HP (HPQ) 10-Q 11 Mar 10 2010 Q1 Quarterly report Financial data

Consolidated Condensed Statemen

Consolidated Condensed Statements of Earnings (USD $)
In Millions, except Per Share data	3 Months Ended Jan. 31, 2010	3 Months Ended Jan. 31, 2009
Net revenue:
Products	$21,003	$18,629
Services	10,067	10,089
Financing income	107	89
Total net revenue	31,177	28,807
Costs and expenses:
Cost of products	16,347	14,168
Cost of services	7,636	7,819
Financing interest	79	86
Research and development	681	732
Selling, general and administrative	2,932	2,893
Amortization of purchased intangible assets	330	412
In-process research and development charges		6
Restructuring charges	131	146
Acquisition-related charges	38	48
Total operating expenses	28,174	26,310
Earnings from operations	3,003	2,497
Interest and other, net	(199)	(232)
Earnings before taxes	2,804	2,265
Provision for taxes	554	409
Net earnings	$2,250	$1,856
Net earnings per share:
Basic (in dollars per share)	0.95	0.77
Diluted (in dollars per share)	0.93	0.75
Cash dividends declared per share (in dollars per share)	0.16	0.16
Weighted-average shares used to compute net earnings per share:
Basic (in shares)	2,358	2,410
Diluted (in shares)	2,427	2,464

Consolidated Condensed Balance

Consolidated Condensed Balance Sheets (USD $)
In Millions	3 Months Ended Jan. 31, 2010	12 Months Ended Oct. 31, 2009
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	33,068	33,109
Purchased intangible assets	6,266	6,600
Total assets	113,618	114,799
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	983	910
Deferred revenue	6,412	6,182
Accrued restructuring	899	1,109
Other accrued liabilities	14,122	14,072
Total current liabilities	40,873	43,003
Long-term debt	14,009	13,980
Other liabilities	16,845	17,052	[1]
Commitments and contingencies
HP Stockholders' equity
Preferred stock, $0.01 par value (300 shares authorized; none issued)	0	0
Common stock, $0.01 par value (9,600 shares authorized; 2,349 and 2,365 shares issued and outstanding, respectively)	23	24
Additional paid-in capital	14,158	13,804
Retained earnings	30,391	29,936
Accumulated other comprehensive loss	(2,944)	(3,247)
Total HP stockholders' equity	41,628	40,517
Noncontrolling interests	263	247	[1]
Total stockholders' equity	41,891	40,764
Total liabilities and stockholders' equity	$113,618	$114,799
[1]Reflects the adoption of the accounting standard related to the presentation of noncontrolling interests in consolidated financial statements.

1_Consolidated Condensed Balanc

Consolidated Condensed Balance Sheets (Parenthetical) (USD $)
Share data in Millions, except Per Share data	Jan. 31, 2010	Oct. 31, 2009
Consolidated Condensed Balance Sheets
Preferred stock, par value (in dollars per share)	0.01	0.01
Preferred stock, shares authorized	300	300
Preferred stock, shares issued	0	0
Common stock, par value (in dollars per share)	0.01	0.01
Common stock, shares authorized	9,600	9,600
Common stock, shares issued	2,349	2,365
Common stock, shares outstanding	2,349	2,365

2_Consolidated Condensed Statem

Consolidated Condensed Statements of Cash Flows (USD $)
In Millions	3 Months Ended Jan. 31, 2010	3 Months Ended Jan. 31, 2009
Cash flows from operating activities:
Net earnings	$2,250	$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 doubtful accounts - accounts and financing receivables	51	85
Provision for inventory	41	83
In-process research and development charges		6
Restructuring charges	131	146
Deferred taxes on earnings	(192)	(63)
Excess tax benefit from stock-based compensation	(128)	(13)
Other, net	87	3
Changes in operating assets and liabilities:
Accounts and financing receivables	1,875	1,780
Inventory	(543)	156
Accounts payable	(1,268)	(3,089)
Taxes on earnings	479	263
Restructuring	(400)	(209)
Other assets and liabilities	(1,319)	(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
Receipts (payments) 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
Supplemental schedule of non-cash investing and financing activities:
Purchase of assets under financing arrangement		264
Purchase of assets under capital lease	$53	$12

