HP Reports Second Quarter 2010 Results

The non-GAAP diluted EPS estimates for both the third quarter and the full year fiscal 2010 include the expected dilution associated with the proposed acquisition of Palm, Inc. that HP announced on April 28, 2010. However, HP has not included any revenue associated with the Palm acquisition in its revenue outlook for either the third quarter or the full year fiscal 2010.

More information on HP’s quarterly earnings, including additional financial analysis and an earnings overview presentation, is available on HP’s Investor Relations website at www.hp.com/investor/home.

HP’s Q2 FY10 earnings conference call is accessible via an audio webcast at www.hp.com/investor/2010q2webcast.

About HP

HP creates new possibilities for technology to have a meaningful impact on people, businesses, governments and society. As the world’s largest technology company, HP brings together a portfolio that spans printing, personal computing, software, services and IT infrastructure to solve customer problems. More information about HP is available at http://www.hp.com.

Use of non-GAAP financial information

To supplement HP’s consolidated condensed financial statements presented on a GAAP basis, HP provides non-GAAP operating profit, non-GAAP operating margin, non-GAAP net earnings, non-GAAP diluted earnings per share and gross cash. HP also provides forecasts of non-GAAP diluted earnings per share. A reconciliation of the adjustments to GAAP results for this quarter and prior periods is included in the tables below. In addition, an explanation of the ways in which HP management uses these non-GAAP measures to evaluate its business, the substance behind HP management’s decision to use these non-GAAP measures, the material limitations associated with the use of these non-GAAP measures, the manner in which HP management compensates for those limitations, and the substantive reasons why HP management believes that these non-GAAP measures provide useful information to investors is included under “Use of Non-GAAP Financial Measures” after the tables below. This additional non-GAAP financial information is not meant to be considered in isolation or as a substitute for operating profit, operating margin, net earnings, diluted earnings per share, or cash and cash equivalents prepared in accordance with GAAP.

Forward-looking statements

This news release contains forward-looking statements that involve risks, uncertainties and assumptions. If the risks or uncertainties ever materialize or the assumptions prove incorrect, the results of HP may differ materially from those expressed or implied by such forward-looking statements and assumptions. All statements other than statements of historical fact are statements that could be deemed forward-looking statements, including but not limited to any projections of revenue, margins, expenses, earnings, tax provisions, cash flows, benefit obligations, share repurchases, 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 the execution of cost reduction programs and restructuring plans; any statements concerning the expected development, performance or market share relating to products or services; any statements regarding current or future macroeconomic trends or events and the impact of those trends and events on HP and its financial performance; any statements regarding pending investigations, claims or disputes; any statements of expectation or belief; and any statements of assumptions underlying any of the foregoing. Risks, uncertainties and assumptions include macroeconomic and geopolitical trends and events; execution and performance of contracts by HP and its suppliers, customers and partners; the challenge of managing asset levels, including inventory; the difficulty of aligning expense levels with revenue changes; assumptions related to pension and other post-retirement costs; expectations and assumptions relating to the execution and timing of cost reduction programs and restructuring plans; the resolution of pending investigations, claims and disputes; and other risks that are described in HP’s Annual Report on Form 10-K for the fiscal year ended October 31, 2009 and HP’s other filings with the Securities and Exchange Commission, including HP’s Quarterly Report on Form 10-Q for the fiscal quarter ended January 31, 2010. As in prior periods, the financial information set forth in this release, including tax-related items, reflects estimates based on information available at this time. While HP believes these estimates to be meaningful, these amounts could differ materially from actual reported amounts in HP’s Form 10-Q for the fiscal quarter ended April 30, 2010. In particular, determining HP’s actual tax balances and provisions as of April 30, 2010 requires extensive internal and external review of tax data (including consolidating and reviewing the tax provisions of numerous domestic and foreign entities), which is being completed in the ordinary course of preparing HP’s Form 10-Q. HP assumes no obligation and does not intend to update these forward-looking statements.

© 2010 Hewlett-Packard Development Company, L.P. The information contained herein is subject to change without notice.

The only warranties for HP products and services are set forth in the express warranty statements accompanying such products and services. Nothing herein should be construed as constituting an additional warranty. HP shall not be liable for technical or editorial errors or omissions contained herein.

