External
Content
HP Q3 FY10 Earnings 10 Announcement
August 19, 2010 http://www.hp.com/investor/home p p
August 19, 2010 http://www.hp.com/investor/home
FORWARD LOOKING STATEMENTS
This presentation may contain 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, currency exchange rates, the impact of acquisitions 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 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 y y g g p g p pension and inventory; the difficulty of aligning expense levels with revenue changes; assumptions related to p 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, including HP’s Quarterly Report on Form 10-Q for q p , p periods, the financial information set forth in this release, , , the fiscal quarter ended April 30, 2010. As in prior p 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 July 31, 2010. In particular, determining HP’s actual tax balances and provisions as of July 31, 2010 requires extensive internal and external review of tax data (including g g provisions of numerous domestic and foreign entities), which is being g ), g consolidating and reviewing the tax p 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.
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USE OF NON-GAAP FINANCIAL INFORMATION
HP has included non-GAAP financial measures in this presentation to supplement HP’s consolidated condensed financial statements presented on a GAAP basis. Definitions of these non-GAAP financial measures and reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are included elsewhere in this presentation. HP s HP’s management uses non GAAP operating expense, non GAAP OI&E, non-GAAP operating profit, non GAAP net earnings, nonnon-GAAP expense non-GAAP OI&E non GAAP profit non-GAAP 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 share. 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 nonGAAP 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 h GAAP fi i l t th t di tl bl d i t t i f ll 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 HP s management to evaluate and measure such performance.
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KEY MESSAGES
Strong quarter with profitable revenue growth and broad-based execution
Net revenue of $30.7 billion, up 11% year over year, with approximately one point of benefit from currency, the highest local currency revenue growth since Q408 Non-GAAP operating margin improvement of 30 bps year over year; GAAP operating margin decline of 40 bps year over year Solid performance across regions and segments
HP executing its strategy, leveraging scale and global reach to extend market leadership
Continuing to enhance portfolio both organically and inorganically Transformational initiatives on track with significant opportunity remaining (supply chain, sales coverage, etc) Continuing to deploy capital for organic investments, M&A and share buybacks
Leading product portfolio across hardware, software and services
Winning data center and converged infrastructure strategy with solid growth led by ISS (+31% year over year) HP Networking gains momentum with 42% ProCurve growth and 3Com revenues ahead of plan Record services signings d i R d i i i driven b strong renewals by t l
IPG on the attack
Supplies growth of 5% g printer hardware with total units up 16% and commercial p p printer units up 44% p Share gains in p Biggest consumer launch in years including web-connected printers and e-print
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Q3 FY10 RESULTS OVERVIEW
Financial Summary
–Net revenue of $30.7B, up 11% Y/Y; currency benefit of ~1pt –Non-GAAP(1) diluted EPS of $1.08; up 17% Y/Y –GAAP diluted EPS of $0.75; up 9% Y/Y –Cash flow from operations of $3.3B Cash $3 3B –$2.6B in share repurchases and $205M in dividends
$ in millions Services Enterprise Storage and Servers HP Software Enterprise Business Personal S t P l Systems Group G Imaging and Printing Group HP Financial Services Total HP (2)
1.
Q3 Revenue $8,609 $4,449 $863 $13,921 $9,918 $9 918 $6,167 $764 $30,729 ,
Growth Y/Y% 1% 19% 2% 6% 17% 9% 14% 11%
OP $ $1,366 $549 $183 $2,098 $469 $1,040 $72 $3,431 (1) ,
OP % of rev 15.9% 12.3% 21.2% 15.1% 4.7% 4 7% 16.9% 9.4% 11.2% (1)
OP $ Y/Y $64 $168 $30 $262 $82 $80 $19 $418(1)
OP % Y/Y 0.6 pts 2.1 pts 3.1 pts 1.1 pts 0.1 t 0 1 pts (0.1)pts 1.5 pts 0.3 pts (1)
2.
5
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.” Includes Corporate Investments & Eliminations
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Q3 FY10 REVENUE
By Segment By Region
Imaging & Printing Group 20%
U.S. 37%
Services S i 28%
Americas
46%, up 12% Y/Y
EMEA
36%, up 9% Y/Y
Personal P l Systems Group 32%
Enterprise Storage & Servers 14% HP Financial Services & Other 3%
Canada/ Latin America 9%
Asia Pacific
18%, 18% up 14% Y/Y
HP Software & Solutions 3%
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REVENUE & EPS PERFORMANCE
$36 $34 $32 $30 $28 $26 $24 $22 $20 $18 $16 $14 $12 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 $1.20 $1.10 $1 10 $1.00 $0.90 $0.80 $0.70 $0.60 $0.50 $0.40 $0.30 $0.20 $0.10 $0 10 $0.00
Revenue (in billions) $25.4 $28.3 $28.5 $28.3 $28.0 $33.6 $28.8 $27.4 N on-GAAP EPS $0.71 $0.86 $0.86 $0.87 $0.86 $1.03 $0.93 $0.86
$27.6 $30.8 $31.2 $30.8 $30.7 $0.92 $1.14 $1.07 $1.09 $1.08
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REGIONAL REVENUE TRENDS
Americas
$16 $14 $ in billions $12 $10 $8 $6 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10
(including U.S.)