Basis of Presentation and Signi

Basis of Presentation and Significant Accounting Policies
	3 Months Ended Jan. 31, 2010
Notes to Consolidated Condensed Financial Statements
Basis of Presentation and Significant Accounting Policies	Note1: Basis of Presentation and Significant Accounting Policies In the opinion of management, the accompanying Consolidated Condensed Financial Statements of Hewlett-Packard Company and its consolidated subsidiaries ("HP") contain all adjustments, including normal recurring adjustments, necessary to present fairly HP's financial position as of January31, 2010, its results of operations and cash flows for the three months ended January31, 2010 and January31, 2009. The Consolidated Condensed Balance Sheet as of October31, 2009 is derived from the October31, 2009 audited consolidated financial statements. Certain reclassifications have been made to prior-period amounts in order to conform to the current period presentation. The results of operations for the three months ended January31, 2010 are not necessarily indicative of the results to be expected for the full year. The information included in this Quarterly Report on Form10-Q should be read in conjunction with "Risk Factors," "Legal Proceedings," "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Quantitative and Qualitative Disclosures About Market Risk" and the Consolidated Financial Statements and notes thereto included in Items1A, 3, 7, 7A and 8, respectively, of the Hewlett-Packard Company Annual Report on Form10-K for the fiscal year ended October31, 2009. The preparation of financial statements in accordance with U.S. generally accepted accounting principles ("GAAP") requires management to make estimates and assumptions that affect the amounts reported in HP's Consolidated Condensed Financial Statements and accompanying notes. Actual results could differ materially from those estimates. Accounting Pronouncements The following disclosure on accounting pronouncements includes those that may apply to the historical financial statements. In December 2007, the Financial Accounting Standards Board ("FASB") issued a new accounting standard related to noncontrolling interests. The standard establishes accounting and reporting standards for ownership interests in subsidiaries held by parties other than the parent, the amount of consolidated net income attributable to the parent and to the noncontrolling interests, changes in a parent's ownership interest, and the valuation of retained noncontrolling equity investments when a subsidiary is deconsolidated. The standard also establishes disclosure requirements that clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners. In January 2010, the FASB issued Accounting Standards Update No.2010-02, "Consolidation: Accounting and Reporting for Decreases in Ownership of a Subsidiarya Scope Clarification." This update clarifies the scope of the decrease in ownership provisions and also requires expanded disclosures. HP adopted these standards in the first quarter of fiscal 2010 with retrospective application of the presentation and disclosure requirements. Noncontrolling interests of $247million at October31, 2009 were reclassified from Other liabilities to Stockholders' equity in the Consolidated Condensed Balance Sheet as of October

Stock-Based Compensation

Stock-Based Compensation
	3 Months Ended Jan. 31, 2010
Notes to Consolidated Condensed Financial Statements
Stock-Based Compensation	Note2: Stock-Based Compensation HP's stock-based compensation plans include incentive compensation plans and an employee stock purchase plan. Incentive compensation plans include principal option plans as well as various stock option plans assumed through acquisitions. Principal option plans include performance-based restricted units ("PRU"), stock options and restricted stock awards. Total stock-based compensation expense before income taxes for the three months ended January31, 2010 and 2009 was $181million and $160million, respectively. The resulting income tax benefit for the three months ended January31, 2010 and 2009 was $58million and $48million, respectively. Performance-based Restricted Units In fiscal 2008, HP implemented a program that provides for the issuance of PRUs representing hypothetical shares of HP common stock that may be issued under the Hewlett-Packard Company 2004 Stock Incentive Plan. Under the PRU program, a target number of units are awarded at the beginning of each three-year performance period. The number of shares released at the end of the performance period will range from zero to two times the target number depending on performance during the period. The performance metrics of the PRU program are (a)annual targets based on cash flow from operations as a percentage of revenue, and (b)an overall "modifier" based on Total Shareholder Return ("TSR") relative to the SP500 over the three-year performance period. TSR is calculated using the quarterly average performance of the SP500 during the three-year performance period. As the cash flow goals are considered performance conditions, the expense for these awards, net of estimated forfeitures, is recorded over the three-year performance period based on the number of shares that are expected to be earned based on the achievement of the cash flow goals during the performance period. HP estimates the fair value of a target PRU share using the Monte Carlo simulation model, as the TSR modifier contains a market condition. The following weighted-average assumptions were used to determine the weighted-average fair values of the PRU awards: Three months ended January31 2010 2009 Weighted-average fair value of grants per share $ 57.13 (1) $ 40.56 (2) Expected volatility(3) 38 % 35 % Risk-free interest rate 0.73 % 1.34 % Dividend yield 0.64 % 0.88 % Expected life in months 22 30 (1) Reflects the weighted-average fair value for the third year of the three-year performance period applicable to PRUs granted in fiscal 2008, for the second year of the three-year performance period applicable to PRUs granted in fiscal 2009 and for the first year of the three-year performance period applicable to PRUs granted in the three months ended January31, 2010. The estimated fair value of a target share for the third year for PRUs granted in fiscal 2009 and for the second and third years for PRUs granted in the three months ended January31, 2010 will be determined on the measurement date applicable to those PRUs, which will be the date that the annual cash flow goals are approved

Net Earnings Per Share

Net Earnings Per Share
	3 Months Ended Jan. 31, 2010
Notes to Consolidated Condensed Financial Statements
Net Earnings Per Share	Note3: Net Earnings Per Share HP calculates basic earnings per share using net earnings and the weighted-average number of shares outstanding during the reporting period. Diluted EPS includes any dilutive effect of outstanding stock options, PRUs, restricted stock units, and restricted stock. The reconciliation of the numerators and denominators of the basic and diluted EPS calculations was as follows: Three months ended January31 2010 2009 In millions, except per share amounts Numerator: Net earnings(1) $ 2,250 $ 1,856 Denominator: Weighted-average shares used to compute basic EPS 2,358 2,410 Dilutive effect of employee stock plans 69 54 Weighted-average shares used to compute diluted EPS 2,427 2,464 Net earnings per share: Basic $ 0.95 $ 0.77 Diluted $ 0.93 $ 0.75 (1) Net earnings available to participating securities were not significant for the first quarter of fiscal 2010 and 2009. HP considers restricted stock that provides the holder with a non-forfeitable right to receive dividends to be a participating security. HP excludes options with exercise prices that are greater than the average market price from the calculation of diluted EPS because their effect would be anti-dilutive. In the first quarter of fiscal 2010 and 2009, HP excluded from the calculation of diluted EPS options to purchase 21million shares and 107million shares, respectively. HP also excluded from the calculation of diluted EPS options to purchase an additional 2million shares and 1million shares in the first quarter of fiscal 2010 and 2009, respectively, whose combined exercise price, unamortized fair value and excess tax benefits were greater in each of those periods than the average market price for HP's common stock because their effect would be anti-dilutive. During the first quarter of fiscal 2010 and 2009, HP granted PRU awards representing at target approximately 7million shares and 14million shares, respectively. HP includes the shares underlying PRU awards in the calculation of diluted EPS when they become contingently issuable and excludes such shares when they are not contingently issuable. Accordingly, for the first quarter of fiscal 2010, HP has included 9million shares underlying the PRU awards granted in fiscal 2009 and 2008 when calculating diluted EPS as those shares became contingently issuable upon the satisfaction of the cash flow from operations condition with respect to the first year of the three-year performance period applicable to the fiscal 2009 awards and the first and second years of the three-year performance period applicable to the fiscal 2008 awards. HP has excluded all other shares underlying the fiscal 2009 and 2008 PRU awards and all shares underlying the fiscal 2010 awards when calculating diluted EPS as those shares are not contingently issuable. For the first quarter of fiscal 2009, HP has included 2million shares underlying the PRU awards granted in fiscal 2008 when calculating diluted EPS as those shares became contingently issuable upon