 
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(Unaudited)
(In millions except per share amounts)
                 
Three months ended
April 30,
2010
January 31,
2010
April 30,
2009
 
Net revenue $ 30,849 $ 31,177 $ 27,383
 
Costs and expenses (a) :
Cost of sales 23,601 24,062 20,945
Research and development 722 681 716
Selling, general and administrative 3,064 2,932 2,880
Amortization of purchased intangible assets 347 330 380
Restructuring charges 180 131 94
Acquisition-related charges   77     38     75  
Total costs and expenses   27,991     28,174     25,090  
 
Earnings from operations 2,858 3,003 2,293
 
Interest and other, net   (91 )   (199 )   (180 )
 
Earnings before taxes 2,767 2,804 2,113
 
Provision for taxes (b)   567     554     392  
 
Net earnings $ 2,200   $ 2,250   $ 1,721  
 
Net earnings per share:
Basic $ 0.94 $ 0.95 $ 0.72
Diluted $ 0.91 $ 0.93 $ 0.71
 
 
Cash dividends declared per share $ - $ 0.16 $ -
 
Weighted-average shares used to compute net earnings per share:
Basic 2,345 2,358 2,394
Diluted 2,406 2,427 2,438
 
(a) Stock-based compensation expense was as follows:
Cost of sales $ 48 $ 47 $ 48
Research and development 16 14 18
Selling, general and administrative 136 119 109
Acquisition-related charges   -     1     16  
Total costs and expenses $ 200 $ 181 $ 191
 
(b) Tax benefit from stock-based compensation $ (64 ) $ (58 ) $ (59 )
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(Unaudited)
(In millions except per share amounts)
           
Six months ended
April 30,
2010
April 30,
2009
 
Net revenue $ 62,026 $ 56,190
 
Costs and expenses (a) :
Cost of sales 47,663 43,018
Research and development 1,403 1,448
Selling, general and administrative 5,996 5,773
Amortization of purchased intangible assets 677 792
In-process research and development charges - 6
Restructuring charges 311 240
Acquisition-related charges   115     123  
Total costs and expenses   56,165     51,400  
 
Earnings from operations 5,861 4,790
 
Interest and other, net   (290 )   (412 )
 
Earnings before taxes 5,571 4,378
 
Provision for taxes (b)   1,121     801  
 
Net earnings $ 4,450   $ 3,577  
 
Net earnings per share:
Basic $ 1.89 $ 1.49
Diluted $ 1.84 $ 1.46
 
 
Cash dividends declared per share $ 0.16 $ 0.16
 
Weighted-average shares used to compute net earnings per share:
Basic 2,352 2,402
Diluted 2,412 2,448
 
(a) Stock-based compensation expense was as follows:
Cost of sales $ 95 $ 100
Research and development 30 35
Selling, general and administrative 255 194
Acquisition-related charges   1     22  
Total costs and expenses $ 381 $ 351
 
(b) Tax benefit from stock-based compensation $ (122 ) $ (107 )
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
ADJUSTMENTS TO GAAP NET EARNINGS, EARNINGS FROM OPERATIONS,
OPERATING MARGIN AND EARNINGS PER SHARE
(Unaudited)
(In millions except per share amounts)
                           
 

Three months ended

April 30,
2010

  Diluted earnings per share

Three months ended

January 31,
2010

 

  Diluted earnings per share

Three months ended

April 30,
2009

  Diluted earnings per share
 
GAAP net earnings $ 2,200 $ 0.91 $ 2,250 $ 0.93 $ 1,721 $ 0.71
 
Non-GAAP adjustments:
Amortization of purchased
intangible assets
347 0.14 330 0.14 380 0.15
Restructuring charges 180 0.08 131 0.05 94 0.04
Acquisition-related charges 77 0.03 38 0.01 75 0.03
Adjustments for taxes   (171 )   (0.07 )   (155 )   (0.06 )   (167 )   (0.07 )
 
Non-GAAP net earnings $ 2,633   $ 1.09   $ 2,594   $ 1.07   $ 2,103   $ 0.86  
 
 
GAAP earnings from operations $ 2,858 $ 3,003 $ 2,293
 
Non-GAAP adjustments:
Amortization of purchased
intangible assets
347 330 380
Restructuring charges 180 131 94
Acquisition-related charges   77     38     75  
Non-GAAP earnings
from operations $ 3,462   $ 3,502   $ 2,842  
 
