These estimates for both the second quarter and full year fiscal 2010 do not reflect the potential impact of the proposed acquisition of 3Com Corporation that HP announced on Nov. 11, 2009.

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 Q1 FY10 earnings conference call is accessible via an audio webcast at www.hp.com/investor/q12010webcast.

About HP

HP creates new possibilities for technology to have a meaningful impact on people, businesses, governments and society. As 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 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 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, acquisition synergies, currency exchange rates or other financial items; any statements of the plans, strategies and objectives of management for future operations, including the execution of cost reduction programs and restructuring plans; any statements concerning the expected development, performance or market share relating to products or services; any statements regarding current or future macroeconomic trends or events and the impact of those trends and events on HP and its financial performance; any statements regarding pending investigations, claims or disputes; any statements of expectation or belief; and any statements of assumptions underlying any of the foregoing. Risks, uncertainties and assumptions include macroeconomic and geopolitical trends and events; execution and performance of contracts by HP and its 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 Annual Report on Form 10-K for the fiscal year ended October 31, 2009 and HP’s other filings with the Securities and Exchange Commission. 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 January 31, 2010. In particular, determining HP’s actual tax balances and provisions as of January 31, 2010 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 http://www.hp.com/hpinfo/newsroom/.

© 2010 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 inn the express warranty statements accompanying such products and services. Nothing herein should be constructed as constructing an additional warranty. HP shall not be liable for technical or editorial errors or omissions contained herein.

HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(Unaudited)
(In millions except per share amounts)
	Three months ended
	January 31, 2010				October 31, 2009				January 31, 2009
Net revenue	$	31,177			$	30,777			$	28,807
Costs and expenses (a) :
Cost of sales		24,062				23,475				22,073
Research and development		681				704				732
Selling, general and administrative		2,932				2,966				2,893
Amortization of purchased intangible assets		330				400				412
In-process research and development charges		-				1				6
Restructuring charges		131				38				146
Acquisition-related charges		38				60				48
Total costs and expenses		28,174				27,644				26,310
Earnings from operations		3,003				3,133				2,497
Interest and other, net		(87	)			(132	)			(232	)
Earnings before taxes		2,916				3,001				2,265
Provision for taxes (b)		593				589				409
Net earnings	$	2,323			$	2,412			$	1,856
Net earnings per share:
Basic	$	0.99			$	1.02			$	0.77
Diluted	$	0.96			$	0.99			$	0.75
Cash dividends declared per share	$	0.16			$	-			$	0.16
Weighted-average shares used to compute net earnings per share:
Basic		2,358				2,366				2,410
Diluted		2,427				2,433				2,464
(a) Stock-based compensation expense was as follows:
Cost of sales	$	47			$	37			$	52
Research and development		14				10				17
Selling, general and administrative		119				86				85
Acquisition-related charges		1				1				6
Total costs and expenses	$	181			$	134			$	160
(b) Tax benefit from stock-based compensation	$	(58	)		$	(41	)		$	(48	)

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 January 31, 2010				Diluted earnings per share				Three months ended October 31, 2009				Diluted earnings per share				Three months ended January 31, 2009				Diluted earnings per share
GAAP net earnings		$	2,323			$	0.96			$	2,412			$	0.99			$	1,856			$	0.75
Non-GAAP adjustments:
Amortization of purchased intangible assets			330				0.14				400				0.16				412				0.17
In-process research and development charges			-				-				1				-				6				-
Restructuring charges			131				0.05				38				0.02				146				0.06
Acquisition-related charges			38				0.01				60				0.03				48				0.02
Adjustments for taxes			(155	)			(0.06	)			(147	)			(0.06	)			(181	)			(0.07	)
Non-GAAP net earnings		$	2,667			$	1.10			$	2,764			$	1.14			$	2,287			$	0.93
GAAP earnings from operations		$	3,003							$	3,133							$	2,497
Non-GAAP adjustments:
Amortization of purchased intangible assets			330								400								412
In-process research and development charges			-								1								6
Restructuring charges			131								38								146
Acquisition-related charges			38								60								48
Non-GAAP earnings from operations		$	3,502							$	3,632							$	3,109
GAAP operating margin			10	%							10	%							9	%
Non-GAAP adjustments			1	%							2	%							2	%
Non-GAAP operating margin			11	%							12	%							11	%

HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(In millions)
		January 31, 2010			October 31, 2009
		(unaudited)
ASSETS
Current assets:
Cash and cash equivalents		$	13,547		$	13,279
Short-term investments			60			55
Accounts receivable			14,503			16,537
Financing receivables			2,765			2,675
Inventory			6,630			6,128
Other current assets			14,192			13,865
Total current assets			51,697			52,539
Property, plant and equipment			11,164			11,262
Long-term financing receivables and other assets			11,423			11,289
Goodwill and purchased intangible assets			39,334			39,709
Total assets		$	113,618		$	114,799
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and short-term borrowings		$	1,862		$	1,850
Accounts payable			13,557			14,809
Employee compensation and benefits			3,038			4,071
Taxes on earnings			1,014			910
Deferred revenue			6,412			6,182
Other accrued liabilities			14,909			15,181
Total current liabilities			40,792			43,003
Long-term debt			14,009			13,980
Other liabilities			16,853			17,052		(a)
Stockholders' equity
HP Stockholders' equity			41,701			40,517
Noncontrolling interests			263			247		(a)
Total stockholders' equity			41,964			40,764
Total liabilities and stockholders' equity		$	113,618		$	114,799
(a) Reflects the adoption of the accounting standard related to noncontrolling interests in consolidated financial statements.

HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(In millions)
		Three months ended
		January 31, 2010				January 31, 2009
Cash flows from operating activities:
Net earnings		$	2,323			$	1,856
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization			1,162				1,214
Stock-based compensation expense			181				160
Provision for bad debt and inventory			92				168
In-process research and development charges			-				6
Restructuring charges			131				146
Deferred taxes on earnings			(184	)			(63	)
Excess tax benefit from stock-based compensation			(128	)			(13	)
Other, net			87				3
Changes in assets and liabilities:
Accounts and financing receivables			1,875				1,780
Inventory			(543	)			156
Accounts payable			(1,268	)			(3,089	)
Taxes on earnings			510				263
Restructuring			(400	)			(209	)
Other assets and liabilities			(1,431	)			(1,252	)
Net cash provided by operating activities			2,407				1,126
Cash flows from investing activities:
Investment in property, plant and equipment			(821	)			(816	)
Proceeds from sale of property, plant and equipment			112				152
Purchases of available-for-sale securities and other investments			(9	)			-
Maturities and sales of available-for-sale securities and other investments			-				46
Payments made in connection with business acquisitions, net			7				(345	)
Net cash used in investing activities			(711	)			(963	)
Cash flows from financing activities:
Issuance of commercial paper and notes payable, net			78				57
Issuance of debt			29				2,004
Payment of debt			(80	)			(69	)
Issuance of common stock under employee stock plans			1,319				299
Repurchase of common stock			(2,713	)			(1,238	)
Excess tax benefit from stock-based compensation			128				13
Dividends			(189	)			(193	)
Net cash (used in) provided by financing activities			(1,428	)			873
Increase in cash and cash equivalents			268				1,036
Cash and cash equivalents at beginning of period			13,279				10,153
Cash and cash equivalents at end of period		$	13,547			$	11,189

	HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
	SEGMENT INFORMATION
	(Unaudited)
	(In millions)
			Three months ended
			January 31, 2010				October 31, 2009				January 31, 2009 (a)
Net revenue:
	Services		$	8,651			$	8,926			$	8,747
	Enterprise Storage and Servers			4,391				4,218				3,949
	HP Software			878				967				878
	HP Enterprise Business			13,920				14,111				13,574
	Personal Systems Group			10,584				9,862				8,792
	Imaging and Printing Group			6,206				6,454				5,981
	HP Financial Services			719				726				636
	Corporate Investments			236				191				196
	Total Segments			31,665				31,344				29,179
	Eliminations of intersegment net revenue and other			(488	)			(567	)			(372	)
	Total HP Consolidated		$	31,177			$	30,777			$	28,807
Earnings from operations:
	Services		$	1,364			$	1,444			$	1,124
	Enterprise Storage and Servers			552				481				406
	HP Software			167				234				140
	HP Enterprise Business			2,083				2,159				1,670
	Personal Systems Group			530				460				436
	Imaging and Printing Group			1,054				1,171				1,105
	HP Financial Services			67				66				41
	Corporate Investments			19				(8	)			(19	)
	Total Segments			3,753				3,848				3,233
	Corporate and unallocated costs and eliminations			(88	)			(100	)			24
	Unallocated costs related to stock-based compensation expense			(163	)			(116	)			(148	)
	Amortization of purchased intangible assets			(330	)			(400	)			(412	)
	In-process research and development charges			-				(1	)			(6	)
	Restructuring charges			(131	)			(38	)			(146	)
	Acquisition-related charges			(38	)			(60	)			(48	)
	Interest and other, net			(87	)			(132	)			(232	)
Total HP Consolidated Earnings Before Taxes			$	2,916			$	3,001			$	2,265
(a) As a result of HP's adoption in fiscal 2009 of the revenue recognition standards related to multiple-deliverable revenue arrangements and revenue arrangements that included software, certain previously reported segment and business unit results have been restated. The adoption primarily impacted the Services, Enterprise Storage and Servers and Personal Systems Group financial reporting segments.

HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
SEGMENT / BUSINESS UNIT INFORMATION
(Unaudited)
(In millions)
		Three months ended
		January 31, 2010				October 31, 2009 (a)				January 31, 2009 (a)(b)
Net revenue:
Infrastructure Technology Outsourcing		$	3,933			$	4,043			$	3,843
Technology Services			2,406				2,459				2,453
Application Services			1,509				1,579				1,632
Business Process Outsourcing			734				785				754
Other			69				60				65
Services			8,651				8,926				8,747
Industry Standard Servers			2,946				2,669				2,322
Storage			889				918				913
Business Critical Systems			556				631				714
Enterprise Storage and Servers			4,391				4,218				3,949
Business Technology Optimization			591				660				594
Other Software			287				307				284
HP Software			878				967				878
HP Enterprise Business			13,920				14,111				13,574
Notebooks			6,125				5,794				4,907
Desktops			3,840				3,481				3,308
Workstations			375				342				333
Handhelds			25				36				57
Other			219				209				187
Personal Systems Group			10,584				9,862				8,792
Supplies			4,081				4,430				4,050
Commercial Hardware			1,291				1,261				1,239
Consumer Hardware			834				763				692
Imaging and Printing Group			6,206				6,454				5,981
HP Financial Services			719				726				636
Corporate Investments			236				191				196
Total Segments			31,665				31,344				29,179
Eliminations of intersegment net revenue and other			(488	)			(567	)			(372	)
Total HP Consolidated		$	31,177			$	30,777			$	28,807
(a) Certain fiscal 2010 organizational reclassifications have been reflected retroactively to provide improved visibility and comparability. For each of the quarters in fiscal year 2009, the reclassifications resulted in the transfer of revenue among the business units within the Services segment only. There was no impact to the previously reported segment financial results.
(b) As a result of HP's adoption in fiscal 2009 of the revenue recognition standards related to multiple-deliverable revenue arrangements and revenue arrangements that included software, certain previously reported segment and business unit results have been restated. The adoption primarily impacted the Services, Enterprise Storage and Servers and Personal Systems Group financial reporting segments.

HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
CALCULATION OF NET EARNINGS PER SHARE
(Unaudited)
(In millions except per share amounts)
		Three months ended
		January 31, 2010			October 31, 2009			January 31, 2009
Numerator:
Net earnings		$	2,323		$	2,412		$	1,856
Denominator:
Weighted-average shares used to compute
basic EPS			2,358			2,366			2,410
Dilutive effect of employee stock plans			69			67			54
Weighted-average shares used to compute diluted EPS			2,427			2,433			2,464
Net earnings per share:
Basic (a)		$	0.99		$	1.02		$	0.77
Diluted (b)		$	0.96		$	0.99		$	0.75
(a) Basic earnings per share was calculated based on net earnings and the weighted-average number of shares outstanding during the reporting period.
(b) Diluted earnings per share included any dilutive effect of outstanding stock options, performance-based restricted units, restricted stock units and restricted stock awards.

HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
CALCULATION OF NON-GAAP NET EARNINGS PER SHARE
(Unaudited)
(In millions except per share amounts)
		Three months ended
		January 31, 2010			October 31, 2009			January 31, 2009
Numerator:
Non-GAAP net earnings		$	2,667		$	2,764		$	2,287
Denominator:
Weighted-average shares used to compute basic EPS			2,358			2,366			2,410
Dilutive effect of employee stock plans			69			67			54
Weighted-average shares used to compute diluted EPS			2,427			2,433			2,464
Non-GAAP net earnings per share:
Basic (a)		$	1.13		$	1.17		$	0.95
Diluted (b)		$	1.10		$	1.14		$	0.93
(a) 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) Diluted non-GAAP earnings per share included any dilutive effect of outstanding stock options, performance-based restricted units, restricted stock units and restricted stock awards.

Use of Non-GAAP Financial Measures