Balance Sheet Details

Balance Sheet Details
	3 Months Ended Jan. 31, 2010
Notes to Consolidated Condensed Financial Statements
Balance Sheet Details	Note4: Balance Sheet Details Balance sheet details were as follows: Accounts and Financing Receivables January31, 2010 October31, 2009 In millions Accounts receivable $ 15,069 $ 17,166 Allowance for doubtful accounts (566 ) (629 ) $ 14,503 $ 16,537 Financing receivables $ 2,811 $ 2,723 Allowance for doubtful accounts (46 ) (48 ) $ 2,765 $ 2,675 HP has revolving trade receivables-based facilities permitting it to sell certain trade receivables to third parties on a non-recourse basis. The aggregate maximum capacity under these programs was $538million as of January31, 2010. HP sold $506million of trade receivables during the first three months of fiscal 2010. As of January31, 2010, HP had $140million available under these programs. Inventory January31, 2010 October31, 2009 In millions Finished goods $ 4,327 $ 4,092 Purchased parts and fabricated assemblies 2,303 2,036 $ 6,630 $ 6,128 Property, Plant and Equipment January31, 2010 October31, 2009 In millions Land $ 521 $ 513 Buildings and leasehold improvements 7,776 7,472 Machinery and equipment 12,954 12,959 21,251 20,944 Accumulated depreciation (10,087 ) (9,682 ) $ 11,164 $ 11,262

Acquisitions

Acquisitions
	3 Months Ended Jan. 31, 2010
Notes to Consolidated Condensed Financial Statements
Acquisitions	Note5: Acquisitions Pending acquisition in fiscal 2010 In November 2009, HP entered into a definitive agreement to acquire 3Com Corporation ("3Com"), a global enterprise provider of networking switching, routing and security solutions, at a price of $7.90 per share in cash or an enterprise value of approximately $2.7billion. The acquisition has received clearance from U.S. and European Union regulatory authorities and the approval of 3Com's stockholders. The closing of the acquisition is subject to certain closing conditions, including obtaining requisite approvals on clearances under certain antitrust or competition laws. The transaction is expected to close in HP's second fiscal quarter of 2010.

Goodwill and Purchased Intangib

Goodwill and Purchased Intangible Assets
	3 Months Ended Jan. 31, 2010
Notes to Consolidated Condensed Financial Statements
Goodwill and Purchased Intangible Assets	Note6: Goodwill and Purchased Intangible Assets Goodwill Goodwill allocated to HP's business segments as of January31, 2010 and changes in the carrying amount of goodwill for the three months ended January31, 2010 are as follows: Services Enterprise Storage and Servers HP Software Personal Systems Group Imaging and Printing Group HP Financial Services Corporate Investments Total In millions Balance at October31, 2009 $ 16,829 $ 5,005 $ 6,140 $ 2,487 $ 2,460 $ 144 $ 44 $ 33,109 Goodwill adjustments (30 ) (6 ) (1 ) (3 ) (1 ) (41 ) Balance at January31, 2010 $ 16,799 $ 4,999 $ 6,139 $ 2,484 $ 2,459 $ 144 $ 44 $ 33,068 During the three months ended January31, 2010, HP recorded reductions to goodwill primarily for tax adjustments related to tax deductible stock-based awards for the acquisition of Compaq Computer Corporation for which the acquisition date was before the effective date of the new guidance for business combinations. HP also recorded reductions to goodwill for currency translation related to certain of Electronic Data Systems Corporation's ("EDS") foreign subsidiaries whose functional currency is not the U.S. dollar. Purchased Intangible Assets HP's purchased intangible assets associated with completed acquisitions are composed of: January31, 2010 October31, 2009 Gross Accumulated Amortization Net Gross Accumulated Amortization Net In millions Customer contracts, customer lists and distribution agreements $ 6,761 $ (3,230 ) $ 3,531 $ 6,763 $ (3,034 ) $ 3,729 Developed and core technology and patents 4,169 (2,878 ) 1,291 4,171 (2,747 ) 1,424 Product trademarks 247 (225 ) 22 247 (222 ) 25 Total amortizable purchased intangible assets 11,177 (6,333 ) 4,844 11,181 (6,003 ) 5,178 Compaq trade name 1,422 1,422 1,422 1,422 Total purchased intangible assets $ 12,599 $ (6,333 ) $ 6,266 $ 12,603 $ (6,003 ) $ 6,600 For the three months ended January31, 2010, adjustments made to purchased intangibles relate primarily to currency translation on certain of EDS's foreign subsidiaries whose functional currency is not the U.S. dollar. Estimated future amortization expense related to finite lived purchased intangible assets at January31, 2010 is as follows: Fiscal year: In millions 2010 (remaining nine months) $ 976 2011 1,052 2012 854 2013 716 2014 464 Thereafter 782 Total $ 4,844