United States
20% 15% 10% 5% 0% (5%) Y/ Y revenue growth % r
$12 $10 $ in billions $8 $6 $4 $2 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10
20% 15% 10% 5% 0% (5%) Y/ Y re evenue growth %
Y/ Y revenue growth % g
$15 $12 $ in billio ons $9 $6 $3 $0
EMEA
30% 20% 10% 0% (10%) (20%) Y/ Y revenue growth %
$8
Asia Pacific
25%
$6 $ in billio ons
15%
$4
5%
$2
(5%)
$0 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10
(15%)
2Q09 3Q09 4Q09 1Q10 2Q10 3Q10
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Y/Y revenue growth % Y/Y constant currency revenue growth %
REVENUE GROWTH
25% 20%
Y/Y revenue gr Y rowth %
15% 10% 5% 0% (5%) (10%)
3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10
Constant currency 12.2% 11.2% 8.2% 4.5% 4.7% 15.6% 4.2% 2.9% 4.0% -5.0% 5.4% 8.4% 10.6% As reported 15.9% 15.2% 13.5% 10.7% 10.5% 18.8% 1.2% -3.1% -1.6% -8.4% 8.2% 12.7% 11.4%
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SERVICES
In billions
$10.0
Revenue
In millions
Operating profit
18% 16% 14% 12% 10% 8% 6% 4% 2% 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10
$1,600 $ , $1,400 $1,200
$8.0 $ $6.0
$1,000 $800
$4.0 $2.0
$600 $400 $200
$0.0 Q Q Q Q Q Q Q Q Q 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10
$0
Q3 FY10 revenue by business
9% IT O Technology Services Application Services BPO
• Services revenue of $8.6B, up 1% Y/Y • Operating profit of $1.4B; 15.9% of revenue • ITO revenue up 1% Y/Y • Technology services revenue down 1% Y/Y • Application services revenue up 4% Y/Y
17%
28%
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46%
• BPO revenue up 1% Y/Y • Record signings due to strong renewals
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OP % revenue P
ENTERPRISE STORAGE & SERVERS (ESS)
In billions
$6.0 $5.0 $5 0 $4.0 $3.0 $2.0
$200
Revenue
In millions
$800 $700 $600 $500 $400 $300
Operating profit
16% 14% 12% 10% 8% 6% 4% 2% 0% O P % revenue
$1.0 $0.0 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10
$100 $0 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10
Q3 FY10 revenue by business
20% Industry Standard Servers (ISS) Business Critical Systems (BCS) 11% 69%
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• ESS revenue of $4.4B, up 19% Y/Y • Operating profit of $549M; 12.3% of revenue • ISS revenue up 31% Y/Y • BCS revenue down 15% Y/Y • Storage revenue up 10% Y/Y; mid-range
Storage Works Division (SWD)
storage arrays (EVA) down 3%
• ESS Blades revenue up 29% Y/Y
HP SOFTWARE
In millions
$1,200 $1,000 $800
$150 15%
Revenue
In millions
$250
Operating profit
25%
$200
20%
$600
$100 10%
$400 $200 $0 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10
$50 5%
$0
0%
3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10
Q3 FY10 revenue by business
33% Business Technology Optimization Other Software
• Software revenue of $863M, up 2% Y/Y • Operating profit of $183M; 21.2% of revenue • B i Business Technology Optimization revenue T h l O ti i ti
up 3% Y/Y
• Other Software revenue down 1% Y/Y
67%
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O P % revenue
PERSONAL SYSTEMS GROUP (PSG)
In billions
$12.0 $10.0 $10 0 $8.0 $6.0
Revenue
In millions
Operating profit
7% 6% 5% 4% 3% 2% 1% 0% OP % revenue P
$700 $600 $500 $400 $300
$4.0
$200
$2.0 $0.0 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10
$100 $0 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10
Q3 FY10 revenue by business
2% 5% Notebooks Desktops Workstations Other
• PSG revenue of $9.9B, up 17% Y/Y • Operating profit of $469M; 4.7% of revenue • T t l units up 12% Y/Y Total it • Notebook revenue up 10%; units up 8% Y/Y • Desktop revenue up 27%; units up 19% Y/Y • Consumer client revenue up 12% Y/Y;
40%
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53%
Commercial client revenue up 25% Y/Y
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IMAGING & PRINTING GROUP (IPG)
In billions
$8.0
Revenue
In millions
$1,300.0
Operating profit
22%
$6.0
$1,100.0
18%
$4.0
$900.0
14%
$2.0
$700.0
10%
$0.0 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10
$500.0 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10
6%
Q3 FY10 revenue by business
10% Supplies Commercial Consumer 23%
• IPG revenue of $6.2B, up 9% Y/Y • Operating profit of $1B; 16.9% of revenue • Supplies revenue up 5% Y/Y pp p • Total printer hardware units up16% Y/Y;
67%
Consumer printer hardware units up 9% Y/Y; Commercial printer hardware units up 44% Y/Y • Color LaserJet units up 41% Y/Y • Printer-based MFP units up 47% Y/Y • Indigo digital press page volume up 22% Y/Y
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OP % of revenue
HP FINANCIAL SERVICES (HPFS)
In millions
$800
Revenue
In millions
$75
Operating profit
10%
$60
$600
8%
$45
$400
6%
$30
$200
4%
$15
2%
$0 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10
$0 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10
0%
Q3 FY10 revenue by region
12% Americas EMEA Asia Pacific
• HPFS revenue of $764M, up 14% Y/Y • Operating profit of $72M; 9.4% of revenue • Fi Financing volume up 3% Y/Y i l • Net portfolio assets of $10.5B, up 13% Y/Y
29%
59%
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O OP %revenue
Non-GAAP FINANCIAL INFORMATION
In millions except per share amounts
(1)
Q3 FY10
$30,729 23,402 , 3,896 3,431 (134) 3,297 722 2,575 $1.08 8.4% 10.7% 100% 76.2% 12.6% 11.2%
Q2 FY10
$30,849 23,601 , 3,786 3,462 (91) 3,371 738 2,633 $1.09 8.5% 10.9% 100% 76.5% 12.3% 11.2%
Q3 FY09
$27,585 21,031 , 3,541 3,013 (177) 2,836 597 2,239 $0.92 8.1% 10.3% 100% 76.2% 12.9% 10.9%
Revenue Cost of sales Total OpEx Operating profit Interest & other, net Pre-tax earnings Income tax Net Earnings EPS
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 non-GAAP presentation. HP’s non-GAAP provided on slide 3 under “Use of non-GAAP Financial Information.”
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Q3 FY10 GAAP to non-GAAP BRIDGE
In millions except per share amounts Amort. of Intangibles ReStructuring Acquisition related charges
GAAP
Non-GAAP Non GAAP
Revenue Cost of sales Total OpEx Operating profit Interest & other, net Pre-tax earnings Income tax Tax rate Net earnings EPS
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$30,729 23,402 5,004 2,323 (134) 2,189 416 19.0% 1,773 $0.75
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$30,729 23,402
(383) (598) (127)
3,896 3,431 (134)
383
598
127
383 100
598 175
127 31
3,297 722 21.9% 2,575 $1.08
GROSS CASH & NET CASH
In billions
$18.0
$14.0
$10.0
$6.0
$2.0
($2.0)
($6.0)
($10.0) ($10 0) 3Q08 Gross cash N et cash
(2) (3) (1)
4Q08 $10.3 ($7.4) ($0.5) ($0 5)
1Q09 $11.3 ($8.7) ($1.8) ($1 8)
2Q09 $13.0 ($5.3) $1.8 $1 8
3Q09 $13.7 ($3.2) $4.3 $4 3
4Q09 $13.4 ($2.1) $6.0 $6 0
1Q10 $13.7 ($1.8) $6.6 $6 6
2Q10 $14.3 ($3.0) $5.6 $5 6
3Q10 $14.8 ($4.7) $4.0 $4 0
$14.9 $4.8 $11.7 $11 7
N et cash excl HPFS Debt excl.
1. 2. 3.
18
Includes cash and cash equivalents, short-term investments, and certain liquid long-term investments Net cash is defined as gross cash less total company debt including the effect of hedging Net cash excl HPFS debt = HP net cash plus HPFS net debt
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CASH FLOW
In billions
$16.0 $14.6 $14.0 $12.0 $13.4
$12.0
$11.4
$10.2 $10.0 $9.4 $9.6 $8.8 $8.0 $7.1 $6.2 $6 2 $6.0
$4.0
$2.0
$0.0 FY06 FY07 FY08 Free cash flow )
(1
FY09
FY10 YTD
Cash flow from operations
1. Free cash flow = cash flow from operations less net capital expenditures
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STOCK REPURCHASE
Quarterly trends
In billions
$3.0
FY06 – FY10
In billions
$12
$4.9B $4 9B remaining in stock repurchase authorization at the end of Q3 FY10
In millions
300
$2.5
$10
250
$8
$2.0
200
$6
$1.5
150
$4
$1.0
100
$2
$0.5
50
$0 FY06
$0.0 3Q08 Stock repurchase $1.6 4Q08 $1.9 1Q09 $1.2 2Q09 $0.8 3Q09 $1.0 4Q09 $2.1 1Q10 $2.7 2Q10 $1.8 3Q10 $2.6
(1)
0 FY07 $11.5 271
(1 )
FY08 $9.6 216
FY09 $5.1 132
FY10 YTD $7.1 144
Stock repurchase Shares received
$7.2 224
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
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OUTLOOK
Q4 FY10 guidance
Revenue GAAP EPS Non-GAAP Non GAAP EPS(1) $32.5B $32.7B $32 5B – $32 7B $1.03 - $1.05 $1.25 $1.27 $1 25 – $1 27
Full year FY10 guidance
Revenue GAAP EPS
( Non-GAAP Non GAAP EPS(2))
$125.3B $125.5 $125 3B - $125 5 $3.62 – $3.64 $4.49 $4.51 $4 49 – $4 51
1. 2.