GAAP operating margin 9 % 10 % 8 %
Non-GAAP adjustments   2 %   1 %   2 %
 
Non-GAAP operating margin   11 %   11 %   10 %
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
ADJUSTMENTS TO GAAP NET EARNINGS, EARNINGS FROM OPERATIONS,
OPERATING MARGIN AND EARNINGS PER SHARE
(Unaudited)
(In millions except per share amounts)
                       
 
Six months ended
April 30,
2010
   

Diluted earnings
per share

Six months ended
April 30,
2009
   

Diluted earnings
per share

 
GAAP net earnings $ 4,450 $ 1.84 $ 3,577 $ 1.46
 
Non-GAAP adjustments:
Amortization of purchased
intangible assets
677 0.28 792 0.32
In-process research and
development charges
- - 6 -
Restructuring charges 311 0.13 240 0.10
Acquisition-related charges 115 0.05 123 0.05
Adjustments for taxes   (326 )   (0.13 )   (348 )   (0.14 )
 
Non-GAAP net earnings $ 5,227   $ 2.17   $ 4,390   $ 1.79  
 
 
GAAP earnings from operations $ 5,861 $ 4,790
 
Non-GAAP adjustments:
Amortization of purchased
intangible assets
677 792
In-process research and
development charges
- 6
Restructuring charges 311 240
Acquisition-related charges   115     123  
Non-GAAP earnings
from operations $ 6,964   $ 5,951  
 
GAAP operating margin 9 % 9 %
Non-GAAP adjustments   2 %   2 %
 
Non-GAAP operating margin   11 %   11 %
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(In millions)
           
 
April 30,
2010
October 31,
2009
(unaudited)
ASSETS
 
Current assets:
Cash and cash equivalents $ 14,131 $ 13,279
Short-term investments 39 55
Accounts receivable 14,753 16,537
Financing receivables 2,795 2,675
Inventory 6,436 6,128
Other current assets   13,541   13,865
 
Total current assets   51,695   52,539
 
Property, plant and equipment 11,242 11,262
Long-term financing receivables and other assets 11,726 11,289
Goodwill and purchased intangible assets   41,331   39,709
 
Total assets $ 115,994 $ 114,799
 
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
Current liabilities:
Notes payable and short-term borrowings $ 3,934 $ 1,850
Accounts payable 13,350 14,809
Employee compensation and benefits 3,410 4,071
Taxes on earnings 1,043 910
Deferred revenue 6,526 6,182
Other accrued liabilities   14,008   15,181
 
Total current liabilities   42,271   43,003
 
Long-term debt 13,728 13,980
Other liabilities 16,183 17,052 (a)
 
Stockholders' equity
HP Stockholders' equity 43,511 40,517
Noncontrolling interests   301   247 (a)
 
Total stockholders' equity   43,812   40,764
 
Total liabilities and stockholders' equity $ 115,994 $ 114,799
 
(a) Reflects the adoption of the accounting standard related to the presentation of noncontrolling interests in consolidated financial statements.
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(In millions)
           
 
Three months ended
April 30,
2010
  Six months ended
April 30,
2010
 
 
Cash flows from operating activities:
Net earnings $ 2,200 $ 4,450
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization 1,184 2,346
Stock-based compensation expense 200 381
Provision for bad debt and inventory 101 193
Restructuring charges 180 311
Deferred taxes on earnings (94 ) (286 )
Excess tax benefit from stock-based compensation (135 ) (263 )
Other, net 62 149
 
Changes in assets and liabilities:
Accounts and financing receivables (166 ) 1,709
Inventory 353 (190 )
Accounts payable (280 ) (1,548 )
Taxes on earnings 247 726
Restructuring (383 ) (783 )
Other assets and liabilities   (378 )   (1,697 )
Net cash provided by operating activities   3,091     5,498  
 
Cash flows from investing activities:
Investment in property, plant and equipment (950 ) (1,771 )
Proceeds from sale of property, plant and equipment 156 268
Purchases of available-for-sale securities and other investments (19 ) (28 )
Maturities and sales of available-for-sale securities and
other investments
103 103
Payments made in connection with business acquisition, net