Restructuring Charges

Restructuring Charges
	3 Months Ended Jan. 31, 2010
Notes to Consolidated Condensed Financial Statements
Restructuring Charges	Note7: Restructuring Charges Fiscal 2009 Restructuring Plan In May 2009, HP's management approved and initiated a restructuring plan to structurally change and improve the effectiveness of the Imaging and Printing Group ("IPG"), the Personal Systems Group ("PSG"), and Enterprise Storage and Servers ("ESS"). The total expected cost of the plan is $303million in severance-related costs associated with the planned elimination of approximately 5,000 positions. As of January31, 2010, approximately 2,800 positions have been eliminated. HP expects the majority of the restructuring costs to be paid out by the fourth quarter of fiscal 2010. In future quarters, HP expects to record an additional charge of approximately $5million related to severance costs associated with this plan. Fiscal 2008 HP/EDS Restructuring Plan In connection with the acquisition of EDS on August26, 2008, HP's management approved and initiated a restructuring plan to streamline the combined company's services business and to better align the structure and efficiency of that business with HP's operating model. The restructuring plan is expected to be implemented over four years from the acquisition date and includes changes to the combined company's workforce as well as changes to corporate overhead functions such as real estate and IT. The total expected cost of this restructuring plan is $3.0billion, consisting mainly of severance costs to eliminate approximately 25,000 positions, costs to vacate duplicative facilities and costs associated with early termination of certain contractual obligations. As of January31, 2010, over 20,000 positions have been eliminated. HP expects the majority of the restructuring costs associated with severance to be paid out by the second quarter of fiscal 2010. In future quarters, HP expects to record an additional charge of approximately $412million related to the cost to vacate duplicative facilities and severance costs. Approximately $1.5 billion of the expected costs were associated with pre-acquisition EDS and were reflected in the purchase price of EDS. These costs are subject to change based on the actual costs incurred. The remaining costs are primarily associated with HP and were recorded as a restructuring charge. Summary of Restructuring Plans The adjustments to the accrued restructuring expenses related to all of HP's restructuring plans described above for the three months ended January31, 2010 were as follows: Three months ended January31, 2010 charges As of January31, 2010 Balance, October31, 2009 Cash payments Non-cash settlements and other adjustments Balance, January31, 2010 Total costs and adjustments to date Total expected costs and adjustments Fiscal 2009 Plan $ 248 $ 1 $ (45 ) $ (6 ) $ 198 $ 298 $ 303 Fiscal 2008 HP/EDS Plan: Severance $ 747 $ 101 $ (330 ) $ (24 ) $ 494 $ 2,011 $ 2,017 Infrastructure 419 29 (20 ) (7 ) 421 529 935 Total severance and other restructuring activities $ 1,16

Fair Value

Fair Value
	3 Months Ended Jan. 31, 2010
Notes to Consolidated Condensed Financial Statements
Fair Value	Note8: Fair Value HP adopted the provisions related to the fair value of nonfinancial assets and nonfinancial liabilities in the first quarter of fiscal 2010 for the following major categories of nonfinancial items from the Consolidated Condensed Balance Sheet: Property, plant and equipment, Goodwill, Purchased intangible assets, Accrued restructuring and the asset retirement obligations within Other accrued liabilities and Other liabilities. The provisions of the accounting standard related to estimating fair value and related disclosures are applied to nonfinancial assets and nonfinancial liabilities whenever they are required to be measured at fair value, such as when accounting for a business combination, when evaluating and/or determining impairment, or in accordance with certain other accounting pronouncements. For the three months ended January31, 2010, HP did not measure any nonfinancial assets and nonfinancial liabilities at fair value on a non-recurring basis. The adoption of these provisions did not have a material impact on the consolidated condensed financial statements of HP for the first quarter of fiscal 2010. The standard relating to fair value measurements and disclosures codifies a new framework for measuring fair value and expands related disclosures. The framework requires fair value to be determined based on the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants. Valuation techniques used by HP are based upon observable and unobservable inputs. Observable or market inputs reflect market data obtained from independent sources, while unobservable inputs reflect HP's assumptions about market participant assumptions based on best information available. Observable inputs are the preferred source of values. These two types of inputs create the following fair value hierarchy: Level1Quoted prices (unadjusted) for identical instruments in active markets. Level2Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level3Prices or valuations that require management inputs that are both significant to the fair value measurement and unobservable. The following section describes the valuation methodologies HP uses to measure its financial assets and liabilities at fair value. Cash Equivalents and Investments: HP holds time deposits, money market funds, commercial paper, other debt securities primarily consisting of corporate and foreign government notes and bonds, and common stock and equivalents. In general, and where applicable, HP uses quoted prices in active markets for identical assets to determine fair value. If quoted prices in active markets for identical assets are not available to determine fair value, HP uses quoted prices for simil