Q4 FY10 non-GAAP diluted earnings per share estimates exclude after-tax costs of approximately $0.22 per share, related primarily to the amortization of purchased intangible assets, restructuring charges and acquisition related charges assets acquisition-related charges. Full year FY10 non-GAAP diluted earnings per share estimates exclude after-tax costs of approximately $0.87 per share, related primarily to the amortization of purchased intangible assets, restructuring charges and acquisition-related charges.
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SUPPLEMENTAL SLIDES
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INVENTORY & ACCOUNTS RECEIVABLE
Inventory
In billions
$9.0 11.0%
Accounts receivable
In billions
$18.0
$16.9 $14.8 $14.7 $14.7
18.0%
$8.2
$8.0
$16.5 $15.6
16.0%
$7.9 $7.6 $ $7.2
$16.0
10.0%
$14.0
$13.8
$14.5 $14.8
14.0%
$7.0
$6.6 $5.9 $6.1
9.0%
$6.4
8.0%
$12.0
12.0%
$6.0
$5.7
$10.0
10.0%
$5.0
7.0%
$8.0
8.0%
$6.0
6.0%
$4.0
6.0%
$ $4.0 4.0%
$3.0
5.0%
$2.0
2.0%
$2.0
Inventory e to y
% of Rev
3Q08 $8.2
7.2%
4Q08 $7.9
6.7%
1Q09 $7.6
6.4%
2Q09 $5.7
4.9%
3Q09 $5.9
5.0%
4Q09 $6.1
5.3%
1Q10 $6.6
5.7%
2Q10 $6.4
5.4%
3Q10 $7.2
5.8%
4.0%
$0.0
Receivables % of Rev
3Q08 $13.8 12.2%
4Q08 $16.9 14.3%
1Q09 $14.8 12.4%
2Q09 $14.7 12.4%
3Q09 $14.7 12.6%
4Q09 $16.5 14.4%
1Q10 $14.5 12.4%
2Q10 $14.8 12.3%
3Q10 $15.6 12.6%
0.0%
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PP&E & ACCOUNTS PAYABLE
Net PP&E
In billions
$13.0 12%
Accounts payable
In billions
$15.0
$14.8 $14.9
$14.8
$14.9
$13.6
$11.2 $11.3 $11.2 $11.2 $11.0 $10.8 $10.8 $10.8 $11.5
$13.4
$13.0 $13 0
10%
$12.8 $11.8 $11.4
$11.0
$9.0 $9 0 $8.0 8%
$9.0
$7.0
6%
$7.0
$5.0
PP&E % of Rev
3Q08 $8.0 7.1% 7 1%
4Q08 $10.8 9.2% 9 2%
1Q09 $10.8 9.1% 9 1%
2Q09 $10.8 9.2% 9 2%
3Q09 $11.2 9.5% 9 5%
4Q09 $11.3 9.8% 9 8%
1Q10 $11.2 9.5% 9 5%
2Q10 $11.2 9.3% 9 3%
3Q10 $11.5 9.3% 9 3%
4%
$5.0
Payables
3Q08 $14.8
4Q08 $14.9
1Q09 $11.8
2Q09 $11.4
3Q09 $12.8
4Q09 $14.8
1Q10 $13.6
2Q10 $13.4
3Q10 $14.9
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WORKING CAPITAL METRICS
Days
60
50
40
30
20 3Q08 Days receivables Days inventory y y Days payable 44 35 62 4Q08 45 27 52 1Q09 46 31 48 2Q 09 48 25 49 3Q09 48 25 55 4Q09 48 23 57 1Q10 42 25 51 2Q10 43 25 51 3Q 10 46 28 57
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HPFS SUPPLEMENTAL DATA
In millions
Q3 FY10
Depreciation (1)
Q3 FY09
$297
Q2 FY10
$343
$351
Net capital expenditures (1)
$521
$463
$515
Sequential increase (decrease) in net financing receivables
1. 2.
$(7)
$400
$37
Depreciation and net capital expenditures are shown net of inter-company eliminations. Prior period net financing receivables have been adjusted to more accurately reflect financing-related activity.
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Q2 FY10 GAAP to non-GAAP BRIDGE
In millions except per share amounts Amort. of Intangibles ReStructuring Acquisition related charges
GAAP
Non-GAAP Non GAAP
Revenue Cost of sales Total OpEx Operating profit Interest & other, net Pre-tax earnings Income tax Tax rate Net earnings EPS
27 August 19, 2010
$30,849 23,601 4,390 2,858 (91) 2,767 567 20.5% 2,200 $0.91
http://www.hp.com/investor/home
$30,849 23,601
(347) (180) (77)
3,786 3,462 (91)
347
180
77
347 92
180 57
77 22
3,371 738 21.9% 2,633 $1.09
Q1 FY10 GAAP to non-GAAP BRIDGE
In millions except per share amounts Amort. of Intangibles ReStructuring Acquisition related charges
GAAP
Non-GAAP Non GAAP
Revenue Cost of sales Total OpEx Operating profit Interest & other, net I t t th t Pre-tax earnings Income tax Tax rate Net earnings EPS
$31,177 24,062 4,112 3,003 (199) 2,804 554 19.8% 2,250 $0.93
330 101 131 42 38 12 (330) (131) (38)
$31,177 24,062 3,613 3,502 (199) 3,303 709 21.5% 2,594 $1.07
330
131
38
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FY09 GAAP to non-GAAP BRIDGE
In millions except per share amounts Amort. of Intangibles ReStructuring Acquisition related charges
GAAP
In-Process In Process R&D
Non-GAAP Non GAAP
Revenue Cost of sales Total OpEx Operating profit Interest & other, net Pre-tax earnings Income tax Tax Ta rate Net earnings EPS
$114,552 87,524 16,892 10,136 (721) 9,415 1,755 18.6% 18 6% 7,660 $3.14
1,571 451 640 197 7 242 79 (1,571) 1,571 (640) 640 (7) 7 (242) 242
$114,552 87,524 14,432 12,596 (721) 11,875 2,482 20.9% 20 9% 9,393 $3.85
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Q4 FY09 GAAP to non-GAAP BRIDGE
In millions except per share amounts Amort. of Intangibles ReStructuring In-Process R&D Acquisition related charges
GAAP
Non-GAAP Non GAAP
Revenue Cost of sales Total OpEx Operating profit Interest & other, net I t t th t Pre-tax earnings Income tax Tax rate Net earnings EPS
$30,777 23,475 4,169 3,133 (132) 3,001 589 19.6% 2,412 $0.99 $0 99
400 117 38 11 1 60 19 (400) (38) (1) (60)
$30,777 23,475 3,670 3,632 (132) 3,500 736 21.0% 2,764 $1.14 $1 14
400
38
1
60
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Q3 FY09 GAAP to non-GAAP BRIDGE
In millions except per share amounts Amort. of Intangibles ReStructuring Acquisition related charges
GAAP
Non-GAAP Non GAAP
Revenue Cost of sales Total OpEx Operating profit Interest & other, net I t t th t Pre-tax earnings Income tax Tax rate Net earnings EPS
$27,585 21,031 4,341 2,213 (177) 2,036 365 17.9% 1,671 $0.69 $0 69
379 105 362 108 59 19 (379) (362) (59)
$27,585 21,031 3,541 3,013 (177) 2,836 597 21.1% 2,239 $0.92 $0 92
379
362
59
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Q2 FY09 GAAP to non-GAAP BRIDGE
In millions except per share amounts Amort. of Intangibles ReStructuring Acquisition related charges
GAAP
Non-GAAP Non GAAP
Revenue Cost of sales Total OpEx Operating profit Interest & other, net I t t th t Pre-tax earnings Income tax Tax rate Net earnings EPS
$27,383 20,945 4,145 2,293 (180) 2,113 392 18.6% 1,721 $0.71 $0 71
380 112 94 31 75 24 (380) (94) (75)
