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Can HP Survive the Post-PC Revolution?

On November 20, 2012, Hewlett-Packard (HP) announced its second quarterly write-down of over $8 billion dollars in a row. That in itself is cause for alarm, but the fact that HP blamed the write-downs on two of its largest recent acquisitions means the company could be flailing to find a foothold in a world where PCs and printers are quickly becoming niche products.

In 2012 the market for tablets and mini tablets exploded as Apple, Amazon, Google, and other manufacturers bet big on the technology. And it’s worked. Global shipments for tablets are expected to rise to 210 million in 2013, beating estimates for PC shipments.

Welcome to the the Post-PC era. Here’s your tablet.

Will the desktop PC ever truly be gone? Give us your predictions in the comments.

HP’s flirtation with mobile technology consisted largely of its acquisition of Palm in 2010. However, the company wasn’t able to compete with Apple, and discontinued all of its webOS products near the end of 2011. HP recently released several hybrid PC/tablet devices based on Microsoft’s Windows 8 operating system, but if Microsoft’s Surface is any indication, those devices aren’t particularly in demand, at least from home consumers.

So, losing the hardware game that had sustained it for decades, HP has turned to its enterprise services for revenue. Unfortunately, value hasn’t been found there either, and HP has announced 29,000 layoffs planned by the end of fiscal year 2014.

In HP’s third quarter 2012 earnings report, the first $8 billion write-down was blamed on Electronic Data Systems (EDS), an IT services company HP bought in 2008 for $13.9 billion. It’s value didn’t hold, and HP shares continued to decline. At the end of 2012, HP stock is trading at around $14, down from highs of around $50 near the beginning of 2011

The company’s fourth quarter 2012 earnings report blamed the majority of the second $8 billion write-down on Autonomy, a British knowledge management service company it acquired in 2011 for $10.2 billion. There was a twist this time, though. HP specifically laid the blame for more than $5 billion of the write-down on former Autonomy CEO Mike Lynch and other former Autonomy executives. HP brazenly accused Autonomy execs of “serious accounting improprieties, misrepresentations, and disclosure failures” prior to the acquisition.

Almost immediately, Lynch fired back at HP, claiming that HP mismanagement was responsible for key people leaving Autonomy after the acquisition. Lynch even created a website and issued an open letter to combat the allegations. In his letter he denies any wrongdoing on Autonomy’s part, saying, “I utterly reject all allegations of impropriety.” He points out that world-class auditing firms, as well as HP’s own accounting people, had access to Autonomy’s books during the due diligence period of the acquisition.

Lynch goes on to accuse HP of operational and financial mismanagement of Autonomy, and leveled some allegations about HP department infighting that made the company appear rather childish. He implored HP to explain, in detail, how $5 billion dollars in accounting fraud could have gone unnoticed.

HP responded to Lynch’s open letter, though it did not detail the numbers in its allegations. Instead, HP insisted that the matter would be resolved by the UK Serious Fraud Office, the U.S. Securities and Exchange Commission, and the U.S. Department of Justice. It then haughtily added that it looks forward to “hearing Dr. Lynch and other former Autonomy employees answer questions under penalty of perjury.” On December 28, 2012, it was confirmed by HP that the U.S. Department of Justice is currently investigating Autonomy’s accounts.

Obviously, someone is lying. Either Lynch and other Autonomy execs are guilty of a nearly unfathomable amount of fraud and deceit, or HP ran Autonomy (and possibly EDS, for that matter) into the ground with shoddy management. Either way, HP overpaid for Autonomy, a move that shows just how desperate the company is to gain traction with its enterprise services.

Who is telling the truth, HP or Mike Lynch? Let us know your thoughts in the comments.

As HP looks to the future, it’s hard to see 2013 being a turnaround year for the company. In addition to Autonomy-related lawsuits which will carry on for years, the company’s restructuring efforts will continue to cut into its quarterly profits. While Apple and Samsung compete to dominate the new frontier of computer hardware, HP will be limping toward a coherent, fully-integrated business structure.

This doesn’t mean the death of HP, though. In its many decades of existence the company has, much like IBM, re-invented itself a few times, and it is likely to survive by doing so again. Exactly what value HP will be bringing to customers in the future isn’t clear, but come 2015 the company should be lean enough for a solid leader take it in almost any direction.

How can companies like HP succeed in the future? Let us know in the comments.

December 30, 2012

HP Announces New EVP of Enterprise Services

Back in August, HP announced a huge $8 billion write-down stemming from the loss of value seen in Electronic Data Systems (EDS). HP bought the company in 2008 for $13.9 billion. As part of the announcement, the company sacked John Visentin, HP’s head of Enterprise Services and replaced him with temporarily with an EDS executive named Mike Nefkens.

Today, HP has made Nefkens’ position official. He is now HP’s executive vice president of Enterprise Services.

Nefkens joined EDS in 2001, and worked at Holland Chemical International NV for a decade before that.

“Mike has led some of our most successful account turnarounds and has already had a very positive impact on the business,” said Meg Whitman, HP president and CEO. “I’m confident in Mike’s ability to build our services business and contribute to HP’s long-term goals.”

HP certainly needs some account turnarounds at this point. The company just last month announced another huge write-down of $8.8 billion. This time, though, HP blamed most of the charge on its Autonomy subsidiary, accusing its former management of fraudulent accounting practices and misrepresenting the value of the company.

Sine that announcement, extensive finger-pointing has ensued between HP and former Autonomy CEO Mike Lynch. Lynch claims Autonomy’s value has tanked due to HP mismanagement and a corporate culture of infighting. HP has said it looks forward to Lynch and other former Autonomy executives testifying under penalty of perjury.

December 21, 2012

Autonomy Founder Starts Website to Combat Fraud Allegations

Autonomy founder Mike Lynch has been outspoken since HP leveled accounting fraud allegations against his former company. The executive, who left Autonomy earlier this year, has denied any wrongdoing and has shot back at HP, stating that mismanagement and infighting between HP divisions is responsible for the company’s massive value loss.