(2,519

)

(2,512

)

Net cash used in investing activities

(3,229

)

(3,940

)

 
Cash flows from financing activities:
Issuance of commercial paper and notes payable, net 1,777 1,855
Issuance of debt 21 50
Payment of debt (164 ) (244 )
Issuance of common stock under employee stock plans 947 2,266
Repurchase of common stock (1,798 ) (4,511 )
Excess tax benefit from stock-based compensation 135 263
Dividends   (196 )   (385 )
Net cash provided by (used in) financing activities   722  

(706

)

 
Increase in cash and cash equivalents 584 852
Cash and cash equivalents at beginning of period   13,547     13,279  
Cash and cash equivalents at end of period $ 14,131   $ 14,131  
  HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
SEGMENT INFORMATION
(Unaudited)
(In millions)
                 
Three months ended
April 30,
2010
January 31,
2010
April 30,
2009 (a)
 
Net revenue:
 
Services $ 8,712 $ 8,651 $ 8,500
Enterprise Storage and Servers 4,542 4,391 3,457
HP Software   871     878     880  
HP Enterprise Business   14,125     13,920     12,837  
Personal Systems Group 9,956 10,584 8,210
Imaging and Printing Group 6,396 6,206 5,916
HP Financial Services 755 719 641
Corporate Investments   315     236     188  
Total Segments 31,547 31,665 27,792
Eliminations of intersegment
net revenue and other
  (698 )   (488 )   (409 )
 
Total HP Consolidated $ 30,849   $ 31,177   $ 27,383  
 
Earnings from operations:
 
Services $ 1,382 $ 1,364 $ 1,174
Enterprise Storage and Servers 571 552 250
HP Software   162     167     157  
HP Enterprise Business   2,115     2,083     1,581  
Personal Systems Group 465 530 378
Imaging and Printing Group 1,098 1,054 1,074
HP Financial Services 69 67 46
Corporate Investments   12     19     (19 )
Total Segments 3,759 3,753 3,060
 
Corporate and unallocated costs and eliminations (112 ) (88 ) (62 )
Unallocated costs related to stock-based
compensation expense
(185 ) (163 ) (156 )
Amortization of purchased intangible assets (347 ) (330 ) (380 )
Restructuring charges (180 ) (131 ) (94 )
Acquisition-related charges (77 ) (38 ) (75 )
Interest and other, net   (91 )   (199 )   (180 )
 
Total HP Consolidated Earnings Before Taxes $ 2,767   $ 2,804   $ 2,113  
 
 
(a) As a result of HP's adoption in fiscal 2009 of the revenue recognition standards related to multiple-deliverable revenue arrangements and revenue arrangements that included software, certain previously reported segment and business unit results have been restated. The adoption primarily impacted the Services, Enterprise Storage and Servers and Personal Systems Group financial reporting segments.
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
SEGMENT INFORMATION
(Unaudited)
(In millions)
             
Six months ended
April 30,
2010
April 30,
2009 (a)
 
Net revenue:
 
Services $ 17,363 $ 17,247
Enterprise Storage and Servers 8,933 7,406
HP Software   1,749     1,758  
HP Enterprise Business   28,045     26,411  
Personal Systems Group 20,540 17,002
Imaging and Printing Group 12,602 11,897
HP Financial Services 1,474 1,277
Corporate Investments   551     384  
Total Segments 63,212 56,971
Eliminations of intersegment
net revenue and other
  (1,186 )   (781 )
 
Total HP Consolidated $ 62,026   $ 56,190  
 
Earnings from operations:
 
Services $ 2,746 $ 2,298
Enterprise Storage and Servers 1,123 656
HP Software   329     297  
HP Enterprise Business   4,198     3,251  
Personal Systems Group 995 814
Imaging and Printing Group 2,152 2,179
HP Financial Services 136 87
Corporate Investments   31     (38 )
Total Segments 7,512 6,293
 
Corporate and unallocated costs and eliminations (200 ) (38 )
Unallocated costs related to stock-based
compensation expense
(348 ) (304 )
Amortization of purchased intangible assets (677 ) (792 )
In-process research and development charges - (6 )
Restructuring charges (311 ) (240 )
Acquisition-related charges (115 ) (123 )
Interest and other, net   (290 )   (412 )
 
