HP (HPQ) 8-K Results of Operations and Financial Condition

HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(Unaudited)
(In millions except per share amounts)

	Three months ended
	April 30, 2006			January 31, 2006			April 30, 2005
Net revenue	$	22,554		$	22,659		$	21,570
Costs and expenses(a):
Cost of sales		16,970			17,392			16,429
Research and development		930			871			890
Selling, general and administrative		2,858			2,692			2,933
Restructuring		(14	)		15			4
Amortization of purchased intangible assets		151			147			151
In-process research and development charges		2			50			--
Total costs and expenses		20,897			21,167			20,407
Earnings from operations		1,657			1,492			1,163
Interest and other, net		157			38			(87	)
Gains (losses) on investments		6			(2	)		3
Earnings before taxes		1,820			1,528			1,079
Provision for taxes(b)		364			301			113
Net earnings	$	1,456		$	1,227		$	966
Net earnings per share:
Basic	$	0.52		$	0.43		$	0.33
Diluted	$	0.51		$	0.42		$	0.33
Cash dividends declared per share	$	--		$	0.16		$	--
Weighted-average shares used to compute net earnings per share:
Basic		2,809			2,822			2,886
Diluted		2,887			2,893			2,917
(a) Stock-based compensation expense included under SFAS 123(R) were as follows:
Cost of sales	$	33		$	39		$	--
Research and development		15			18			--
Selling, general and administrative		76			87			--
Total costs and expenses	$	124		$	144		$	--
(b) Tax benefit from stock-based compensation	$	(39	)	$	(43	)	$	--

HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(Unaudited)
(In millions except per share amounts)

	Six months ended April 30,
	2006			2005
Net revenue	$	45,213		$	43,024
Costs and expenses(a):
Cost of sales		34,362			32,966
Research and development		1,801			1,768
Selling, general and administrative		5,550			5,637
Restructuring		1			7
Amortization of purchased intangible assets		298			318
In-process research and development charges		52			--
Total costs and expenses		42,064			40,696
Earnings from operations		3,149			2,328
Interest and other, net		195			(62	)
Gains (losses) on investments		4			(21	)
Dispute settlement		--			(116	)
Earnings before taxes		3,348			2,129
Provision for taxes(b)		665			220
Net earnings	$	2,683		$	1,909
Net earnings per share:
Basic	$	0.95		$	0.66
Diluted	$	0.93		$	0.65
Cash dividends declared per share	$	0.16		$	0.16
Weighted-average shares used to compute net earnings per share:
Basic		2,815			2,897
Diluted		2,890			2,926
(a) Stock-based compensation expense included under FAS 123(R)were as follows:
Cost of sales	$	72		$	--
Research and development		33			--
Selling, general and administrative		163			--
Total costs and expenses	$	268		$	--
(b) Tax benefit from stock-based compensation	$	(82	)	$	--

HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(In millions)

	April 30, 2006		October 31, 2005
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	14,032	$	13,911
Short-term investments		12		18
Accounts receivable, net		9,783		9,903
Financing receivables, net		2,540		2,551
Inventory		6,768		6,877
Other current assets		9,073		10,074
Total current assets		42,208		43,334
Property, plant and equipment, net		6,351		6,451
Long-term financing receivables and other assets		8,210		7,502
Goodwill and purchased intangibles, net		20,430		20,030
Total assets	$	77,199	$	77,317
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and short-term borrowings	$	2,609	$	1,831
Accounts payable		10,077		10,223
Employee compensation and benefits		2,538		2,343
Taxes on earnings		2,365		2,367
Deferred revenue		4,101		3,815
Accrued restructuring		872		1,119
Other accrued liabilities		10,354		9,762
Total current liabilities		32,916		31,460
Long-term debt		2,406		3,392
Other liabilities		5,266		5,289
Stockholders' equity		36,611		37,176
Total liabilities and stockholders' equity	$	77,199	$	77,317

HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
SEGMENT INFORMATION
(Unaudited)
(In millions)

	Three months ended
	April 30, 2006			January 31, 2006			April 30, 2005(a)
Net revenue:	��
Enterprise Storage and Servers	$	4,265		$	4,240		$	4,187
HP Services		3,892			3,757			3,984
Software		330			304			274
Technology Solutions Group		8,487			8,301			8,445
Personal Systems Group		6,977			7,449			6,369
Imaging and Printing Group		6,724			6,545			6,390
HP Financial Services		518			496			544
Corporate Investments		122			129			123
Total Segments		22,828			22,920			21,871
Eliminations of intersegment net revenue and other		(274	)		(261	)		(301	)
Total HP Consolidated	$	22,554		$	22,659		$	21,570
Earnings from operations:
Enterprise Storage and Servers	$	322		$	326		$	180
HP Services		345			293			292
Software		3			9			(2	)
Technology Solutions Group		670			628			470
Personal Systems Group		248			293			147
Imaging and Printing Group		1,041			973			814
HP Financial Services		39			38			58
Corporate Investments		(49	)		(33	)		(51	)
Total Segments		1,949			1,899			1,438
Corporate and unallocated costs and eliminations, excluding         stock-based compensation expense		(50	)		(72	)		(120	)
Unallocated costs related to stock-based compensation expense		(103	)		(123	)		--
Restructuring		14			(15	)		(4	)
In-process research and development charge		(2	)		(50	)		--
Amortization of purchased intangible assets		(151	)		(147	)		(151	)
Interest and other, net		157			38			(87	)
Gains (losses) on investments		6			(2	)		3
Total HP Consolidated Earnings Before Taxes	$	1,820		$	1,528		$	1,079

(a) Reflects certain fiscal 2006 organizational realignments retroactively to provide improved visibility and comparability. For each of the quarters in fiscal year 2005, the realignments resulted primarily in revenue and operating profit movement of $5 million or less between ESS and SW segments within TSG. There was no impact to the remaining segments.

HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
SEGMENT INFORMATION
(Unaudited)
(In millions)

	Six months ended April 30,
	2006			2005(a)
Net revenue:
Enterprise Storage and Servers	$	8,505		$	8,238
HP Services		7,649			7,799
Software		634			510
Technology Solutions Group		16,788			16,547
Personal Systems Group		14,426			13,242
Imaging and Printing Group		13,269			12,457
HP Financial Services		1,014			1,099
Corporate Investments		251			238
Total Segments		45,748			43,583
Eliminations of intersegment net revenue and other		(535	)		(559	)
Total HP Consolidated	$	45,213		$	43,024
Earnings from operations:
Enterprise Storage and Servers	$	648		$	249
HP Services		638			573
Software		12			(40	)
Technology Solutions Group		1,298			782
Personal Systems Group		541			294
Imaging and Printing Group		2,014			1,746
HP Financial Services		77			103
Corporate Investments		(82	)		(102	)
Total Segments		3,848			2,823
Corporate and unallocated costs and eliminations,excluding
stock-based compensation expense		(122	)		(170	)
Unallocated costs related to stock-based compensation expense		(226	)		--
Restructuring		(1	)		(7	)
In-process research and development charge		(52	)		--
Amortization of purchased intangible assets		(298	)		(318	)
Interest and other, net		195			(62	)
Gains (losses) on investments		4			(21	)
Dispute settlement		--			(116	)
Total HP Consolidated Earnings Before Taxes	$	3,348		$	2,129

(a) Reflects certain fiscal 2006 organizational realignments retroactively to provide improved visibility and comparability. For the period in fiscal year 2005, the realignments resulted primarily in revenue and operating profit movement of $5 million or less between ESS and SW segments within TSG. There was no impact to the remaining segments.