Financial Instruments

Financial Instruments
	3 Months Ended Jan. 31, 2010
Notes to Consolidated Condensed Financial Statements
Financial Instruments	Note9: Financial Instruments Available-for-Sale Investments Cash equivalents and investments at fair value as of January31, 2010 and October31, 2009 were as follows: January31, 2010 October31, 2009 Cost Gross Unrealized Gain Gross Unrealized Loss Estimated Fair Value Cost Gross Unrealized Gain Gross Unrealized Loss Estimated Fair Value In millions Cash Equivalents Time deposits $ 9,371 $ $ $ 9,371 $ 8,870 $ $ $ 8,870 Commercial paper 1,375 1,375 1,388 1,388 Money market funds 586 586 262 262 Total cash equivalents $ 11,332 $ $ $ 11,332 $ 10,520 $ $ $ 10,520 Investments Debt securities: Time deposits $ 62 $ $ $ 62 $ 55 $ $ $ 55 Other debt securities 404 51 (45 ) 410 419 49 (45 ) 423 Total debt securities $ 466 $ 51 $ (45 ) $ 472 $ 474 $ 49 $ (45 ) $ 478 Equity securities in public companies $ 3 $ 2 $ $ 5 $ 3 $ 2 $ $ 5 Total cash equivalents and investments $ 11,801 $ 53 $ (45 ) $ 11,809 $ 10,997 $ 51 $ (45 ) $ 11,003 Cash equivalents consist of investments with original maturities of ninety days or less. Available-for-sale securities consist of short-term investments which mature within twelve months or less and long-term investments with maturities longer than twelve months. Investments include primarily time deposits, fixed-interest securities, and institutional bonds. As discussed in Note8, HP estimated the fair values of its investments based on quoted market prices or pricing models using current market rates. These estimated fair values may not be representative of actual values that will be realized in the future. The gross unrealized loss as of January31, 2010 was due primarily to declines in certain debt securities and included $31million that has been in a continuous loss position for more than twelve months. The gross unrealized loss as of October31, 2009 was due primarily to declines in certain debt securities and included $20million that had been in a continuous loss position for more than twelve months. HP does not intend to sell these debt securities, and it is not likely that HP will be required to sell these debt securities prior to the recovery of the amortized cost. In the three months ended January31, 2010, HP did not recognize any impairment charge associated with debt securities. In the three months ended January31, 2009, HP recognized an impairment charge of $11million representing credit losses associated with debt securities. Contractual maturities of short-term and long-term investments in available-for-sale securities at January31, 2010 were as follows:

Financing Receivables and Opera

Financing Receivables and Operating Leases
	3 Months Ended Jan. 31, 2010
Notes to Consolidated Condensed Financial Statements
Financing Receivables and Operating Leases	Note10: Financing Receivables and Operating Leases Financing receivables represent sales-type and direct-financing leases resulting from the marketing of HP's and third-party products. These receivables typically have terms from two to five years and are usually collateralized by a security interest in the underlying assets. Financing receivables also include billed receivables from operating leases. The components of net financing receivables, which are included in financing receivables and long-term financing receivables and other assets, were as follows: January31, 2010 October31, 2009 In millions Minimum lease payments receivable $ 6,541 $ 6,413 Allowance for doubtful accounts (102 ) (108 ) Unguaranteed residual value 238 244 Unearned income (570 ) (571 ) Financing receivables, net 6,107 5,978 Less current portion (2,765 ) (2,675 ) Amounts due after one year, net $ 3,342 $ 3,303 Equipment leased to customers under operating leases was $3.1billion at January31, 2010 and $3.0billion at October31, 2009 and is included in machinery and equipment. Accumulated depreciation on equipment under lease was $0.9billion at January31, 2010 and October31, 2009.

Guarantees

Guarantees
	3 Months Ended Jan. 31, 2010
Notes to Consolidated Condensed Financial Statements
Guarantees	Note11: Guarantees Guarantees and Indemnifications In the ordinary course of business, HP may provide certain clients with subsidiary performance guarantees and/or financial performance guarantees, which may be backed by standby letters of credit or surety bonds. In general, HP would be liable for the amounts of these guarantees in the event HP or HP's subsidiaries' nonperformance permits termination of the related contract by the client, the likelihood of which HP believes is remote. HP believes that the company is in compliance with the performance obligations under all material service contracts for which there is a performance guarantee. HP has certain service contracts supported by client financing or securitization arrangements. Under specific circumstances involving nonperformance resulting in service contract termination or failure to comply with terms under the financing arrangement, HP would be required to acquire certain assets. HP considers the possibility of its failure to comply to be remote and the asset amounts involved to be immaterial. In the ordinary course of business, HP enters into contractual arrangements under which HP may agree to indemnify the third party to such arrangement from any losses incurred relating to the services they perform on behalf of HP or for losses arising from certain events as defined within the particular contract, which may include, for example, litigation or claims relating to past performance. Such indemnification obligations may not be subject to maximum loss clauses. Historically, payments made related to these indemnifications have been immaterial. Warranty HP provides for the estimated cost of product warranties at the time it recognizes revenue. HP engages in extensive product quality programs and processes, including actively monitoring and evaluating the quality of its component suppliers; however, product warranty terms offered to customers, ongoing product failure rates, material usage and service delivery costs incurred in correcting a product failure, as well as specific product class failures outside of HP's baseline experience, affect the estimated warranty obligation. If actual product failure rates, repair rates or any other post sales support costs differ from these estimates, revisions to the estimated warranty liability would be required. The changes in HP's aggregate product warranty liabilities for the three months ended January31, 2010 were as follows: In millions Product warranty liability at October31, 2009 $ 2,409 Accruals for warranties issued 758 Adjustments related to pre-existing warranties (including changes in estimates) (23 ) Settlements made (in cash or in kind) (676 ) Product warranty liability at January31, 2010 $ 2,468