Now, Lynch has created a website, AutonomyAccounts.org, to be his and other former Autonomy management’s home base for combatting HP’s allegations. The site states that it is to provide “relevant information” pertaining to the disagreement and that the former management team of Autonomy “strongly rejects” HP’s allegations. From the website:

This site is designed to be a public point of contact for Dr Mike Lynch and other former managers at Autonomy with the wider world. It will contain information about Autonomy and any public statements made on behalf of the former management team related to these issues.

The Autonomy team are committed to providing clear and transparent information during this process, and would like to see the issue resolved as quickly as possible.

Lynch has already posted a short statement from former Autonomy management and an open letter Lynch wrote to HP. The statement again denies the accounting fraud allegations and calls them “false.” The open letter challenges HP to reveal the evidence it has against Autonomy. HP responded to Lynch’s letter, stating that it will let legal system sort the situation out, but that it looks “forward to hearing Dr. Lynch and other former Autonomy employees anseer questions under penalty of perjury.”

The Autonomy allegations came as HP announced last month it would be taking an $8.8 billion impairment charge, $5 billion of which is related to “serious accounting improprieties, misrepresentations, and disclosure failures” at Autonomy. HP bought Autonomy in 2011 for $10.2 billion. HP shareholders have filed lawsuits against just about everyone involved in the purchase of Autonomy.

December 4, 2012

Shareholders Sue Everyone Over HP/Autonomy Deal

When HP announced last week that it was taking an $8.8 billion impairment charge, and that $5 billion it is related to “serious accounting improprieties, misrepresentation, and disclosure failures” at Autonomy before HP acquired the firm, it was clear that the lawsuits would soon be flying. Lawyers no doubt jumped into action before the earnings call was even over, and now the first related lawsuits have been filed.

According to a Reuters report, an HP shareholder has sued just about everyone involved with the acquisition of Autonomy a knowledge and enterprise search services company. HP’s board of directors, HP CFO Catherine Lesjak, HP CEO Meg Whitman, and former HP CEO Leo Apotheker are all named in the lawsuit. Four different auditing firms – Deloitte, KPMG, Barclays, and Perella Weinberg Partners – have also been sued, and a San Francisco Chronicle report states that former Autonomy CEO Mike Lynch has also been sued. Deloitte was name-dropped by Whitman during the announcement, and the firm has denied knowledge of any fraud, promising to cooperate with investigations.

The lawsuit alleges that HP executives and the auditing firms missed “red flags” about Autonomy’s accounting practices. They claim that due diligence was lacking, and that HP overpaid for Autonomy, costing the company billions. HP stated last week that an internal investigation uncovered fraudulent accounting practices at Autonomy before it bought the company for $10.2 billion in 2011. Lynch immediately began speaking out against the accusations, calling HP’s announcement an ambush and stating that the allegations are “completely and utterly wrong and we reject them completely.” Lynch went on to reveal that Autonomy had difficulty transitioning to HP’s corporate structure, and blamed infighting between HP divisions as the real cause of the value loss. He even filed an open letter to the company, challenging them to present their evidence against the company he founded.

HP, for it’s part, has stated that it is currently investigating the alleged “accounting improprieties, disclosure failures, and outright misrepresentations,” and that the issue is now with the U.K. Serious Fraud Office, the U.S. Securities and Exchange Commission, and the U.S. Department of Justice. The company did state, however, that it looks forward to hearing Lynch “answer questions under penalty of perjury.”

November 30, 2012

Autonomy Founder Issues Open Letter to HP, HP Responds

Ever since HP’s announcement that it will take an $8.8 billion impairment charge, mostly due to what it calls “serious accounting improprieties, misrepresentations, and disclosure failures” at Autonomy prior to its 2011 acquisition by HP, Autonomy founder Mike Lynch has been firing back at the company he says destroyed Autonomy’s value. Lynch claims that he and other former Autonomy executives had been “ambushed” by the HP announcement, and that infighting between HP divisions is the real reason for the write-down.

Today, Lynch released a lengthy letter rejecting all allegations of impropriety at Autonomy, and demanding that HP release details of their allegations “in the intrest of all stakeholders.” The letter, in its entirety:

Open Letter from Dr Mike Lynch to the Board of Directors of Hewlett-Packard

27 November 2012

To: The Board of Directors of Hewlett-Packard Company

On 20 November Hewlett-Packard (HP) issued a statement accusing unspecified members of Autonomy’s former management team of serious financial impropriety. It was shocking that HP put non-specific but highly damaging allegations into the public domain without prior notification or contact with me, as former CEO of Autonomy.

I utterly reject all allegations of impropriety.

Autonomy’s finances, during its years as a public company and including the time period in question, were handled in accordance with applicable regulations and accounting practices. Autonomy’s accounts were overseen by independent auditors Deloitte LLC, who have confirmed the application of all appropriate procedures including those dictated by the International Financial Reporting Standards used in the UK.

Having no details beyond the limited public information provided last week, and still with no further contact from you, I am writing today to ask you, the board of HP, for immediate and specific explanations for the allegations HP is making. HP should provide me with the interim report and any other documents which you say you have provided to the SEC and the SFO so that I can answer whatever is alleged, instead of the selective disclosure of non-material information via background discussions with the media.

I believe it is in the interest of all stakeholders, and the public record, for HP to respond to a number of questions:

Many observers are stunned by HP’s claim that these allegations account for a $5 billion write down and fail to understand how HP reaches that number. Please publish the calculations used to determine the $5 billion impairment charge. Please provide a breakdown of the relative contribution for revenue, cash flow, profit and write down in relation to:

The alleged “mischaracterization” of hardware that HP did not realize Autonomy sold, as I understand this would have no effect on annual top or bottom lines and a minor effect on gross margin within normal fluctuations and no impact on growth, assuming a steady state over the period;

The alleged “inappropriate acceleration of revenue recognition with value-added resellers” and the “[creation of] revenue where no end-user customer existed at the time of sale”, given their normal treatment under IFRS; and

The allegations of incorrect revenue recognition of long-term arrangements of hosted deals, again given the normal treatment under IFRS.