$27,383 20,945 3,596 2,842 (180) 2,662 559 21.0% 2,103 $0.86 $0 86
380
94
75
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Q1 FY09 GAAP to non-GAAP BRIDGE
In millions except per share amounts Amort. of Intangibles ReStructuring In-Process R&D Acquisition related charges
GAAP
Non-GAAP Non GAAP
Revenue Cost of sales Total OpEx Operating profit Interest & other, net other Pre-tax earnings Income tax Tax rate Net earnings EPS
$28,807 22,073 4,237 2,497 (232) 2,265 409 18.1% 1,856 $0.75
412 117 146 47 6 48 17 (412) (146) (6) (48)
$28,807 22,073 3,625 3,109 (232) 2,877 590 20.5% 2,287 $0.93
412
146
6
48
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FY08 GAAP to non-GAAP BRIDGE
In millions except per share amounts Amort. of Intangibles ReStructuring In-Process R&D Acquisition related charges
GAAP
Non-GAAP Non GAAP
Revenue Cost of sales Total OpEx Operating profit Interest & other, net other Pre-tax earnings Income tax Tax rate Net earnings EPS
$118,364 89,699 18,192 10,473 0 10,473 2,144 20.5% 8,329 $3.25 $3 25
967 262 270 74 45 41 14 (967) (270) (45) (41)
$118,364 89,699 16,869 11,796 0 11,796 2,494 21.1% 9,302 $3.62 $3 62
967
270
45
41
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Q4 FY08 GAAP to non-GAAP BRIDGE
In millions except per share amounts Amort. of Intangibles ReStructuring In-Process R&D Acquisition related charges
GAAP
Non-GAAP Non GAAP
Revenue Cost of sales Total OpEx Operating profit Interest & other, net other Pre-tax earnings Income tax Tax rate Net earnings EPS
$33,603 25,853 5,009 2,741 (98) 2,643 531 20.1% 2,112 $0.84
337 96 251 69 32 41 14 (337) (251) (32) (41)
$33,603 25,853 4,348 3,402 (98) 3,304 710 21.5% 2,594 $1.03
337
251
32
41
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Q3 FY08 GAAP to non-GAAP BRIDGE
In millions except per share amounts Amort. of Intangibles ReStructuring In-Process R&D
GAAP
Non-GAAP Non GAAP
Revenue Cost of sales Total OpEx Operating profit Interest & other, net Pre-tax earnings Income tax Tax rate Net earnings EPS
$28,032 21,197 4,306 2,529 23 2,552 525 20.6% 2,027 $0.80 $0 80
213 56 5 1 (213) (5) -
$28,032 21,197 4,088 2,747 23 2,770 582 21.0% 2,188 $0.86 $0 86
213
5
-
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Q2 FY08 GAAP to non-GAAP BRIDGE
In millions except per share amounts Amort. of Intangibles ReStructuring In-Process R&D
GAAP
Non-GAAP Non GAAP
Revenue Cost of sales Total OpEx Operating profit Interest & other, net Pre-tax earnings Income tax Tax rate Net earnings EPS
$28,262 21,205 4,467 2,590 3 2,593 536 20.7% 2,057 $0.80 $0 80
211 55 4 1 13 (211) (4) (13)
$28,262 21,205 4,239 2,818 3 2,821 592 21.0% 2,229 $0.87 $0 87
211
4
13
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Q1 FY08 GAAP to non-GAAP BRIDGE
In millions except per share amounts
GAAP
Amort. of Intangibles
Restructuring
Non-GAAP
Revenue Cost of sales Total OpEx Operating profit Interest & other, net Pre-tax earnings Income tax Tax rate Net earnings EPS
$28,467 21,444 4,410 2,613 72 2,685 552 20.6% 20 6% 2,133 $0.80
(206) (10)
$28,467 21,444 4,194 2,829 72 2,901 610 21.0% 21 0% 2,291 $0.86
206
10
206 55
10 3
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FY07 GAAP to non-GAAP BRIDGE
In millions except per share amounts
GAAP
Amort. of Intangibles
Restructuring charges
In-process R&D
Pension Curtail.
Non-GAAP
Revenue Cost of sales Total OpEx Operating profit Interest & other, net other Pre-tax earnings Income tax Tax rate Net earnings EPS
$104,286 78,683 16,884 16 884 8,719 458 9,177 1,913 20.8% 7,264 $2.68 $2 68
783 197 387 136 190 (517) (180) (783) (387) (190) 517
$104,286 78,683 16,041 16 041 9,562 458 10,020 2,066 20.6% 7,954 $2.93 $2 93
783
387
190
(517)
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Q4 FY07 GAAP to non-GAAP BRIDGE
In millions except per share amounts
GAAP
Amort. of Intangibles
Restructuring
In-process R&D
Non-GAAP
Revenue Cost of sales Total OpEx Operating profit Interest & other, net other Pre-tax earnings Income tax Tax rate Net earnings EPS
$28,293 21,250 4,411 2,632 67 2,699 535 19.8% 2,164 $0.81
187 46 (20) (7) 4 (187) 20 (4)
$28,293 21,250 4,240 2,803 67 2,870 574 20.0% 2,296 $0.86
187
(20)
4
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Q3 FY07 GAAP to non-GAAP BRIDGE
In millions except per share amounts
GAAP
Amort. of Intangibles
Restructuring
In-process R&D
Non-GAAP
Revenue Cost of sales Total OpEx Operating profit Interest & other, net Pre-tax earnings Income tax Tax t T rate Net earnings EPS
$25,377 19,112 4,149 2,116 170 2,286 508 22.2% 22 2% 1,778 $0.66
183 48 (5) (4) (183) 183 5 (5)
$25,377 19,112 3,971 2,294 170 2,464 552 22.4% 22 4% 1,912 $0.71
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Q&A
August 19, 2010
http://www.hp.com/investor/home
August 19, 2010 http://www.hp.com/investor/home p p
August 19, 2010 http://www.hp.com/investor/home
FORWARD LOOKING STATEMENTS
This presentation may contain 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, currency exchange rates, the impact of acquisitions 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 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 y y g g p g p pension and inventory; the difficulty of aligning expense levels with revenue changes; assumptions related to p 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, including HP’s Quarterly Report on Form 10-Q for q p , p periods, the financial information set forth in this release, , , the fiscal quarter ended April 30, 2010. As in prior p 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 July 31, 2010. In particular, determining HP’s actual tax balances and provisions as of July 31, 2010 requires extensive internal and external review of tax data (including g g provisions of numerous domestic and foreign entities), which is being g ), g consolidating and reviewing the tax p 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.