Borrowings

Borrowings
	3 Months Ended Jan. 31, 2010
Notes to Consolidated Condensed Financial Statements
Borrowings	Note12: Borrowings Notes Payable and Short-Term Borrowings Notes payable and short-term borrowings, including the current portion of long-term debt, were as follows: January31, 2010 October31, 2009 Amount Outstanding Weighted- Average Interest Rate Amount Outstanding Weighted- Average Interest Rate In millions Current portion of long-term debt $ 1,113 0.8 % $ 1,143 1.0 % Commercial paper 296 1.0 % 294 1.2 % Notes payable to banks, lines of credit and other 453 2.6 % 413 2.0 % $ 1,862 $ 1,850 Notes payable to banks, lines of credit and other includes deposits associated with HP's banking-related activities of approximately $320million and $326million at January31, 2010 and October31, 2009, respectively. Long-Term Debt Long-term debt was as follows: January31, 2010 October31, 2009 In millions U.S. Dollar Global Notes 2002 Shelf Registration Statement: $500 issued at discount to par at a price of 99.505% in June 2002 at 6.5%, due July 2012 $ 499 $ 499 2006 Shelf Registration Statement: $600 issued at par in February 2007 at three-month USD LIBOR plus 0.11%, due March 2012 600 600 $900 issued at discount to par at a price of 99.938% in February 2007 at 5.25%, due March 2012 900 900 $500 issued at discount to par at a price of 99.694% in February 2007 at 5.4%, due March 2017 499 499 $1,000 issued at par in June 2007 at three-month USD LIBOR plus 0.06%, due June 2010 1,000 1,000 $1,500 issued at discount to par at a price of 99.921% in March 2008 at 4.5%, due March 2013 1,499 1,499 $750 issued at discount to par at a price of 99.932% in March 2008 at 5.5%, due March 2018 750 750 $2,000 issued at discount to par at a price of 99.561% in December 2008 at 6.125%, due March 2014 1,993 1,992 $275 issued at par in February 2009 at three-month USD LIBOR plus 1.75%, due February 2011 275 275 $1,000 issued at discount to par at a price of 99.956% in February 2009 at 4.25%, due February 2012 1,000 1,000 $1,500 issued at discount to par at a price of 99.993% in February 2009 at 4.75%, due June 2014 1,500 1,500 2009 Shelf Registration Statement: $750 issued at par in May 2009 at three-month USD LIBOR plus 1.05%, due May 2011 750 750 $1,000 issued at discount to par at a price of 99.967% in May 2009 at 2.25%, due May 2011 1,000 1,000 $250 issued at discount to par at a price of 99.984% in May 2009 at 2.95%, due August 2012 250 250 12,515 12,514 EDS Senior Notes $1,100 issued June 2003 at 6.0%, due August 2013 1,138 1,140 $300 issued October 1999 at 7.45%, due October 2029 315 315 1,453 1,455 Other, including capital lease obligations, at 3.75%-8.63%, due in calendar year 2010-2024 77

Income Taxes

Income Taxes
	3 Months Ended Jan. 31, 2010
Notes to Consolidated Condensed Financial Statements
Income Taxes	Note13: Income Taxes Provision for Taxes HP's effective tax rate was 19.8% and 18.0% for the three months ended January31, 2010 and January31, 2009, respectively. HP's effective tax rate increased due to a decline in the percentage of total earnings earned in lower-tax jurisdictions and a decline in its discrete tax benefits relative to pretax earnings. HP's effective tax rate generally differs from the U.S. federal statutory rate of 35% due to favorable tax rates associated with certain earnings from HP's operations in lower-tax jurisdictions throughout the world. HP has not provided U.S. taxes for all of such earnings because HP plans to reinvest some of those earnings indefinitely outside the United States. In the three months ended January31, 2010, HP recorded discrete items with a net tax benefit of $92million, decreasing the effective tax rate. These amounts included net tax benefits of $54million from restructuring and acquisition charges, a tax benefit of $19million from settlement of a tax audit matter, a net tax benefit of $19million from adjustments to prior year foreign income tax accruals and credits, and other miscellaneous discrete items. In the three months ended January31, 2009, HP recorded discrete items with a net tax benefit of $91 million, decreasing the effective tax rate. These amounts included net tax benefits of $63 million from restructuring and acquisition charges and other miscellaneous discrete items resulting in a net tax benefit of $28million. During the first three months of fiscal 2010, the amount of gross unrecognized tax benefits remained at $1.9billion, of which up to $940million would affect HP's effective tax rate if realized. HP recognizes interest expense and penalties on unrecognized tax benefits within income tax expense. During the first three months of fiscal 2010, there was no material change in the amount of accrued net interest and penalties. HP engages in continuous discussion and negotiation with tax authorities regarding tax matters in the various jurisdictions. HP does not expect complete resolution of any Internal Revenue Service ("IRS") audit cycle within the next 12months. However, it is reasonably possible that certain federal, foreign and state tax issues may be concluded in the next 12months, including issues involving transfer pricing and other matters. Accordingly, HP believes it is reasonably possible that its existing unrecognized tax benefits may be reduced by an amount up to $115million within the next 12months. HP is subject to income tax in the United States and over sixty foreign countries and is subject to routine corporate income tax audits in many of these jurisdictions. In addition, HP is subject to numerous ongoing audits by state and foreign tax authorities. HP has received from the IRS Notices of Deficiency for its fiscal 1999, 2000, 2003, 2004 and 2005 tax years, and Revenue Agent's Reports ("RAR's") for its fiscal 2001 and 2002 tax years. The IRS began an audit of HP's 2006 and 2007 income tax returns in 2009. With respect to major foreign and state tax jurisdictions, HP is no longer subject to tax authority examinations for years prior to 1999.