In order to justify a $5 billion accounting writedown, a significant amount of revenue must be involved. Please explain how such issues could possibly have gone undetected during the extensive acquisition due diligence process and HP’s financial oversight of Autonomy for a year from acquisition until October 2012 (a period during which all of the Autonomy finance reported to HP’s CFO Cathie Lesjak).

Can HP really state that no part of the $5 billion writedown was, or should be, attributed to HP’s operational and financial mismanagement of Autonomy since the acquisition?

How many people employed by Autonomy in September 2011 have left or resigned under the management of HP?

HP raised issues about the inclusion of hardware in Autonomy’s IDOL Product revenue, notwithstanding this being in accordance with proper IFRS accounting practice. Please confirm that Ms Whitman and other HP senior management were aware of Autonomy’s hardware sales before 2012. Did Autonomy, as part of HP, continue to sell third-party hardware of materially similar value after acquisition?Was this accounted for by HP and was this reported in the Autonomy segment of their accounts?

Were Ms Whitman and Ms Lesjak aware that Paul Curtis (HP’s Worldwide Director of Software Revenue Recognition), KPMG and Ernst & Young undertook in December 2011 detailed studies of Autonomy’s software revenue recognition with a view to optimising for US GAAP?

Why did HP senior management apparently wait six months to inform its shareholders of the possibility of a material event related to Autonomy?

Hewlett Packard is an iconic technology company, which was historically admired and respected all over the world. Autonomy joined forces with HP with real hopes for the future and in the belief that together there was an opportunity to make HP great again. I have been truly saddened by the events of the past months, and am shocked and appalled by the events of the past week.

I believe it is in the best interests of all parties for this situation to be resolved as quickly as possible.

I am placing this letter in the public domain in the interests of complete transparency.

Yours faithfully,

Dr Mike Lynch

HP quickly fired back a response to the letter. In short, the company wants legal processes to run their course, and demurred to engage Lynch in a public debate. It did, however, get in one jab about looking forward to Lynch answering questions “under penalty of perjury.” HP stated that the matter is now in the hands of the appropriate authorities, including the U.K. Serious Fraud Office, the U.S. Securities and Exchange Commission, and the U.S. Department of Justice. The company also made it clear that it intends to take legal action “at the appropriate time. HP’s full statement:

HP has initiated an intense internal investigation into a series of accounting improprieties, disclosure failures and outright misrepresentations that occurred prior to HP’s acquisition of Autonomy. We believe we have uncovered extensive evidence of a willful effort on behalf of certain former Autonomy employees to inflate the underlying financial metrics of the company in order to mislead investors and potential buyers.

The matter is in the hands of the authorities, including the UK Serious Fraud Office, the US Securities and Exchange Commission’s Enforcement Division and the US Department of Justice, and we will defer to them as to how they wish to engage with Dr. Lynch. In addition, HP will take legal action against the parties involved at the appropriate time.

While Dr. Lynch is eager for a debate, we believe the legal process is the correct method in which to bring out the facts and take action on behalf of our shareholders. In that setting, we look forward to hearing Dr. Lynch and other former Autonomy employees answer questions under penalty of perjury.

November 27, 2012

Autonomy Founder Blames HP For Lost Billions

HP is seeing some massive blowback from its announcement that it has taken an $8.8 billion impairment charge, and that around $5 billion of it is due to ” serious accounting improprieties, misrepresentations, and disclosure failures” at Autonomy. HP purchased the enterprise search and knowledge management service company just over one year ago for $10.2 billion. It claims that soon after Autonomy founder Mike Lynch left the company, a whistleblower stepped forward about “a series of questionable accounting and business practices at Autonomy prior to the acquisition by HP.”

The day of the announcement, Lynch spoke out against the allegations of accounting fraud, saying that he and other Autonomy executives had been “ambushed.” He stated that the allegations are “completely and utterly wrong.” An accounting auditor name-dropped by HP CEO Meg Whitman in the latest HP earnings call also came forward to deny any knowledge of accounting improprieties or misrepresentations.

Lynch hasn’t stayed quiet following his zero-day remarks, though. In an interview segment published today over at Business Insider, Lynch put the blame for Autonomy’s value loss squarely on HP’s shoulders. He stated that HP is torn between executives who want the company to focus more on software and executives who’s positions in the company require a focus on hardware.

Lynch points to infighting between HP divisions as the reason for the recent impairment charge. He claims that much of Autonomy’s “great, playful, lively young talent” left the company due to internal bureaucracy. In fact, Lynch claims, he and the entire Autonomy management team eventually “gave up.” He states that the unnamed senior Autonomy whistleblower HP claims revealed the accounting fraud couldn’t have been from the senior management team at Autonomy. Lynch states that the name of the whistleblower that circulated to him was “an HP software person who was brought in a month before I left,” and suggested this person came into Autonomy with an agenda.

It’s clear from HP’s financial position that things at the company aren’t going completely smoothly. However Lynch, who compared HP to an airplane with its engine on fire, also hasn’t fully addressed the claims of misrepresentations at Autonomy, preferring to stay on the offensive against HP. No doubt many lawsuits are currently being prepared, and the truth of both sides’ claims will be put to the test in court over the coming years, with a lot of dirty laundry to go with them.

November 26, 2012

Autonomy Auditor Denies Knowledge of HP’s Fraud Claims

The fallout from HP‘s allegations of massive accounting fraud at Autonomy continue to grow.

Today, an account auditing firm that audited Autonomy’s financials before the company was purchase by HP has denied any knowledge of the accounting improprieties HP alleges.

According to a statement obtained by the New York Times, auditing firm Deloitte “categorically denies that it had any knowledge of any accounting improprieties or misrepresentations in Autonomy’s financial statements.” From the statement:

“We conducted our audit work in full compliance with regulation and professional standards. We are unable to discuss our audit work further due to client confidentiality. We will cooperate with the relevant authorities with any investigations into these allegations.”