Total HP Consolidated Earnings Before Taxes $ 5,571   $ 4,378  
 
 
(a) As a result of HP's adoption in fiscal 2009 of the revenue recognition standards related to multiple-deliverable revenue arrangements and revenue arrangements that included software, certain previously reported segment and business unit results have been restated. The adoption primarily impacted the Services, Enterprise Storage and Servers and Personal Systems Group financial reporting segments.
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
SEGMENT / BUSINESS UNIT INFORMATION
(Unaudited)
(In millions)
 
    Three months ended
April 30,
2010
    January 31,
2010
    April 30,
2009 (a) (b)
 
Net revenue:
 
Infrastructure Technology Outsourcing $ 3,998 $ 3,933 $ 3,762
Technology Services 2,420 2,406 2,418
Application Services 1,512 1,509 1,541
Business Process Outsourcing 716 734 719
Other   66     69     60  
Services   8,712     8,651     8,500  
Industry Standard Servers 3,056 2,946 1,989
Storage 948 889 818
Business Critical Systems   538     556     650  
Enterprise Storage and Servers   4,542     4,391     3,457  
Business Technology Optimization 584 591 568
Other Software   287     287     312  
HP Software   871     878     880  
HP Enterprise Business   14,125     13,920     12,837  
Notebooks 5,513 6,125 4,706
Desktops 3,788 3,840 2,977
Workstations 423 375 287
Handhelds 24 25 47
Other   208     219     193  
Personal Systems Group   9,956     10,584     8,210  
Supplies 4,331 4,081 4,103
Commercial Hardware 1,348 1,291 1,193
Consumer Hardware   717     834     620  
Imaging and Printing Group   6,396     6,206     5,916  
HP Financial Services 755 719 641
Corporate Investments   315     236     188  
Total Segments   31,547     31,665     27,792  
 
Eliminations of intersegment net revenue and other  

(698

)

 

(488

)

 

(409

)

 
Total HP Consolidated $ 30,849   $ 31,177   $ 27,383  
 
 
(a) Certain fiscal 2010 organizational reclassifications have been reflected retroactively to provide improved visibility and comparability. For each of the quarters in fiscal year 2009, the reclassifications resulted in the transfer of revenue among the business units within the Services segment only. There was no impact to the previously reported segment financial results.
 
(b) As a result of HP's adoption in fiscal 2009 of the revenue recognition standards related to multiple-deliverable revenue arrangements and revenue arrangements that included software, certain previously reported segment and business unit results have been restated. The adoption primarily impacted the Services, Enterprise Storage and Servers and Personal Systems Group financial reporting segments.
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
SEGMENT / BUSINESS UNIT INFORMATION
(Unaudited)
(In millions)
 
    Six months ended
April 30,
2010
    April 30,
2009 (a)(b)
 
Net revenue:
 
Infrastructure Technology Outsourcing $ 7,931 $ 7,605
Technology Services 4,826 4,871
Application Services 3,021 3,173
Business Process Outsourcing 1,450 1,473
Other   135     125  
Services   17,363     17,247  
Industry Standard Servers 6,002 4,311
Storage 1,837 1,731
Business Critical Systems   1,094     1,364  
Enterprise Storage and Servers   8,933     7,406  
Business Technology Optimization 1,175 1,162
Other Software   574     596  
HP Software   1,749     1,758  
HP Enterprise Business   28,045     26,411  
Notebooks 11,638 9,613
Desktops 7,628 6,285
Workstations 798 620
Handhelds 49 104
Other   427     380  
Personal Systems Group   20,540     17,002  
Supplies 8,412 8,153
Commercial Hardware 2,639 2,432
Consumer Hardware   1,551     1,312  
Imaging and Printing Group   12,602     11,897  
HP Financial Services 1,474 1,277
Corporate Investments   551     384  
Total Segments   63,212     56,971  
 
Eliminations of intersegment net revenue and other   (1,186 )   (781 )
 
Total HP Consolidated $ 62,026   $ 56,190  
 
 
(a) Certain fiscal 2010 organizational reclassifications have been reflected retroactively to provide improved visibility and comparability. For each of the quarters in fiscal year 2009, the reclassifications resulted in the transfer of revenue among the business units within the Services segment only. There was no impact to the previously reported segment financial results.
 