2 August 19, 2010 http://www.hp.com/investor/home
USE OF NON-GAAP FINANCIAL INFORMATION
HP has included non-GAAP financial measures in this presentation to supplement HP’s consolidated condensed financial statements presented on a GAAP basis. Definitions of these non-GAAP financial measures and reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are included elsewhere in this presentation. HP s HP’s management uses non GAAP operating expense, non GAAP OI&E, non-GAAP operating profit, non GAAP net earnings, nonnon-GAAP expense non-GAAP OI&E non GAAP profit non-GAAP 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 share. 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 nonGAAP 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 h GAAP fi i l t th t di tl bl d i t t i f ll 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 HP s management to evaluate and measure such performance.
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KEY MESSAGES
Strong quarter with profitable revenue growth and broad-based execution
Net revenue of $30.7 billion, up 11% year over year, with approximately one point of benefit from currency, the highest local currency revenue growth since Q408 Non-GAAP operating margin improvement of 30 bps year over year; GAAP operating margin decline of 40 bps year over year Solid performance across regions and segments
HP executing its strategy, leveraging scale and global reach to extend market leadership
Continuing to enhance portfolio both organically and inorganically Transformational initiatives on track with significant opportunity remaining (supply chain, sales coverage, etc) Continuing to deploy capital for organic investments, M&A and share buybacks
Leading product portfolio across hardware, software and services
Winning data center and converged infrastructure strategy with solid growth led by ISS (+31% year over year) HP Networking gains momentum with 42% ProCurve growth and 3Com revenues ahead of plan Record services signings d i R d i i i driven b strong renewals by t l
IPG on the attack
Supplies growth of 5% g printer hardware with total units up 16% and commercial p p printer units up 44% p Share gains in p Biggest consumer launch in years including web-connected printers and e-print
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Q3 FY10 RESULTS OVERVIEW
Financial Summary
–Net revenue of $30.7B, up 11% Y/Y; currency benefit of ~1pt –Non-GAAP(1) diluted EPS of $1.08; up 17% Y/Y –GAAP diluted EPS of $0.75; up 9% Y/Y –Cash flow from operations of $3.3B Cash $3 3B –$2.6B in share repurchases and $205M in dividends
$ in millions Services Enterprise Storage and Servers HP Software Enterprise Business Personal S t P l Systems Group G Imaging and Printing Group HP Financial Services Total HP (2)
1.
Q3 Revenue $8,609 $4,449 $863 $13,921 $9,918 $9 918 $6,167 $764 $30,729 ,
Growth Y/Y% 1% 19% 2% 6% 17% 9% 14% 11%
OP $ $1,366 $549 $183 $2,098 $469 $1,040 $72 $3,431 (1) ,
OP % of rev 15.9% 12.3% 21.2% 15.1% 4.7% 4 7% 16.9% 9.4% 11.2% (1)
OP $ Y/Y $64 $168 $30 $262 $82 $80 $19 $418(1)
OP % Y/Y 0.6 pts 2.1 pts 3.1 pts 1.1 pts 0.1 t 0 1 pts (0.1)pts 1.5 pts 0.3 pts (1)
2.
5
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.” Includes Corporate Investments & Eliminations
August 19, 2010 http://www.hp.com/investor/home
Q3 FY10 REVENUE
By Segment By Region
Imaging & Printing Group 20%
U.S. 37%
Services S i 28%
Americas
46%, up 12% Y/Y
EMEA
36%, up 9% Y/Y
Personal P l Systems Group 32%
Enterprise Storage & Servers 14% HP Financial Services & Other 3%
Canada/ Latin America 9%
Asia Pacific
18%, 18% up 14% Y/Y
HP Software & Solutions 3%
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REVENUE & EPS PERFORMANCE
$36 $34 $32 $30 $28 $26 $24 $22 $20 $18 $16 $14 $12 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 $1.20 $1.10 $1 10 $1.00 $0.90 $0.80 $0.70 $0.60 $0.50 $0.40 $0.30 $0.20 $0.10 $0 10 $0.00
Revenue (in billions) $25.4 $28.3 $28.5 $28.3 $28.0 $33.6 $28.8 $27.4 N on-GAAP EPS $0.71 $0.86 $0.86 $0.87 $0.86 $1.03 $0.93 $0.86
$27.6 $30.8 $31.2 $30.8 $30.7 $0.92 $1.14 $1.07 $1.09 $1.08
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REGIONAL REVENUE TRENDS
Americas
$16 $14 $ in billions $12 $10 $8 $6 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10
(including U.S.)
United States
20% 15% 10% 5% 0% (5%) Y/ Y revenue growth % r
$12 $10 $ in billions $8 $6 $4 $2 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10
20% 15% 10% 5% 0% (5%) Y/ Y re evenue growth %
Y/ Y revenue growth % g
$15 $12 $ in billio ons $9 $6 $3 $0
EMEA
30% 20% 10% 0% (10%) (20%) Y/ Y revenue growth %
$8
Asia Pacific
25%
$6 $ in billio ons
15%
$4
5%
$2
(5%)
$0 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10
(15%)
2Q09 3Q09 4Q09 1Q10 2Q10 3Q10
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Y/Y revenue growth % Y/Y constant currency revenue growth %
REVENUE GROWTH
25% 20%
Y/Y revenue gr Y rowth %
15% 10% 5% 0% (5%) (10%)
3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10
Constant currency 12.2% 11.2% 8.2% 4.5% 4.7% 15.6% 4.2% 2.9% 4.0% -5.0% 5.4% 8.4% 10.6% As reported 15.9% 15.2% 13.5% 10.7% 10.5% 18.8% 1.2% -3.1% -1.6% -8.4% 8.2% 12.7% 11.4%
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SERVICES
In billions
$10.0
Revenue
In millions
Operating profit
18% 16% 14% 12% 10% 8% 6% 4% 2% 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10
$1,600 $ , $1,400 $1,200
$8.0 $ $6.0
$1,000 $800
$4.0 $2.0
$600 $400 $200
$0.0 Q Q Q Q Q Q Q Q Q 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10
$0
Q3 FY10 revenue by business
9% IT O Technology Services Application Services BPO
• Services revenue of $8.6B, up 1% Y/Y • Operating profit of $1.4B; 15.9% of revenue • ITO revenue up 1% Y/Y • Technology services revenue down 1% Y/Y • Application services revenue up 4% Y/Y
17%
28%
10 August 19, 2010
46%
• BPO revenue up 1% Y/Y • Record signings due to strong renewals
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OP % revenue P
ENTERPRISE STORAGE & SERVERS (ESS)
In billions
$6.0 $5.0 $5 0 $4.0 $3.0 $2.0
$200
Revenue
In millions
$800 $700 $600 $500 $400 $300
Operating profit
16% 14% 12% 10% 8% 6% 4% 2% 0% O P % revenue
$1.0 $0.0 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10
