non-GAAP diluted EPS estimates exclude after-tax costs of approximately $0.25 per share, related primarily to the amortization of purchased intangible assets and in process research and development charges.

Second quarter and FY07 GAAP diluted EPS estimates do not reflect the impact of the retirement plan modifications and the voluntary early retirement program because the level of participation in the retirement program is uncertain.

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/hpinfo/investor/.

HP's Q1 FY07 earnings conference call is accessible via an audio webcast at www.hp.com/hpinfo/investor/financials/quarters/2007/q1webcast.html.

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 $94.1 billion for the four fiscal quarters ended Jan. 31, 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, 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 any 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 from time to time in HP's Securities and Exchange Commission reports, including but not limited to the risks described in 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 January 31, 2007. In particular, determining HP's actual tax balances and provisions as of January 31, 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
                                   January 31, October 31, January 31,
                                      2007        2006        2006
                                   ----------- ----------- -----------

Net revenue                           $25,082     $24,555     $22,659

Costs and expenses(a):
  Cost of sales                        19,136      18,593      17,392
  Research and development                877         870         871
  Selling, general and
   administrative                       2,908       2,886       2,692
  Amortization of purchased
   intangible assets                      201         153         147
  In-process research and
   development charges                    167           -          50
  Restructuring                           (41)        152          15
  Pension curtailment                      (9)          -           -
                                    -----------  -----------  -----------
        Total  costs  and  expenses                      23,239            22,654            21,167
                                                                      -----------  -----------  -----------

Earnings  from  operations                                1,843              1,901              1,492

Interest  and  other,  net                                      111                  190                    38
Gains  (losses)  on  investments                            10                    14                    (2)
                                                                      -----------  -----------  -----------

Earnings  before  taxes                                      1,964              2,105              1,528

Provision  for  taxes(b)                                        417                  408                  301
                                                                      -----------  -----------  -----------

Net  earnings                                                      $1,547            $1,697            $1,227
                                                                      ===========  ===========  ===========

Net  earnings  per  share:
    Basic                                                                  $0.57              $0.62              $0.43
    Diluted                                                              $0.55              $0.60              $0.42

Cash  dividends  declared  per  share              $0.16                    $-              $0.16

Weighted-average  shares  used  to  compute  net  earnings  per  share:

    Basic                                                                  2,705              2,730              2,822
    Diluted                                                              2,801              2,816              2,893

(a)  Stock-based  compensation  expense  included  under  SFAS  123R  was  as

    Cost  of  sales                                                      $45                  $37                  $39
    Research  and  development                                  19                    20                    18
    Selling,  general  and
      administrative                                                    99                    84                    87
                                                                      -----------  -----------  -----------
        Total  costs  and  expenses                          $163                $141                $144

(b)  Tax  benefit  from  stock-based
  compensation                                                        $(44)              $(40)              $(43)

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