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Announcement
HP’s management uses non-GAAP operating expense, non-GAAP OI&E, non-GAAP operating profit, non-GAAP net earnings, non-
GAAP diluted earnings per share, and HP’s non-GAAP tax rate to evaluate and forecast HP’s performance before gains, losses or other
charges that are considered by HP’s management to be outside of HP’s core business segment operating results. Gross cash, net cash
and free cash flow are liquidity measures that provide useful information to management about the amount of cash available for
investment in HP’s businesses, funding strategic acquisitions, repurchasing stock and other purposes.
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. 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 net earnings, non-GAAP diluted earnings per share and HP’s
non-GAAP tax rate and therefore does not reflect the full economic effect of the loss in value of those intangible assets. In addition,
items such as restructuring charges that are excluded from non-GAAP operating expense, non-GAAP operating profit, non-GAAP net
earnings, non-GAAP diluted earnings per share and HP’s non-GAAP tax rate can have a material impact on cash flows and earnings
per share. HP may not be able to liquidate the long-term investments included in gross cash immediately, which may limit the
usefulness of gross cash as a liquidity measure. In addition, free cash flow does not represent the total increase or decrease in the cash
balance for the period. The non-GAAP financial information that we provide also may differ from the non-GAAP information provided
by other companies.
We compensate for the limitations on our use of these non-GAAP financial measures by relying primarily on our GAAP financial
statements and using non-GAAP financial measures only supplementally. We also provide robust and detailed reconciliations of each
non-GAAP financial measure to the most directly comparable GAAP measure, and we encourage investors to review carefully those
reconciliations.
We believe that providing these non-GAAP financial measures 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. We further believe that providing this information better enables 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.
Executed well in a challenging consumer PC market with margin expansion and share gains
Gained worldwide market share sequentially across all PC categories – consumer, commercial, notebook and desktop
Increased PSG operating profit 27% year over year, delivering a 6.4% operating margin in Q1
Opportunity in Services to drive growth with more higher value-added solutions
Solid long term signings and operating margin expansion
Opportunity to improve short-term signings with more higher value services and add-on projects
OP OP $ OP %
$ in millions Q1 Revenue Growth Y/Y% OP $ % of rev Y/Y Y/Y
Personal Systems Group $10,449 (1%) $672 6.4% $142 1.4 pts
Imaging and Printing Group $6,630 7% $1,129 17.0% $75 0.0 pts
1. All non-GAAP numbers have been adjusted to exclude certain items. A reconciliation of specific adjustments to GAAP results for this quarter and prior periods is included on slide
17 and in the GAAP to non-GAAP slides that appear as part of the supplemental slides of this presentation. A description of HP’s use of non-GAAP information is provided on slide
3 under “Use of non-GAAP Financial Information.”
2. Includes Corporate Investments & Eliminations
5 February 22, 2011 http://www.hp.com/investor/home
Q1 FY11 REVENUE
By Segment By Region
U.S.
Imaging & 35%
Printing Group Services
21% 27% EMEA
Americas
38%,
44%, up 6% Y/Y
FLAT Y/Y
Enterprise Canada/
Personal Servers, Latin America
Systems Group Storage & 9%
32% Networking Asia Pacific
17% 18%,
up 7% Y/Y
HP Financial
Services & Other
HP Software 1%
2%
6 February 22, 2011 http://www.hp.com/investor/home
REVENUE & EPS PERFORMANCE
$36 $1.50
$1.40
$34
$1.30
$32
$1.20
$30
$1.10
$28 $1.00
$0.90
$26
$0.80
$24
$0.70
$22
$0.60
$20 $0.50
$0.40
$18
$0.30
$16
$0.20
$14
$0.10
$12 $0.00
1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11
Revenue (in billions) $28.5 $28.3 $28.0 $33.6 $28.8 $27.4 $27.6 $30.8 $31.2 $30.8 $30.7 $33.3 $32.3
Non-GAAP EPS $0.86 $0.87 $0.86 $1.03 $0.93 $0.86 $0.92 $1.14 $1.07 $1.09 $1.08 $1.33 $1.36
$ in billions