$100 $0 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10
Q3 FY10 revenue by business
20% Industry Standard Servers (ISS) Business Critical Systems (BCS) 11% 69%
11 August 19, 2010 http://www.hp.com/investor/home
• ESS revenue of $4.4B, up 19% Y/Y • Operating profit of $549M; 12.3% of revenue • ISS revenue up 31% Y/Y • BCS revenue down 15% Y/Y • Storage revenue up 10% Y/Y; mid-range
Storage Works Division (SWD)
storage arrays (EVA) down 3%
• ESS Blades revenue up 29% Y/Y
HP SOFTWARE
In millions
$1,200 $1,000 $800
$150 15%
Revenue
In millions
$250
Operating profit
25%
$200
20%
$600
$100 10%
$400 $200 $0 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10
$50 5%
$0
0%
3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10
Q3 FY10 revenue by business
33% Business Technology Optimization Other Software
• Software revenue of $863M, up 2% Y/Y • Operating profit of $183M; 21.2% of revenue • B i Business Technology Optimization revenue T h l O ti i ti
up 3% Y/Y
• Other Software revenue down 1% Y/Y
67%
12 August 19, 2010 http://www.hp.com/investor/home
O P % revenue
PERSONAL SYSTEMS GROUP (PSG)
In billions
$12.0 $10.0 $10 0 $8.0 $6.0
Revenue
In millions
Operating profit
7% 6% 5% 4% 3% 2% 1% 0% OP % revenue P
$700 $600 $500 $400 $300
$4.0
$200
$2.0 $0.0 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10
$100 $0 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10
Q3 FY10 revenue by business
2% 5% Notebooks Desktops Workstations Other
• PSG revenue of $9.9B, up 17% Y/Y • Operating profit of $469M; 4.7% of revenue • T t l units up 12% Y/Y Total it • Notebook revenue up 10%; units up 8% Y/Y • Desktop revenue up 27%; units up 19% Y/Y • Consumer client revenue up 12% Y/Y;
40%
13 August 19, 2010
53%
Commercial client revenue up 25% Y/Y
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IMAGING & PRINTING GROUP (IPG)
In billions
$8.0
Revenue
In millions
$1,300.0
Operating profit
22%
$6.0
$1,100.0
18%
$4.0
$900.0
14%
$2.0
$700.0
10%
$0.0 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10
$500.0 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10
6%
Q3 FY10 revenue by business
10% Supplies Commercial Consumer 23%
• IPG revenue of $6.2B, up 9% Y/Y • Operating profit of $1B; 16.9% of revenue • Supplies revenue up 5% Y/Y pp p • Total printer hardware units up16% Y/Y;
67%
Consumer printer hardware units up 9% Y/Y; Commercial printer hardware units up 44% Y/Y • Color LaserJet units up 41% Y/Y • Printer-based MFP units up 47% Y/Y • Indigo digital press page volume up 22% Y/Y
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OP % of revenue
HP FINANCIAL SERVICES (HPFS)
In millions
$800
Revenue
In millions
$75
Operating profit
10%
$60
$600
8%
$45
$400
6%
$30
$200
4%
$15
2%
$0 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10
$0 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10
0%
Q3 FY10 revenue by region
12% Americas EMEA Asia Pacific
• HPFS revenue of $764M, up 14% Y/Y • Operating profit of $72M; 9.4% of revenue • Fi Financing volume up 3% Y/Y i l • Net portfolio assets of $10.5B, up 13% Y/Y
29%
59%
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O OP %revenue
Non-GAAP FINANCIAL INFORMATION
In millions except per share amounts
(1)
Q3 FY10
$30,729 23,402 , 3,896 3,431 (134) 3,297 722 2,575 $1.08 8.4% 10.7% 100% 76.2% 12.6% 11.2%
Q2 FY10
$30,849 23,601 , 3,786 3,462 (91) 3,371 738 2,633 $1.09 8.5% 10.9% 100% 76.5% 12.3% 11.2%
Q3 FY09
$27,585 21,031 , 3,541 3,013 (177) 2,836 597 2,239 $0.92 8.1% 10.3% 100% 76.2% 12.9% 10.9%
Revenue Cost of sales Total OpEx Operating profit Interest & other, net Pre-tax earnings Income tax Net Earnings EPS
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 non-GAAP presentation. HP’s non-GAAP provided on slide 3 under “Use of non-GAAP Financial Information.”
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Q3 FY10 GAAP to non-GAAP BRIDGE
In millions except per share amounts Amort. of Intangibles ReStructuring Acquisition related charges
GAAP
Non-GAAP Non GAAP
Revenue Cost of sales Total OpEx Operating profit Interest & other, net Pre-tax earnings Income tax Tax rate Net earnings EPS
17 August 19, 2010
$30,729 23,402 5,004 2,323 (134) 2,189 416 19.0% 1,773 $0.75
http://www.hp.com/investor/home
$30,729 23,402
(383) (598) (127)
3,896 3,431 (134)
383
598
127
383 100
598 175
127 31
3,297 722 21.9% 2,575 $1.08
GROSS CASH & NET CASH
In billions
$18.0
$14.0
$10.0
$6.0
$2.0
($2.0)
($6.0)
($10.0) ($10 0) 3Q08 Gross cash N et cash
(2) (3) (1)
4Q08 $10.3 ($7.4) ($0.5) ($0 5)
1Q09 $11.3 ($8.7) ($1.8) ($1 8)
2Q09 $13.0 ($5.3) $1.8 $1 8
3Q09 $13.7 ($3.2) $4.3 $4 3
4Q09 $13.4 ($2.1) $6.0 $6 0
1Q10 $13.7 ($1.8) $6.6 $6 6
2Q10 $14.3 ($3.0) $5.6 $5 6
3Q10 $14.8 ($4.7) $4.0 $4 0
$14.9 $4.8 $11.7 $11 7
N et cash excl HPFS Debt excl.
1. 2. 3.
18
Includes cash and cash equivalents, short-term investments, and certain liquid long-term investments Net cash is defined as gross cash less total company debt including the effect of hedging Net cash excl HPFS debt = HP net cash plus HPFS net debt
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August 19, 2010
CASH FLOW
In billions
$16.0 $14.6 $14.0 $12.0 $13.4
$12.0
$11.4
$10.2 $10.0 $9.4 $9.6 $8.8 $8.0 $7.1 $6.2 $6 2 $6.0
$4.0
$2.0
$0.0 FY06 FY07 FY08 Free cash flow )
(1
FY09
FY10 YTD
Cash flow from operations
1. Free cash flow = cash flow from operations less net capital expenditures
19 August 19, 2010 http://www.hp.com/investor/home
STOCK REPURCHASE
Quarterly trends
In billions
$3.0
FY06 – FY10
In billions
$12
$4.9B $4 9B remaining in stock repurchase authorization at the end of Q3 FY10
In millions
300
$2.5
$10
250
$8
$2.0
200
$6
$1.5
150
$4
$1.0
100
$2
$0.5
50
$0 FY06
$0.0 3Q08 Stock repurchase $1.6 4Q08 $1.9 1Q09 $1.2 2Q09 $0.8 3Q09 $1.0 4Q09 $2.1 1Q10 $2.7 2Q10 $1.8 3Q10 $2.6
(1)
0 FY07 $11.5 271
(1 )
FY08 $9.6 216
FY09 $5.1 132
FY10 YTD $7.1 144
Stock repurchase Shares received
$7.2 224
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 August 19, 2010 http://www.hp.com/investor/home
OUTLOOK
Q4 FY10 guidance
Revenue GAAP EPS Non-GAAP Non GAAP EPS(1) $32.5B $32.7B $32 5B – $32 7B $1.03 - $1.05 $1.25 $1.27 $1 25 – $1 27
Full year FY10 guidance
Revenue GAAP EPS
( Non-GAAP Non GAAP EPS(2))
$125.3B $125.5 $125 3B - $125 5 $3.62 – $3.64 $4.49 $4.51 $4 49 – $4 51
1. 2.