Shareholders Equity

Shareholders Equity
	3 Months Ended Jan. 31, 2010
Notes to Consolidated Condensed Financial Statements
Stockholders' Equity	Note14: Stockholders' Equity Share Repurchase Program HP's share repurchase program authorizes both open market and private repurchase transactions. In the first quarter of fiscal 2010, HP executed share repurchases of 53million shares. Repurchases of 54million shares were settled for $2.7billion in the first quarter of fiscal 2010, which included 3million shares repurchased in transactions that were executed in fiscal 2009 but settled in the first quarter of fiscal 2010. HP had approximately 2million shares repurchased in the first quarter of fiscal 2010 that will be settled in the second quarter of fiscal 2010. HP paid approximately $1.2billion in connection with repurchases of approximately 34million shares during the three months ended January31, 2009. On November19, 2009, HP's Board of Directors authorized an additional $8.0billion for future share repurchases. As of January31, 2010, HP had remaining authorization of $9.2billion for future share repurchases. Comprehensive Income The changes in the components of OCI, net of taxes, were as follows: Three months ended January31 2010 2009 In millions Net earnings $ 2,250 $ 1,856 Net change in unrealized gains (losses) on available-for-sale securities, net of tax of $1million in 2010 and net of tax benefit of $4million in 2009 2 (7 ) Net change in unrealized gains/losses on cash flow hedges: Unrealized gains recognized in OCI, net of tax of $157million in 2010 and $73million in 2009 290 129 Losses (gains) reclassified into income, net of tax benefit of $42million in 2010 and net of tax of $190million in 2009 60 (335 ) 350 (206 ) Net change in cumulative translation adjustment, net of tax benefit of $14million in 2010 and $211million in 2009 (60 ) (382 ) Net change in unrealized components of defined benefit plans, net of tax of $9million in 2010 and $58million in 2009 11 80 Comprehensive income $ 2,553 $ 1,341 The components of accumulated other comprehensive loss, net of taxes, were as follows: January31, 2010 October31, 2009 In millions Net unrealized gain on available-for-sale securities $ 6 $ 4 Net unrealized gain (loss) on cash flow hedges 181 (169 ) Cumulative translation adjustment (519 ) (459 ) Unrealized components of defined benefit plans (2,612 ) (2,623 ) Accumulated other comprehensive loss $ (2,944 ) $ (3,247 )

Retirement and Post-Retirement

Retirement and Post-Retirement Benefit Plans
	3 Months Ended Jan. 31, 2010
Notes to Consolidated Condensed Financial Statements
Retirement and Post-Retirement Benefit Plans	Note15: Retirement and Post-Retirement Benefit Plans Modifications to Defined Contribution Plans HP offers various defined contribution plans for U.S. and non-U.S. employees. As disclosed in our Consolidated Financial Statements for the fiscal year ended October31, 2009, prior to April1, 2009, HP matched employee contributions to the U.S. HP 401(k) Plan with cash contributions up to a maximum of 6% of eligible compensation for U.S. employees hired prior to August1, 2008 and up to a maximum of 4% of eligible compensation for U.S. employees hired on or after August1, 2008. Further, effective from January1, 2009 through March31, 2009, U.S. employees participating in the EDS 401(k) Plan were eligible for a 4% HP matching contribution on eligible compensation. Effective April1, 2009, HP matching contributions under both the U.S. HP 401(k) Plan and the EDS 401(k) Plan were changed to a quarterly, discretionary, performance-based match of up to a maximum of 4% of eligible compensation for all U.S. employees, which is determined each fiscal quarter based on business results. HP matching contributions vary from 0% to 100% of the maximum 4% match, based on such factors as quarterly earnings, market share growth, and performance relative to market and economic conditions. HP's matching contributions for the quarter ended January31, 2010 was 100% of the maximum 4% match. HP's net pension and post-retirement benefit costs were as follows: Three months ended January31 U.S. Defined Benefit Plans Non-U.S. Defined Benefit Plans Post- Retirement Benefit Plans 2010 2009 2010 2009 2010 2009 In millions Service cost $ $ 6 $ 86 $ 77 $ 3 $ 3 Interest cost 145 148 172 153 12 18 Expected return on plan assets (166 ) (133 ) (198 ) (165 ) (7 ) (8 ) Amortization and deferrals: Actuarial loss (gain) 7 (13 ) 56 20 5 1 Prior service benefit (2 ) (2 ) (21 ) (19 ) Net periodic benefit (gain) cost $ (14 ) $ 8 $ 114 $ 83 $ (8 ) $ (5 ) Special termination benefits 1 Net benefit (gain) cost $ (14 ) $ 8 $ 114 $ 84 $ (8 ) $ (5 ) Employer Contributions and Funding Policy HP previously disclosed in its Consolidated Financial Statements for the fiscal year ended October31, 2009 that it expected to contribute approximately $745million to its pension plans and approximately $30million to cover benefit payments to U.S. non-qualified plan participants. In addition, HP expected to pay approximately $45million to cover benefit claims for HP's post-retirement benefit plans. HP's funding policy is to contribute cash to its pension plans so that it meets at least the minimum contribution requirements, as established by local government, funding and taxing authorities. As of January31, 2010, HP has made $152million of contributions to its pension plans, paid $4million to cover benefit payments to U.S. no