$12 10% $8 10%
$10 5% $6 5%
$8 0% $4 0%
$6 (5%) $2 (5%)
4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11
EMEA $8
Asia Pacific 25%
$15 30%
$ in billions
$ in billions
$9 10%
$4 5%
$6 0%
$2 (5%)
$3 (10%)
$0 (20%) $0 (15%)
4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11
25%
(%)% 20%
15%
growth
growth
10%
revenue
revenue
5%
Y/Y
0%
Y/Y
(5%)
(10%)
1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11
Constant currency 8.2% 4.5% 4.7% 15.6% 4.2% 2.9% 4.0% -5.0% 5.4% 8.4% 10.6% 8.8% 4.3%
As reported 13.5% 10.7% 10.5% 18.8% 1.2% -3.1% -1.6% -8.4% 8.2% 12.7% 11.4% 8.1% 3.6%
$1,400 16%
$8.0
$1,200 14%
OP % revenue
$6.0 $1,000 12%
$800 10%
$4.0 $600 8%
$400 6%
$2.0
$200 4%
$0.0 $0 2%
1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11
OP % revenue
$600
10%
$3.0 $500 8%
$400 6%
$2.0 $300
4%
$200
$1.0 2%
$100
$0 0%
$0.0
1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11
1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11
$250 30%
$600
$200 25%
OP %revenue
$400 $150 20%
$100 15%
$200
$50 10%
$0 $0 5%
1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11
50%
12 February 22, 2011 http://www.hp.com/investor/home
PERSONAL SYSTEMS GROUP (PSG)
In billions Revenue In millions Operating profit
$12.0 $700 7%
$10.0 $600 6%
$500 5%
$8.0
OP % revenue
$400 4%
$6.0
$300 3%
$4.0
$200 2%
$2.0 $100 1%
$0.0 $0 0%
1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11
OP % of revenue
$4.0 $900 14%
$0.0 $500 6%
1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11
$75 10%
$800
$60 8%
OP %revenue
$600
$45 6%
$400
$30 4%
$200 $15 2%
$0 $0 0%
1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11
58%
In millions except
per share amounts Q1 FY11 Q4 FY10 Q1FY10
1. All non-GAAP numbers have been adjusted to exclude certain items. A reconciliation of specific adjustments to GAAP results for this quarter and prior periods is included on slide 17 and
in the GAAP to non-GAAP slides that appear as part of the supplemental slides of this presentation. A description of HP’s use of non-GAAP information is provided on slide 3 under “Use of
non-GAAP Financial Information.”
2 At the time of HP’s Q4 FY10 earnings announcement, HP disclosed that in Q1 FY11 it expected to realize a one-time gain of approximately 4 cents per share primarily related to the
disposition of real estate. Included in HP’s Q1 FY11 results is a net one-time gain of 5 cents per share primarily related to the disposition of real estate, reflected as a one–time credit of
$250 million or 80 basis points to operating expense offset by an $80 million charge to OI&E and a higher effective tax rate.
16 February 22, 2011 http://www.hp.com/investor/home
Q1 FY11 GAAP to non-GAAP BRIDGE
Amort. of
In millions except Purchased Acquisition related
per share amounts GAAP Intangibles Restructuring charges Non-GAAP
$10.0
$5.0
$0.0
($5.0)
($10.0)
($15.0)
1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11
(1)
Gross cash $11.3 $13.0 $13.7 $13.4 $13.7 $14.3 $14.8 $11.0 $10.0
Net cash (2) ($8.7) ($5.3) ($3.2) ($2.1) ($1.8) ($3.0) ($4.7) ($10.6) ($9.9)
(3)
Net cash excl. HPFS Debt ($1.8) $1.8 $4.3 $6.0 $6.6 $5.6 $4.0 ($1.5) ($0.4)
1. Includes cash and cash equivalents, short-term investments, and certain liquid long-term investments
2. Net cash is defined as gross cash less total company debt including the effect of hedging
3. Net cash excl HPFS debt = HP net cash plus HPFS net debt
$14.0 $13.4
$11.9
$12.0
$12.0
$10.2
$9.6
$10.0
$8.4
$8.0 $7.1
$6.0
$4.0
$3.1
$2.7
$2.0
$0.0
FY07 FY08 FY09 FY10 FY11 YTD
(1)
Cash flow from operations Free cash flow
1. Free cash flow = cash flow from operations less net capital expenditures
19 February 22, 2011 http://www.hp.com/investor/home
STOCK REPURCHASE
$3.0
$8 200
$2.5
$6 150
$2.0
$4 100
$1.5
$1.0 $2 50
$0.5
$0 0
(1) FY11
FY07 FY08 FY09 FY10
YTD
$0.0
1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 Stock repurchase $11.5 $9.6 $5.1 $11.0 $2.3
Stock repurchase $1.2 $0.8 $1.0 $2.1 $2.7 $1.8 $2.6 $4.0 $2.3 Shares received 271 216 132 240 54
1. In Q1 FY06, HP entered into a prepaid variable share purchase program. $1.7 billion in cash was used in Q1 FY06 to fully
fund this plan. See our Form 10-Q for the period ended January 31, 2006 for more information. HP completed all
repurchases under this plan in March 2007 and received a total of 53M shares.