Q4 FY10 non-GAAP diluted earnings per share estimates exclude after-tax costs of approximately $0.22 per share, related primarily to the amortization of purchased intangible assets, restructuring charges and acquisition related charges assets acquisition-related charges. Full year FY10 non-GAAP diluted earnings per share estimates exclude after-tax costs of approximately $0.87 per share, related primarily to the amortization of purchased intangible assets, restructuring charges and acquisition-related charges.
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SUPPLEMENTAL SLIDES
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INVENTORY & ACCOUNTS RECEIVABLE
Inventory
In billions
$9.0 11.0%
Accounts receivable
In billions
$18.0
$16.9 $14.8 $14.7 $14.7
18.0%
$8.2
$8.0
$16.5 $15.6
16.0%
$7.9 $7.6 $ $7.2
$16.0
10.0%
$14.0
$13.8
$14.5 $14.8
14.0%
$7.0
$6.6 $5.9 $6.1
9.0%
$6.4
8.0%
$12.0
12.0%
$6.0
$5.7
$10.0
10.0%
$5.0
7.0%
$8.0
8.0%
$6.0
6.0%
$4.0
6.0%
$ $4.0 4.0%
$3.0
5.0%
$2.0
2.0%
$2.0
Inventory e to y
% of Rev
3Q08 $8.2
7.2%
4Q08 $7.9
6.7%
1Q09 $7.6
6.4%
2Q09 $5.7
4.9%
3Q09 $5.9
5.0%
4Q09 $6.1
5.3%
1Q10 $6.6
5.7%
2Q10 $6.4
5.4%
3Q10 $7.2
5.8%
4.0%
$0.0
Receivables % of Rev
3Q08 $13.8 12.2%
4Q08 $16.9 14.3%
1Q09 $14.8 12.4%
2Q09 $14.7 12.4%
3Q09 $14.7 12.6%
4Q09 $16.5 14.4%
1Q10 $14.5 12.4%
2Q10 $14.8 12.3%
3Q10 $15.6 12.6%
0.0%
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PP&E & ACCOUNTS PAYABLE
Net PP&E
In billions
$13.0 12%
Accounts payable
In billions
$15.0
$14.8 $14.9
$14.8
$14.9
$13.6
$11.2 $11.3 $11.2 $11.2 $11.0 $10.8 $10.8 $10.8 $11.5
$13.4
$13.0 $13 0
10%
$12.8 $11.8 $11.4
$11.0
$9.0 $9 0 $8.0 8%
$9.0
$7.0
6%
$7.0
$5.0
PP&E % of Rev
3Q08 $8.0 7.1% 7 1%
4Q08 $10.8 9.2% 9 2%
1Q09 $10.8 9.1% 9 1%
2Q09 $10.8 9.2% 9 2%
3Q09 $11.2 9.5% 9 5%
4Q09 $11.3 9.8% 9 8%
1Q10 $11.2 9.5% 9 5%
2Q10 $11.2 9.3% 9 3%
3Q10 $11.5 9.3% 9 3%
4%
$5.0
Payables
3Q08 $14.8
4Q08 $14.9
1Q09 $11.8
2Q09 $11.4
3Q09 $12.8
4Q09 $14.8
1Q10 $13.6
2Q10 $13.4
3Q10 $14.9
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WORKING CAPITAL METRICS
Days
60
50
40
30
20 3Q08 Days receivables Days inventory y y Days payable 44 35 62 4Q08 45 27 52 1Q09 46 31 48 2Q 09 48 25 49 3Q09 48 25 55 4Q09 48 23 57 1Q10 42 25 51 2Q10 43 25 51 3Q 10 46 28 57
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HPFS SUPPLEMENTAL DATA
In millions
Q3 FY10
Depreciation (1)
Q3 FY09
$297
Q2 FY10
$343
$351
Net capital expenditures (1)
$521
$463
$515
Sequential increase (decrease) in net financing receivables
1. 2.
$(7)
$400
$37
Depreciation and net capital expenditures are shown net of inter-company eliminations. Prior period net financing receivables have been adjusted to more accurately reflect financing-related activity.
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Q2 FY10 GAAP to non-GAAP BRIDGE
In millions except per share amounts Amort. of Intangibles ReStructuring Acquisition related charges
GAAP
Non-GAAP Non GAAP
Revenue Cost of sales Total OpEx Operating profit Interest & other, net Pre-tax earnings Income tax Tax rate Net earnings EPS
27 August 19, 2010
$30,849 23,601 4,390 2,858 (91) 2,767 567 20.5% 2,200 $0.91
http://www.hp.com/investor/home
$30,849 23,601
(347) (180) (77)
3,786 3,462 (91)
347
180
77
347 92
180 57
77 22
3,371 738 21.9% 2,633 $1.09
Q1 FY10 GAAP to non-GAAP BRIDGE
In millions except per share amounts Amort. of Intangibles ReStructuring Acquisition related charges
GAAP
Non-GAAP Non GAAP
Revenue Cost of sales Total OpEx Operating profit Interest & other, net I t t th t Pre-tax earnings Income tax Tax rate Net earnings EPS
$31,177 24,062 4,112 3,003 (199) 2,804 554 19.8% 2,250 $0.93
330 101 131 42 38 12 (330) (131) (38)
$31,177 24,062 3,613 3,502 (199) 3,303 709 21.5% 2,594 $1.07
330
131
38
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FY09 GAAP to non-GAAP BRIDGE
In millions except per share amounts Amort. of Intangibles ReStructuring Acquisition related charges
GAAP
In-Process In Process R&D
Non-GAAP Non GAAP
Revenue Cost of sales Total OpEx Operating profit Interest & other, net Pre-tax earnings Income tax Tax Ta rate Net earnings EPS
$114,552 87,524 16,892 10,136 (721) 9,415 1,755 18.6% 18 6% 7,660 $3.14
1,571 451 640 197 7 242 79 (1,571) 1,571 (640) 640 (7) 7 (242) 242
$114,552 87,524 14,432 12,596 (721) 11,875 2,482 20.9% 20 9% 9,393 $3.85
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Q4 FY09 GAAP to non-GAAP BRIDGE
In millions except per share amounts Amort. of Intangibles ReStructuring In-Process R&D Acquisition related charges
GAAP
Non-GAAP Non GAAP
Revenue Cost of sales Total OpEx Operating profit Interest & other, net I t t th t Pre-tax earnings Income tax Tax rate Net earnings EPS
$30,777 23,475 4,169 3,133 (132) 3,001 589 19.6% 2,412 $0.99 $0 99
400 117 38 11 1 60 19 (400) (38) (1) (60)
$30,777 23,475 3,670 3,632 (132) 3,500 736 21.0% 2,764 $1.14 $1 14
400
38
1
60
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Q3 FY09 GAAP to non-GAAP BRIDGE
In millions except per share amounts Amort. of Intangibles ReStructuring Acquisition related charges
GAAP
Non-GAAP Non GAAP
Revenue Cost of sales Total OpEx Operating profit Interest & other, net I t t th t Pre-tax earnings Income tax Tax rate Net earnings EPS
$27,585 21,031 4,341 2,213 (177) 2,036 365 17.9% 1,671 $0.69 $0 69
379 105 362 108 59 19 (379) (362) (59)