Deloitte was mentioned by name by HP CEO Meg Whitman (pictured above) during the company’s fourth quarter 2012 earnings call as one of the accounting firms the HP board relied on while doing due diligence for the Autonomy purchase. Deloitte made it clear that, though Deloitte UK was auditor to Autonomy when the HP sale occurred, it “was not engaged by HP, or by Autonomy, to provide any due diligence in relation to the acquisition of Autonomy.”

On November 20, HP announced it would be taking an $8.8 billion impairment charge, $5 billion of which is due to what it calls “serious accounting improprieties, misrepresentations, and disclosure failures” at Autonomy prior to HP’s acquisition of the company. HP stated that after Autonomy founder Mike Lynch left the company, a “senior member” of Autonomy’s leadership stepped forward and blew the whistle on questionable accounting and business practices. Later that day, Lynch fired back at HP, calling their figures “mad” and implying that it’s no coincidence the announcement came on the heels of HP’s worst earnings results in history.

November 21, 2012

Autonomy Founder Fires Back at HP Amid Accounting Fraud Claims

The founder of enterprise search and knowledge management service company Autonomy is firing back at HP amid allegations that his company used sketchy accounting practices to inflate its value prior to its sale to HP in August 2011. In an interview with the Wall Street Journal (WSJ), Lynch said of HP’s allegations that “they are completely and utterly wrong and we reject them completely.”

This morning HP revealed that it will take an $8.8 billion impairment charge due to what it calls “serious accounting improprieties, misrepresentations, and disclosure failures” by Autonomy in the run up to its acquisition. HP claims that a “senior member” of Autonomy’s leadership came forward after Lynch left the company, spurring a forensic review of Autonomy’s accounting practices.

Lynch told WSJ that he was not aware of HP’s allegations before they were made public this morning. “We have been ambushed,” said Lynch. He pointed out that Autonomy was audited on a quarterly basis, and that HP was meticulous during its due diligence investigation into Autonomy before the acquisition.

“The figures are just mad,” said Lynch. “You are talking about handing them an asset worth $12 billion and they are saying $9 billion of that they are taking off. That would be such an obvious massive thing with 300 people and all these firms doing due diligence, how could you possibly not spot it?

Lynch also mentions that the announcement seems “coincident with [HP] releasing the worst set of results in their 70-year company history.”

It does seem incredible that HP and other entities could have missed accounting fraud on such a huge scale, and it’s clear that Lynch intends to defend himself and his former company against HP’s allegations. HP pledged in its statement this morning that it intends to “seek redress against various parties in the appropriate civil courts to recoup what it can for its shareholders.” The lawsuits will be flying soon, bringing with them clarity on whether Autonomy’s books were clean or not.

November 20, 2012

HP Logs $8.8 Billion Impairment Charge For Possibly Fraudulent Accounting by Autonomy

Just over one year ago, HP bought Autonomy, an enterprise search and knowledge management service company for $10.2 billion. Today, HP announced it would be taking an $8.8 billion impairment charge due to what it calls “serious accounting improprieties, misrepresentations, and disclosure failures” at Autonomy prior to HP’s acquisition of the company.

HP stated that it discovered the fraudulent accounting practices during an internal investigation and forensic review into Autonomy’s accounting practices before the 2011 acquisition. It claims more than $5 billion of the impairment charge is linked to the Autonomy accounting.

HP’s statement on the matter:

“HP is extremely disappointed to find that some former members of Autonomy’s management team used accounting improprieties, misrepresentations and disclosure failures to inflate the underlying financial metrics of the company, prior to Autonomy’s acquisition by HP. These efforts appear to have been a willful effort to mislead investors and potential buyers, and severely impacted HP management’s ability to fairly value Autonomy at the time of the deal. We remain 100 percent committed to Autonomy and its industry-leading technology.”

The investigation into Autonomy’s accounting practices commenced after Autonomy founder Mike Lynch left the company. A “senior member” of Autonomy’s leadership stepped forward and blew the whistle on what he or she alleged were “a series of questionable accounting and business practices at Autonomy prior to the acquisition by HP,” and provided details that HP had no knowledge of.

HP stated that its investigation is still ongoing. It provided two examples of the types of accounting improprieties it accuses Autonomy of practicing:

The mischaracterization of revenue from negative-margin, low-end hardware sales with little or no associated software content as “IDOL product,” and the improper inclusion of such revenue as “license revenue” for purposes of the organic and IDOL growth calculations.
This negative-margin, low-end hardware is estimated to have comprised 10-15% of Autonomy’s revenue.

The use of licensing transactions with value-added resellers to inappropriately accelerate revenue recognition, or worse, create revenue where no end-user customer existed at the time of sale.

The forensic accounting review was undertaken by PricewaterhouseCoopers under the oversight of John Schultz, HP’s general counsel. HP has referred the matter to the U.S. Securities and Exchange Commission and the U.K.’s Serious Fraud Office. The company is also “preparing to seek redress against various parties in the appropriate civil courts to recoup what it can for its shareholders.”

November 20, 2012

HP ElitePad Chosen to Fly on Emirates Airlines

HP and Emirates Airlines announced today that HP’s new Windows 8 tablet, the ElitePad 900, has been chosed at the “primary interface” for the airline’s flight crews. As part of Emirates’ new Knowledge-driven Inflight Service (KIS), the tablets will be used to facilitate in-flight communications and also function as part of the customer relationship management system. HP stated that Emirates flight crews will be able to “work more efficiently” and “deliver personalized service” using the devices.

“Emirates constantly seeks ways to enhance our customers’ experience,” said Kevin Griffiths, senior vice president of Cabin Crew at Emirates. “We selected the HP ElitePad 900 to power KIS because of its sleek design and light weight, which allows our staff to provide the highest levels of service to our customers, whilst maintaining the ruggedness and security measures needed from an Enterprise class device.”

HP made it clear that Emirates is now the first global customer of the ElitePad 900, which was announced back in October and is currently scheduled to launch sometime in January. The device is a Windows 8 tablet aimed at business and government customers.