(b) As a result of HP's adoption in fiscal 2009 of the revenue recognition standards related to multiple-deliverable revenue arrangements and revenue arrangements that included software, certain previously reported segment and business unit results have been restated. The adoption primarily impacted the Services, Enterprise Storage and Servers and Personal Systems Group financial reporting segments.
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
CALCULATION OF NET EARNINGS PER SHARE
(Unaudited)
(In millions except per share amounts)
           
 
Three months ended
April 30,
2010
January 31,
2010
April 30,
2009
 
Numerator:
Net earnings $ 2,200 $ 2,250 $ 1,721
 
Denominator:
Weighted-average shares used to compute
basic EPS 2,345 2,358 2,394
Dilutive effect of employee stock plans   61   69   44
Weighted-average shares used to compute
diluted EPS
  2,406   2,427   2,438
 
Net earnings per share:
Basic (a) $ 0.94 $ 0.95 $ 0.72
Diluted (b) $ 0.91 $ 0.93 $ 0.71
 
 
(a) Basic earnings per share was calculated based on net earnings and the weighted-average number of shares outstanding during the reporting period.
 
(b) Diluted earnings per share included any dilutive effect of outstanding stock options, performance-based restricted units, restricted stock units and restricted stock.
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
CALCULATION OF NET EARNINGS PER SHARE
(Unaudited)
(In millions except per share amounts)
           
 
Six months ended
April 30,
2010
April 30,
2009
 
Numerator:
Net earnings $ 4,450 $ 3,577
 
Denominator:
Weighted-average shares used to compute
basic EPS 2,352 2,402
Dilutive effect of employee stock plans   60   46
Weighted-average shares used to compute
diluted EPS
  2,412   2,448
 
Net earnings per share:
Basic (a) $ 1.89 $ 1.49
Diluted (b) $ 1.84 $ 1.46
 
 
(a) Basic earnings per share was calculated based on net earnings and the weighted-average number of shares outstanding during the reporting period.
 
(b) Diluted earnings per share included any dilutive effect of outstanding stock options, performance-based restricted units, restricted stock units and restricted stock.
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
CALCULATION OF NON-GAAP NET EARNINGS PER SHARE
(Unaudited)
(In millions except per share amounts)
             
 
Three months ended
April 30,
2010
January 31,
2010
April 30,
2009
 
Numerator:
Non-GAAP net earnings $ 2,633 $ 2,594 $ 2,103
 
Denominator:
Weighted-average shares used to compute
basic EPS
2,345 2,358 2,394
Dilutive effect of employee stock plans   61   69   44
Weighted-average shares used to compute
diluted EPS
  2,406   2,427   2,438
 
Non-GAAP net earnings per share:
Basic (a) $ 1.12 $ 1.10 $ 0.88
Diluted (b) $ 1.09 $ 1.07 $ 0.86
 
 
(a) Basic non-GAAP earnings per share was calculated based on non-GAAP net earnings and the weighted-average number of shares outstanding during the reporting period.
 
(b) Diluted non-GAAP earnings per share included any dilutive effect of outstanding stock options, performance-based restricted units, restricted stock units and restricted stock.
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
CALCULATION OF NON-GAAP NET EARNINGS PER SHARE
(Unaudited)
(In millions except per share amounts)
         
 
Six months ended
April 30,
2010
April 30,
2009
 
Numerator:
Non-GAAP net earnings $ 5,227 $ 4,390
 
Denominator:
Weighted-average shares used to compute
basic EPS
2,352 2,402
Dilutive effect of employee stock plans   60   46
Weighted-average shares used to compute
diluted EPS
  2,412   2,448
 
Non-GAAP net earnings per share:
Basic (a) $ 2.22 $ 1.83
Diluted (b) $ 2.17 $ 1.79
 
 
(a) Basic non-GAAP earnings per share was calculated based on non-GAAP net earnings and the weighted-average number of shares outstanding during the reporting period.
 
(b) Diluted non-GAAP earnings per share included any dilutive effect of outstanding stock options, performance-based restricted units, restricted stock units and restricted stock.

Use of Non-GAAP Financial Measures

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