20 February 22, 2011 http://www.hp.com/investor/home
FY09 & FY10 reclassification
FY09 FY10
Revised Previously Revised Previously
In millions Amount Reported Variance Amount Reported Variance
Amortization of
purchased 1,578 1,578 - 1,484 1,484 -
intangibles
Restructuring
640 640 - 1,144 1,144 -
charges
Acquisition
242 242 - 293 293 -
related charges
Earnings from
10,136 10,136 - 11,479 11,479 -
operations
Earnings before
9,415 9,415 - 10,974 10,974 -
tax
Net Revenue Services $35,380 $34,693 $687 Services $35,529 $34,935 $594
Net Revenue ITO $14,563 $15,554 ($991) ITO $14,942 $15,963 ($1,021)
Application Application
6,926 6,194 732 6,792 6,123 669
Services Services
HP HP
762 - 762 1,705 - 1,705
Networking Networking
Other PSG 929 798 131 Other PSG 834 845 (11)
Corp Corp
191 768 (577) 346 1,863 (1,517)
Investments Investments
Eliminations Eliminations
(1,784) (1,829) 45 (2,479) (2,554) 75
& other & other
HP has reflected fiscal 2011 organizational realignments on a backward-looking basis to provide improved visibility and comparability.
23 February 22, 2011 http://www.hp.com/investor/home
OUTLOOK
Q2 FY11 guidance
1. Q2 FY11 non-GAAP diluted earnings per share estimates exclude after-tax costs of approximately $0.20 per share, related primarily to the amortization of purchased
intangible assets, restructuring charges and acquisition-related charges.
2. Full year FY11 non-GAAP diluted earnings per share estimates exclude after-tax costs of approximately $0.74 per share, related primarily to the amortization of
purchased intangible assets, restructuring charges and acquisition-related charges.
$10.0 10.0%
$5.0 7.0%
$8.0 8.0%
$4.0 4.0%
$3.0 5.0%
$2.0 2.0%
Invent ory $7.6 $5.7 $5.9 $6.1 $6.6 $6.4 $7.2 $6.5 $6.7 Receivables $14.8 $14.7 $14.7 $16.5 $14.5 $14.8 $15.6 $18.5 $16.6
% of Rev 6.4% 4.9% 5.0% 5.3% 5.7% 5.4% 5.8% 5.1% 5.3% % of Rev 12.4% 12.4% 12.6% 14.4% 12.4% 12.3% 12.6% 14.7% 13.0%
$11.8
$13.6 $13.5
$11.6 $13.4
$11.5
$11.2 $11.3 $11.2 $11.2 $12.8
$13.0
$11.0 $10.8 $10.8 10%
$11.8
$11.4
$11.0
$9.0 8%
$9.0
$7.0 6%
$7.0
$5.0 4%
1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11
$5.0
PP&E $10.8 $10.8 $11.2 $11.3 $11.2 $11.2 $11.5 $11.8 $11.6 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11
% of Rev 9.1% 9.2% 9.5% 9.8% 9.5% 9.3% 9.3% 9.3% 9.1% Payables $11.8 $11.4 $12.8 $14.8 $13.6 $13.4 $14.9 $14.4 $13.5
Days
60
50
40
30
20
1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11
Days receivables 46 48 48 48 42 43 46 50 46
Days inventory 31 25 25 23 25 25 28 23 25
Days payable 48 49 55 57 51 51 57 52 50
In millions
Q1 FY11 Q1 FY10 Q4 FY10
1. Depreciation and net capital expenditures are shown net of inter-company eliminations.
Amort. of Acquisition
In millions except Purchased related
per share amounts GAAP Intangibles Restructuring charges Non-GAAP
Amort. of
In millions except Purchased Acquisition related
per share amounts GAAP Intangibles Restructuring charges Non-GAAP
Amort. of
In millions except Purchased Acquisition related
per share amounts GAAP Intangibles Restructuring charges Non-GAAP
Amort. of
In millions except Purchased Acquisition related
per share amounts GAAP Intangibles Restructuring charges Non-GAAP
Amort. of
In millions except Purchased Acquisition related
per share amounts GAAP Intangibles Restructuring charges Non-GAAP
Amort. of
In millions except Purchased Acquisition related
per share amounts GAAP Intangibles Restructuring charges Non-GAAP
Amort. of
In millions except Purchased Acquisition related
per share amounts GAAP Intangibles Restructuring charges Non-GAAP
Amort. of
In millions except Purchased Acquisition related
per share amounts GAAP Intangibles Restructuring charges Non-GAAP
Amort. of
In millions except Purchased Acquisition related
per share amounts GAAP Intangibles Restructuring charges Non-GAAP
Amort. of
In millions except Purchased
per share amounts GAAP Intangibles Restructuring Non-GAAP