“For its advanced KIS concierge service, Emirates Airlines needed an enterprise-grade tablet,” said James Mouton, general manager of the Personal Computer Global Business Unit at HP. “In the HP ElitePad, it found a compact, powerful and stylish business tool ideally suited to meet the needs of its staff and customers, both on the ground and at 40,000 feet.”

This year, airlines have been looking to implement touch device technology on flights and the FAA has been reviewing the rules on how such devices can be used during flights. American Airlines announced in September that it had chosen Samsung’s Galaxy Note to function as a customer service device, and Apple’s iPad was recently cleared to take the place of bulky paper manuals in American Airlines Pilot flight bags.

(Image courtesy wikimedia and omeyamapyonta)

November 19, 2012

Cybercrime Costs on the Rise, HP-Sponsored Study Finds

HP and the Ponemon Institute today unveiled a new security study that shows the cost and frequency of cybercrime has risen for the third year in a row.

The 2012 Cost of Cyber Crime Study, conducted by the Ponemon Institute and sponsored by HP, found that the average annual cost of cybercrime for U.S. organizations was $8.9 million in 2012. That amount is 6% more than the $8.4 million average costs of cybercrime in 2011, and a 38% increase over the 2010 average of $6.5 million.

The report also shows a 42% increase in the number of cyberattacks in 2012. This year, organizations experienced an average of 102 successful attacks per week, compared to 72 attacks per week in 2011 and 50 attacks per week in 2010.

“A successful attack is one that infiltrates or infects an enterprise system,” said Larry Ponemon, chairman and founder of the Ponemon Institute, who spoke with WebProNews. “We’re really looking at things that stick, rather than bounce off a company’s firewall or other perimeter protections.”

Ponemon has served on the Advisory Committee for Online Access & Security for the U.S. Federal Trade Commission and was appointed by the White House to the Data Privacy and Integrity Advisory Committee for the Department of Homeland Security.

Though the total average cost of cybercrime is on the rise, the report shows that companies incur costs differently according to their size and the industry they are associated with. Ponemon shows that while organizations they classify as small have lower annual cybercrime costs, their per capita cybercrime costs ($1,324) are much higher than larger organizations ($305). Organizations in the defense, utilities & energy, and financial services industries have higher costs associated with cybercrime than those in other industry segments, such as retail, hospitality, and consumer products.

This is the first year the report has expanded past U.S. companies, looking at businesses in the U.K., Germany, Japan, and Australia. According to Ponemon, the U.S. and Germany were much more likely to be hit with cyberattacks, and a larger percentage of their external costs due to cybercrime came from information loss. The majority of the U.K.’s and Australia’s external costs came from business disruption, meaning their internal costs largely consisted of recovering from cyberattacks, while the U.S. and Germany spent more internally on detection.

Several security solutions are advised by the Ponemon report. It shows that a “strong security posture” based on the Security Effectiveness Score (SES) metric can mitigate the average cost of cyberattacks. Strong security governance practices are encouraged as well, with the report showing that organizations that invest adequately in security resources, appoint a high-level security leader, and employ experts can reduce their cybercrime costs.

The report also found that, unsurprisingly, deployment of security intelligence systems can make a difference in the costs companies incur as a result of cybercrime. It shows that organizations that deploy security intelligence technologies saved an average of $1.6 million compared to those that did not.

“The purpose of this benchmark research is to quantify the economic impact of cyberattacks and observe cost trends over time,” said Ponemon. “We believe a better understanding of the cost of cybercrime will assist organizations in determining the appropriate amount of investment and resources needed to prevent or mitigate the devastating consequences of an attack.”

HP believes its security services are just the sort of resources companies need to safeguard their network infrastructures. The company recently updated its enterprise security solutions, focusing on proactively protecting customers rather than reacting to cyberattacks. HP will also sponsor a series of live webinars, presented by Larry Ponemon, starting later this month. The webinars will detail the findings of the Ponemon report for the individual countries in which the study was conducted.

“Organizations are spending increasing amounts of time, money and energy responding to cyberattacks at levels that will soon become unsustainable,” said Michael Callahan, vice president of Worldwide Product and Solution Marketing, and Enterprise Security Products at HP. “There is clear evidence to show that the deployment of advanced security intelligence solutions helps to substantially reduce the cost, frequency and impact of these attacks.”

Varun Kohli, director of Product Marketing for Enterprise Security Products at HP told WebProNews that the Ponemon report provides conclusive data for security teams trying to sell their worth to executives, who often don’t see value in comprehensive preventative security solutions. His advice to organizations is to “bake-in” security to their solutions by making the solutions “intelligent” and “protecting what matters.”

“If it doesn’t neet to be on the internet, don’t put it on the internet,” said Kohli.

October 8, 2012

HP Announces ElitePad 900 Tablet

HP is certainly looking to have a large presence in stores this holiday season. In August, the company announced a large lineup of Windows 8 hybrid PCs and Ultrabooks. Last month, HP unveiled its upcoming Windows 8 “sleekbooks.” This week, HP is announcing another Windows 8 tablet, this one aimed squarely at the business market.

The HP ElitePad 900, HP states, has been designed with business and government in mind. Customers who purchase the tablet will have the option of the serviceability, enhanced security, and manageability that HP’s desktop “Elite” desktop PCs have. The company also claims that it has “military-grade durability” that protects it from drops, extreme temperatures, and high altitudes.

“Businesses used to face a tough purchase decision: How to find a product that will delight employees and help them be more productive, while also making sure IT can secure and manage it,” said Todd Bradley, executive vice president of Printing and Personal Systems at HP. “The HP ElitePad meets all those tests. It combines the great style and user experience consumers demand with the features IT requires.”

The tablet has a 10.1-inch display, is 9.2 mm thick, and weighs 1.5 pounds. Inside, the tablet sports an Intel mobile processor, as well as front and rear cameras.

