PALO ALTO, Calif. Aug. 19, 2008 - HP today announced financial results for its third fiscal quarter ended July 31, 2008, with net revenue of $28.0 billion, up 10% from a year earlier and up 5% when adjusted for the effects of currency.

In the third quarter, GAAP operating profit was $2.5 billion and GAAP diluted earnings per share (EPS) was $0.80, up from $0.66 in the prior-year period. Non-GAAP operating profit was $2.7 billion, with non-GAAP diluted EPS of $0.86, up from $0.71 in the prior-year period. Non-GAAP financial information excludes $161 million of adjustments on an after-tax basis, or $0.06 per diluted share, related primarily to amortization of purchased intangibles.

"By accelerating our enterprise growth and executing well across the portfolio, HP delivered a strong third quarter performance," said Mark Hurd, HP chairman and chief executive officer. "Our global position, broad product and services offerings and incremental cost saving opportunities make us confident that we'll continue to meaningfully expand earnings."

 Information about HP's use of non-GAAP financial information is provided under "Use of non-GAAP financial information" below.

Revenue in the Americas grew 4% on a year-over-year basis to $11.6 billion. Revenue grew 16% in Europe, the Middle East and Africa to $11.2 billion. Revenue grew 14% in Asia Pacific to $5.2 billion. When adjusted for the effects of currency, revenue in the Americas grew 3%, revenue in Europe, the Middle East and Africa grew 5%, and revenue in Asia Pacific grew 8%. Revenue from outside of the United States in the third quarter was 68% of the total, with revenue in the BRIC countries (Brazil, Russia, India and China) growing 24% over the prior-year period and accounting for 10% of total revenue.

Personal Systems Group

Personal Systems Group (PSG) revenue grew 15% year over year to $10.3 billion, with unit shipments up 20% on a year-over-year basis. Notebook revenue for the quarter grew 26% over the prior-year period, while Desktop revenue increased 6%. Commercial client revenue grew 15% year over year, while Consumer client revenue increased 17%. Operating profit was $587 million, or 5.7% of revenue, up from $519 million, or 5.8% of revenue, in the prior-year period.

Imaging and Printing Group

Imaging and Printing Group (IPG) revenue grew 3% year over year to $7.0 billion. On a year-over-year basis, supplies revenue grew 11%, Commercial hardware revenue declined 5% and Consumer hardware revenue declined 14%. Printer unit shipments declined 2% year over year, with Consumer printer hardware units flat and Commercial printer hardware units down 9%. Operating profit was $1.0 billion, or 15.0% of revenue, versus $981 million, or 14.5% of revenue, in the prior-year period.

Enterprise Storage and Servers

Enterprise Storage and Servers (ESS) reported revenue of $4.7 billion, up 5% over the prior-year period fueled by ESS blades, which grew 66%, and Storage, which grew 16%. Storage revenue growth was fueled by the midrange EVA line and the low-end MSA line, which each grew 19%. On a year-over-year basis, Industry Standard Server revenue grew 2%. Business Critical Systems revenue increased 2%. Operating profit was $544 million, or 11.5% of revenue, up from $507 million, or 11.2% of revenue, in the prior-year period.

HP Services

HP Services (HPS) revenue increased 14% year over year to $4.8 billion. Revenue in Technology Services grew 13% with Consulting and Integration and Outsourcing Services up 13% and 18%, respectively, compared with the prior-year period. Operating profit was $574 million, or 12.1% of revenue, up from $417 million, or 10.0% of revenue, in the prior-year period.

HP Software

HP Software revenue grew 29% compared with the prior-year period to $781 million, led by 32% growth in the Business Technology Optimization portfolio. Operating profit was $122 million, or 15.6% of revenue, up from $51 million, or 8.4% of revenue, in the prior-year period.

Financial Services

HP Financial Services (HPFS) reported revenue of $680 million, an increase of 17% year over year. Financing volume and net portfolio assets increased 15% and 13%, respectively, over the prior-year period. Operating margin was 7.5% of revenue, up from 6.7% in the comparable period last year.

Asset management

HP generated $3.4 billion in cash flow from operations for the quarter. Inventory ended the quarter at $8.2 billion, down 3 days over the prior year. Accounts receivable of $13.8 billion was up 2 days over the prior-year period. Accounts payable ended the quarter at $14 billion up 5 days from the prior-year period. HP's dividend payment of $0.08 per share in the third quarter resulted in cash usage of $197 million. HP utilized $1.6 billion of cash during the third quarter to repurchase approximately 34 million shares of common stock from the open market. HP exited the quarter with $14.9 billion in gross cash, which includes cash and cash equivalents of $14.8 billion, short-term investments of $64 million, and certain long-term investments of $101 million.

Outlook

HP estimates fourth quarter FY08 revenue will be approximately $30.2 billion to $30.3 billion.

Fourth quarter FY08 GAAP diluted EPS is expected to be approximately $0.95 to $0.97 and non-GAAP diluted EPS is expected to be approximately $1.01 to $1.03. Fourth quarter FY08 non-GAAP diluted EPS estimates exclude after-tax costs of approximately $0.06 per share, related primarily to the amortization of purchased intangibles.

These estimates do not reflect the anticipated financial impact of HP's acquisition of Electronic Data Systems Corporation, which is expected to be completed in the fourth quarter of FY08.

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 Q3 FY08 earnings conference call is accessible via an audio webcast at www.hp.com/investor/q32008webcast.