Litigation and Contingencies

Litigation and Contingencies
	3 Months Ended Jan. 31, 2010
Notes to Consolidated Condensed Financial Statements
Litigation and Contingencies	Note16: Litigation and Contingencies HP is involved in lawsuits, claims, investigations and proceedings, including those identified below, consisting of intellectual property, commercial, securities, employment, employee benefits and environmental matters that arise in the ordinary course of business. HP records a provision for a liability when management believes that it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. HP believes it has adequate provisions for any such matters. HP reviews these provisions at least quarterly and adjusts these provisions to reflect the impact of negotiations, settlements, rulings, advice of legal counsel, and other information and events pertaining to a particular case. Based on its experience, HP believes that any damage amounts claimed in the specific matters discussed below are not a meaningful indicator of HP's potential liability. Litigation is inherently unpredictable. However, HP believes that it has valid defenses with respect to legal matters pending against it. Nevertheless, it is possible that cash flows or results of operations could be materially affected in any particular period by the unfavorable resolution of one or more of these contingencies or because of the diversion of management's attention and the creation of significant expenses. Litigation, Proceedings and Investigations Copyright levies. As described below, proceedings are ongoing or have been concluded against HP in certain European Union ("EU") member countries, including litigation in Germany, seeking to impose levies upon equipment (such as multifunction devices ("MFDs"), personal computers ("PCs") and printers) and alleging that these devices enable producing private copies of copyrighted materials. The levies are generally based upon the number of products sold and the per-product amounts of the levies, which vary. Some EU member countries that do not yet have levies on digital devices are expected to implement similar legislation to enable them to extend existing levy schemes, while some other EU member countries are expected to limit the scope of levy schemes and applicability in the digital hardware environment. HP, other companies and various industry associations have opposed the extension of levies to the digital environment and have advocated alternative models of compensation to rights holders. VerwertungsGesellschaft Wort ("VG Wort"), a collection agency representing certain copyright holders, instituted legal proceedings against HP in June 2001 in Germany relating to whether and to what extent German copyright levies for photocopiers should be imposed on MFDs. On July6, 2005, the Court of Appeals in Stuttgart Germany ordered HP to pay VG Wort levies based on the published tariffs for photocopiers in Germany (which range from 38.35 to 613.56 per unit), plus interest, on MFDs sold in Germany up to December 2001, and the German Federal Supreme Court later affirmed that ruling on appeal. HP subsequently appealed the decision by filing a claim with the German Federal Constitutional Court, which declined to hear HP's appeal, thus concluding these proc

Segment Information

Segment Information
	3 Months Ended Jan. 31, 2010
Notes to Consolidated Condensed Financial Statements
Segment Information	Note17: Segment Information Description of Segments HP is a leading global provider of products, technologies, software, solutions and services to individual consumers, small and medium sized businesses ("SMBs"), and large enterprises including customers in the government, health and education sectors. HP's offerings span personal computing and other access devices; imaging and printing-related products and services; enterprise information technology ("IT") infrastructure, including enterprise storage and server technology and networking products; software that optimizes business technology investments; financial services including leasing; and multi-vendor customer services, including technology support and maintenance, consulting and integration, information technology and business process outsourcing services and application services. HP and its operations are organized into seven business segments for financial reporting purposes: Services, ESS, HP Software, PSG, IPG, HP Financial Services ("HPFS"), and Corporate Investments. HP's organizational structure is based on a number of factors that management uses to evaluate, view and run its business operations, which include, but are not limited to, customer base, homogeneity of products and technology. The business segments disclosed in the accompanying Consolidated Condensed Financial Statements are based on this organizational structure and information reviewed by HP's management to evaluate the business segment results. Services, ESS and HP Software are reported collectively as a broader HP Enterprise Business. In order to provide a supplementary view of HP's business, aggregated financial data for the HP Enterprise Business is presented herein. HP has reclassified segment operating results for fiscal 2009 to conform to certain fiscal 2010 organizational realignments. None of the changes impacts HP's previously reported consolidated net revenue, earnings from operations, net earnings or net earnings per share. Future changes to this organizational structure may result in changes to the business segments disclosed. A description of the types of products and services provided by each business segment follows. HP Enterprise Business. Each of the business segments within the HP Enterprise Business is described in detail below. Services provides consulting, outsourcing and technology services across infrastructure, applications and business process domains. Services is divided into four main business units: infrastructure technology outsourcing, applications services, business process outsourcing and technology services. Infrastructure technology outsourcing delivers comprehensive services that encompass the data center and the workplace (desktop); network and communications; and security, compliance and business continuity. HP also offers a set of managed services, providing a cross-section of its broader infrastructure services for smaller discrete engagements. Applications services help clients revitalize and manage their applications assets through flexible, project-based, consulting services and longer-term outsourcing contracts. These full lifecycle services e

Document and Entity Information

Document and Entity Information
	3 Months Ended Jan. 31, 2010	Feb. 28, 2010
Document and Entity Information
Entity Registrant Name	HEWLETT PACKARD CO
Entity Central Index Key	0000047217
Document Type	10-Q
Document Period End Date	2010-01-31
Amendment Flag	false
Current Fiscal Year End Date	--10-31
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		2,345,093,045