The ElitePad is also compatible with accessories that HP believes turn the device into a business machine. The HP ElitePad Productivity Jacket adds a keyboard and an SD card slot to the tablet, while the ElitePad Expansion Jacket adds USB, HDMI, and “other connectivity.” Users can also extend the tablet’s battery life with a Jacket battery. Other ElitePad jackets include the Rugged Case and the Docking Station.

HP has not announced a price for the ElitePad 900 yet. The company currently projects that the device will be available in the U.S. by January 2013.

October 1, 2012

HP Announces New Windows 8 “Sleekbooks”

While consumers and the tech press continue to debate whether Windows 8 is well-designed or not, Microsoft now has several manufacturers that are doubling down on its new operating system.

Today, HP announced new ENVY computers and two new “sleekbook” laptops that have been designed with Windows 8 in mind. This comes less than a month after HP announced its new lineup of tablet/laptop hybrids and ultrabooks for Windows 8.

First up are the HP Pavilion Sleekbook 14 and Pavilion Sleekbook 15. These thin laptops are designed for the consumer market. The Sleekbook 14 has a 14-inch display, while the Sleekbook 15 has a 15.6-inch display. Both come with up to one terabyte of storage and feature webcams, Dolby Advanced Audio, and optional Nvidia graphics cards. These “sleekbooks” will start at $500 for the Sleekbook 14 and $560 for the Sleekbook 15.

HP also announced new additions to the ENVY laptop lineup it announced last month. The HP ENVY m4 is a notebook PC and has a 14-inch display. It comes with an intel processor, optional backlit keyboard, and Beats Audio branded sound. Its pricing starts at $900.

The HP ENVY Phoenix h9 is a desktop PC that features an “armor-plated design” and “attention-grabbing lighting.” It will come with a third-generation Intel processor and a choice of Nvidia or AMD graphics cards. The PC also features liquid cooling and Beats Audio. Pricing for the Phoenix h9 starts at $900.

There is also a new Compaq Pro desktop PC, the 6305, coming for enterprise customers. It comes with an AMD processor and tons of software for enterprise customers, such as HP Client Security. The Windows 7 version of the PC will be available on October 8 starting at $539, and Windows 8 versions will be available later on.

In addition to the Compaq, HP announced a new series of ProBooks, the 4445, 4446, and 4545. These notebook PCs will come with AMD A-series processors and the option for dual AMD graphics cards. All of these ProBooks will be offered starting at $499.

September 20, 2012

Hewlett-Packard to Cut 2,000 More Jobs Than Previously Stated

Hewlett-Packard (HP) announced today that it would cut 2,000 more jobs than it originally reported back in May. This brings the total planned layoffs up to 29,000 by the end of fiscal year 2014.

According to a Bloomberg report, a regulatory filing today revealed the increased number of layoffs. Back in May, HP announced that it had begun a restructuring program, of which the tens of thousands of layoffs (8% of its entire workforce) are a large part. The company estimated that the program will save $3-$3.5 billion annually by the end of 2014.

This news comes on the same day that HP announced a new lineup of enterprise security solutions. A new focus on cloud security and information analytics is part of HP’s restructuring program.

Even so, its enterprise services were devalued in August, when the company wrote off $8 billion from the value of Electronic Data Systems (EDS), an IT services company HP bought in 2008 for $13.9 billion. Since that acquisition, HP has faced the growing competition and rapid industry change that many aging technology manufacturers have seen. HP’s stock has reflected this, falling over 30% this year, according to Bloomberg.

HP has not announced the reason for the increased number of layoffs. At the IFA trade show in Berlin two weeks ago, HP announced a new series of Windows 8 ultrabooks and a Hybrid tablet/PC called the HP ENVY x2

September 10, 2012

HP Beefs Up Its Enterprise Security Solutions

Amid the spectre of job cuts and huge losses, HP seems to be reinventing itself. As many aging hardware manufacturers have, the company is beginning to restructure its business and focus its efforts on providing quality B2B enterprise solutions.

Hewlett-Packard (HP) announced today that it has updated its enterprise security solutions. Its updated offerings run the gamut from “intelligent” solutions for the public sector to comprehensive networked printer security.

HP’s new focus for enterprise security is proactively protecting their clients, rather than waiting to respond to an attack. Sanjay Raja, director of product marketing for TippingPoint at Hewlett-Packard, told WebProNews that HP is recognizing customer concerns in three areas: cloud security, mobility, and big data.

“The perimeter has gone away,” said Raja. This is a theme he returned to often, emphasizing that HP is now focusing on a more proactive approach to enterprise security. Raja pointed out that networks are beging to sprawl as mobile technology becomes more ubiquitous. He said HP is developing solutions that understand all the different, disparate parts of networks.

HP has updated its ArcSight Enterprise Security Manager to version 6.0c to help protect a multitude of networked devices. ArcSight is HP’s security monitoring and compliance solution that identifies cyber threats across a network infrastructure and prioritizes security concerns.

Alongside ArcSight is HP’s intrusion prevention system (IPS), TippingPoint NX. Raja calls TippingPoint NX a next-generation IPS. It adds deep packet traffic inspection and a modular architecture designed to scale automatically to threats. HP claims its new IPS will save companies both rack space and power costs.

HP has also updated its public sector security offerings. This includes an update to its Assured Identity solution, which allows simple credential and access management. In addition to its identity and access controls, Raja stated that Assured Identity can help with the sharing of information for people who are properly credentialed.

As for mobile, HP has announced a free mobile app for WebOs, iOS, and Android that monitors current and trending cyberthreats. The data used in the app is taken from HP’s Digital Vaccine Labs (DVLabs), HP’s award-winning security research lab. Raja said the app provides trending, monitoring, and real-time security threats. “It’s basically a kind of early-warning system,” said Raja.

One of the more niche areas that HP is specializing in is enterprise security solutions for networked printers. Though not often thought of as a large security threat, Raja said that HP’s clients are seeing a growing number of attacks that use printers as an entry point. HP offers imaging and printing security assessments to minimize security risks, as well as an updated imaging and printing solution center that implements a policy-based solution.