$27,585 21,031 3,541 3,013 (177) 2,836 597 21.1% 2,239 $0.92 $0 92
379
362
59
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Q2 FY09 GAAP to non-GAAP BRIDGE
In millions except per share amounts Amort. of Intangibles ReStructuring Acquisition related charges
GAAP
Non-GAAP Non GAAP
Revenue Cost of sales Total OpEx Operating profit Interest & other, net I t t th t Pre-tax earnings Income tax Tax rate Net earnings EPS
$27,383 20,945 4,145 2,293 (180) 2,113 392 18.6% 1,721 $0.71 $0 71
380 112 94 31 75 24 (380) (94) (75)
$27,383 20,945 3,596 2,842 (180) 2,662 559 21.0% 2,103 $0.86 $0 86
380
94
75
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Q1 FY09 GAAP to non-GAAP BRIDGE
In millions except per share amounts Amort. of Intangibles ReStructuring In-Process R&D Acquisition related charges
GAAP
Non-GAAP Non GAAP
Revenue Cost of sales Total OpEx Operating profit Interest & other, net other Pre-tax earnings Income tax Tax rate Net earnings EPS
$28,807 22,073 4,237 2,497 (232) 2,265 409 18.1% 1,856 $0.75
412 117 146 47 6 48 17 (412) (146) (6) (48)
$28,807 22,073 3,625 3,109 (232) 2,877 590 20.5% 2,287 $0.93
412
146
6
48
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FY08 GAAP to non-GAAP BRIDGE
In millions except per share amounts Amort. of Intangibles ReStructuring In-Process R&D Acquisition related charges
GAAP
Non-GAAP Non GAAP
Revenue Cost of sales Total OpEx Operating profit Interest & other, net other Pre-tax earnings Income tax Tax rate Net earnings EPS
$118,364 89,699 18,192 10,473 0 10,473 2,144 20.5% 8,329 $3.25 $3 25
967 262 270 74 45 41 14 (967) (270) (45) (41)
$118,364 89,699 16,869 11,796 0 11,796 2,494 21.1% 9,302 $3.62 $3 62
967
270
45
41
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Q4 FY08 GAAP to non-GAAP BRIDGE
In millions except per share amounts Amort. of Intangibles ReStructuring In-Process R&D Acquisition related charges
GAAP
Non-GAAP Non GAAP
Revenue Cost of sales Total OpEx Operating profit Interest & other, net other Pre-tax earnings Income tax Tax rate Net earnings EPS
$33,603 25,853 5,009 2,741 (98) 2,643 531 20.1% 2,112 $0.84
337 96 251 69 32 41 14 (337) (251) (32) (41)
$33,603 25,853 4,348 3,402 (98) 3,304 710 21.5% 2,594 $1.03
337
251
32
41
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Q3 FY08 GAAP to non-GAAP BRIDGE
In millions except per share amounts Amort. of Intangibles ReStructuring In-Process R&D
GAAP
Non-GAAP Non GAAP
Revenue Cost of sales Total OpEx Operating profit Interest & other, net Pre-tax earnings Income tax Tax rate Net earnings EPS
$28,032 21,197 4,306 2,529 23 2,552 525 20.6% 2,027 $0.80 $0 80
213 56 5 1 (213) (5) -
$28,032 21,197 4,088 2,747 23 2,770 582 21.0% 2,188 $0.86 $0 86
213
5
-
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Q2 FY08 GAAP to non-GAAP BRIDGE
In millions except per share amounts Amort. of Intangibles ReStructuring In-Process R&D
GAAP
Non-GAAP Non GAAP
Revenue Cost of sales Total OpEx Operating profit Interest & other, net Pre-tax earnings Income tax Tax rate Net earnings EPS
$28,262 21,205 4,467 2,590 3 2,593 536 20.7% 2,057 $0.80 $0 80
211 55 4 1 13 (211) (4) (13)
$28,262 21,205 4,239 2,818 3 2,821 592 21.0% 2,229 $0.87 $0 87
211
4
13
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Q1 FY08 GAAP to non-GAAP BRIDGE
In millions except per share amounts
GAAP
Amort. of Intangibles
Restructuring
Non-GAAP
Revenue Cost of sales Total OpEx Operating profit Interest & other, net Pre-tax earnings Income tax Tax rate Net earnings EPS
$28,467 21,444 4,410 2,613 72 2,685 552 20.6% 20 6% 2,133 $0.80
(206) (10)
$28,467 21,444 4,194 2,829 72 2,901 610 21.0% 21 0% 2,291 $0.86
206
10
206 55
10 3
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FY07 GAAP to non-GAAP BRIDGE
In millions except per share amounts
GAAP
Amort. of Intangibles
Restructuring charges
In-process R&D
Pension Curtail.
Non-GAAP
Revenue Cost of sales Total OpEx Operating profit Interest & other, net other Pre-tax earnings Income tax Tax rate Net earnings EPS
$104,286 78,683 16,884 16 884 8,719 458 9,177 1,913 20.8% 7,264 $2.68 $2 68
783 197 387 136 190 (517) (180) (783) (387) (190) 517
$104,286 78,683 16,041 16 041 9,562 458 10,020 2,066 20.6% 7,954 $2.93 $2 93
783
387
190
(517)
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Q4 FY07 GAAP to non-GAAP BRIDGE
In millions except per share amounts
GAAP
Amort. of Intangibles
Restructuring
In-process R&D
Non-GAAP
Revenue Cost of sales Total OpEx Operating profit Interest & other, net other Pre-tax earnings Income tax Tax rate Net earnings EPS
$28,293 21,250 4,411 2,632 67 2,699 535 19.8% 2,164 $0.81
187 46 (20) (7) 4 (187) 20 (4)
$28,293 21,250 4,240 2,803 67 2,870 574 20.0% 2,296 $0.86
187
(20)
4
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Q3 FY07 GAAP to non-GAAP BRIDGE
In millions except per share amounts
GAAP
Amort. of Intangibles
Restructuring
In-process R&D
Non-GAAP
Revenue Cost of sales Total OpEx Operating profit Interest & other, net Pre-tax earnings Income tax Tax t T rate Net earnings EPS
$25,377 19,112 4,149 2,116 170 2,286 508 22.2% 22 2% 1,778 $0.66
183 48 (5) (4) (183) 183 5 (5)
$25,377 19,112 3,971 2,294 170 2,464 552 22.4% 22 4% 1,912 $0.71
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Q&A
August 19, 2010
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