Printer intrusion is especially concerning for the healthcare industry, which uses printers for sensitive healthcare data. Raja pointed out that hospitals and doctors in the U.S. have to stay compliant with HIPAA, a law passed in 1996 that mandates certain security and privacy requirements with regards to patient health data.

Raja said that HP’s Access Control Printing Solutions have been expanded specifically with the healthcare industry in mind. Aside from providing secure authentication and secure pull printing, it’s management tool provides metrics, password management, and ensures compatibility across the network.

“Cybersecurity threats are growing exponentially, and without a proactive information risk management strategy, enterprise growth, innovation, and efficiencies are hindered,” said George Kadifa, executive vice president of HP Software.

Verizon’s 2012 Data Breach Investigation Report backs up Kadifa’s claim, showing that intrusions are becoming more grassroots and political in their intent.

September 10, 2012

HP Announces Its Windows 8 Hybrid PC and Ultrabooks

Yesterday at the IFA trade show in Berlin, Samsung debuted a plethora of gadgets, including a Windows 8 tablet, Windows 8 hybrid PCs, and a Windows 8 Phone smartphone. Not to be outdone, HP today announced its own lineup of Windows 8 hybrid PCs and ultrabooks.

There had been rumors for most of the year that HP was working Windows 8 devices, including a tablet. Still, between the company’s massive layoffs this spring and its $8 billion loss this past quarter, nothing was certain when it came to HP.

The two ultrabooks HP has announced are nothing surprising. The HP SpectreXT TouchSmart Ultrabook and HP ENVY TouchSmart Ultrabook 4 are similar to other ultrabooks, looking very slim and sporting a 15.6-inch and 14-inch display respectively. What makes them different is that their displays are touch sensitive, allowing users to operate the Windows 8 interface in the way it was obviously designed to.

The more interesting product announcement from HP is the HP ENVY x2, a hybrid tablet/PC that resembles Samsung’s ATIV Smart PC. The device is a tablet that can be docked into a keyboard, making it into a laptop. HP’s preview of the device can be seen in the video below.

“Consumers want the flexibility to move between creating rich documents and losing themselves in a great movie,” said James Mouton, general manager of the Personal Computer Global Business Unit at HP. “With the HP ENVY x2, customers can have it all, and the touch experience on these three new notebooks brings out the best of Windows 8.”

It seems every Windows 8 OEM is getting in on this hybrid PC form-factor that Microsoft began touting with its Surface device. Blutooth keyboards for the iPad do sell, so there is some logic behind Microsoft’s decision to push the hybrid design. Still, it will be interesting to see whether consumers actually want such devices, or whether tablet accessories make such devices obsolete.

August 30, 2012

HP to Report Quarterly Loss of Over $8 billion

HP hinted today that it expects to report the third quarter of 2012 as its largest-ever quarterly loss. The losses, which total more than $8 billion, are the affect of a restructuring program and a services goodwill impairment charge of around $8 billion.

The $8 billion charge stems from the acquisition of IT services company Electronic Data Systems (EDS). When HP acquired EDS in 2008, it paid $13.9 billion for the company. HP added billions of dollars worth of goodwill to its ledgers as a result of the deal. Goodwill, in accounting terms is the value a company has beyond the value of its assets. The value of EDS has not held, and HP has been forced to take an $8 billion hit in value.

As for HP’s massive restructuring, the costs of that program will run the company a pre-tax charge of $1.5 to $1.7 billion. The company states that costs stem from “a higher than anticipated acceptance rate under its early retirement program and faster than expected implementation of the workforce reduction program.”

Among this financial news, HP also announced changes to its senior management. HP will be replacing John Visentin, the head of HP’s Enterprise Services division with HP Enterprise Services General Manager Mike Nefkens, who will head the division on an acting basis. HP Enterprise Services Chief Financial Officer Jean-Jacque Carhon was also appointed to the role of of COO for the Enterprise Services division.

Hardware manufacturers may face more challenges in the future, as software makers begin to sell their own hardware. Emulating the success of the Apple ecosystem, Google has begun selling its Nexus line of devices, and Microsoft announced its own laptop/tablet hybrid Surface.

August 8, 2012

Can We Blame Social Sites For HP’s Restructuring?

Over the next couple years, print giant Hewlett Packard will scale back their workforce by as much as 8%, or 27,000 people. It is all part of a massive initiative to restructure the way the company does business, and to stay competitive in this market, quick adaptation is needed. They expect to reinvest the money they save from cutting labor expenses back into refining processes and simplifying their market strategy.

HP President and CEO Meg Whitman comments on the changes at the firm:

“These initiatives build upon our recent organizational realignment, and will further streamline our operations, improve our processes, and remove complexity from our business,”

“While some of these actions are difficult because they involve the loss of jobs, they are necessary to improve execution and to fund the long term health of the company. We are setting HP on a path to extend our global leadership and deliver the greatest value to customers and shareholders.”

While the company invests in cloud security, information analytics, speed development in security, big data and other areas, there is a noticeable piece of the puzzle missing. Yes that’s right, printing technology. While I am sure they are not out of the game, some wonder if network sharing and other forms of digital media aren’t cutting into the physical photo printing business.

Venture Beat published a story that features Facebook as a main reason for HP’s recent decline in revenue from printers and ink cartridges used in their devices. Essentially they are claiming that as more people join the Facebook revolution, fewer choose to actually print out their photos.

I like what they are implying here. It speaks to a positive evolution, at least by my reckoning. Facebook and other social sites like Twitter and Pinterest allow us to share photos and other documents in a way that’s both, environmentally friendly, and economical. Let’s be honest, most of us use printers that are overpriced, antiquated, and expensive to operate. It’s cheaper to take your photos to Walgreens.

I am glad to see HP evolving and shifting their research efforts away from old technology and investing in newer more useful endeavors like cloud-based systems and security. Of course dying product lines will temporarily effect the bottom line, why do you think we still have gas-powered automobiles? Strained sales and revenue growth should indicate it’s time to innovate and move on, not sink more money into a dying cow.

May 24, 2012

HP Job Cuts: Company Announces 27,000

HP announced a massive restructuring today, which it says will generate annual savings of $3.0 to $3.5 billion (exiting fiscal year 2014). These savings will be reinvested back into the company, HP says. The restructuring comes at the cost of 27,000 jobs, as the company announced that it expects as many employees to exit the company. That’s 8% of its entire workforce. This is also to take place by the end of fiscal year 2014.

The company says it also expects to save money from non-headcount cost reductions in supply chain optimization, SKU and platform rationalization, go-to-market strategy simplification and business process improvement.

The company will invest in research and development, accelerating service capabilities in cloud security and information analytics, and speed development in security, big data and other areas, to name a few.

“These initiatives build upon our recent organizational realignment, and will further streamline our operations, improve our processes, and remove complexity from our business,” said HP President and CEO Meg Whitman. “While some of these actions are difficult because they involve the loss of jobs, they are necessary to improve execution and to fund the long term health of the company. We are setting HP on a path to extend our global leadership and deliver the greatest value to customers and shareholders.”

The company also released its Q2 earnings report today, including net revenue of $30.7 billion(down 3% year over year).

“We are making progress in our multi-year effort to make HP simpler, more efficient and better for customers, employees, and shareholders,” said Whitman. “This quarter we exceeded our previously provided outlook and are executing against our strategy, but we still have a lot of work to do.”

Here’s the earnings release in its entirety:

HP Reports Second Quarter 2012 Results

PALO ALTO, CA, May 23, 2012 (MARKETWIRE via COMTEX) –HP (NYSE: HPQ)

-- Second quarter non-GAAP diluted earnings per share of $0.98, above previously provided outlook of $0.88 to $0.91 per share -- Second quarter GAAP diluted earnings per share of $0.80, above previously provided outlook of $0.68 to $0.71 per share -- Second quarter net revenue of $30.7 billion, down 3% from the prior-year period -- Returned $601 million in cash to shareholders in the form of dividends and share repurchases -- Company announces multi-year restructuring to fuel innovation and enable investment -- see separate press release for details

HP second quarter fiscal 2012 financial performance

Q2 FY12 Q2 FY11 Y/Y GAAP net revenue ($B) $30.7 $31.6 (3%) GAAP operating margin 7.2% 9.4% (2.2 pts.) GAAP net earnings ($B) $1.6 $2.3 (31%) GAAP diluted EPS $0.80 $1.05 (24%) Non-GAAP operating margin 8.9% 11.3% (2.4 pts.) Non-GAAP net earnings ($B) $1.9 $2.7 (28%) Non-GAAP diluted EPS $0.98 $1.24 (21%)

Information about HP’s use of non-GAAP financial information is provided under “Use of non-GAAP financial information” below.

HP (NYSE: HPQ) today announced financial results for its second fiscal quarter ended April 30, 2012. For the quarter, net revenue of $30.7 billion was down 3% year over year both as reported and when adjusted for the effects of currency.

GAAP diluted earnings per share (EPS) was $0.80, down 24% from the prior-year period. Non-GAAP diluted EPS was $0.98, down 21% from the prior-year period. Second quarter non-GAAP earnings information excludes after-tax costs of $356 million, or $0.18 per diluted share, related to amortization of purchased intangible assets, restructuring charges and acquisition-related charges.

“We are making progress in our multi-year effort to make HP simpler, more efficient and better for customers, employees, and shareholders,” said Meg Whitman, HP president and chief executive officer. “This quarter we exceeded our previously provided outlook and are executing against our strategy, but we still have a lot of work to do.”

Business Group Results

-- Personal Systems Group(PSG) revenue was flat year over year with a 5.5% operating margin. Commercial revenue increased 3%, and Consumer revenue declined 4% while Workstations revenue was down 1% year over year. Desktop units were up 5%, notebook units were down 6% and total units were down 1%. -- Services revenue declined 1% year over year with an 11.3% operating margin. Technology Services revenue was flat year over year, Application and Business Services revenue grew 1% and IT Outsourcing revenue declined 3% year over year. -- Imaging and Printing Group (IPG) revenue declined 10% year over year with a 13.2% operating margin. Commercial hardware revenue was down 4% year over year with commercial printer units down 7%. Consumer hardware revenue was down 15% year over year with a 13% decline in printer units. -- Enterprise Servers, Storage and Networking (ESSN) revenue declined 6% year over year with an 11.2% operating margin. Networking revenue was up 2%, Industry Standard Servers revenue was down 6%, Business Critical Systems revenue was down 23%, and Storage revenue was up 1% year over year. -- HP Financial Services revenue grew 9% year over year driven by a 4% increase in net portfolio assets and a 5% increase in financing volume. The business delivered a 9.9% operating margin. -- Software revenue grew 22% year over year with a 17.7% operating margin, including the results of Autonomy. Software revenue was driven by 7% license growth, 17% support growth, and 72% growth in services. Autonomy saw a significant decline in license revenue.

To help improve Autonomy’s performance, Bill Veghte, HP’s chief strategy officer and executive vice president of HP Software, will step in to lead Autonomy. Veghte is an experienced software leader who will help develop the right processes and discipline to scale Autonomy and fulfill its promise. Mike Lynch, Autonomy’s founder and executive vice president for Information Management, will leave HP after a transition period. The market and competitive positioning for Autonomy remain strong, particularly in cloud offerings.

Asset Management HP generated $2.5 billion in cash flow from operations in the second quarter. Inventory ended the quarter at $7.3 billion, with days of inventory up 2 days year over year to 28 days. Accounts receivable of $16.6 billion was down 4 days year over year to 49 days. Accounts payable ended the quarter at $12.9 billion, down 5 days from the prior-year period to 49 days. HP’s dividend payment of $0.12 per share in the second quarter resulted in cash usage of $251 million. HP also utilized $350 million of cash during the quarter to repurchase approximately 13 million shares of common stock in the open market. HP exited the quarter with $8.7 billion in gross cash.

Outlook In connection with the restructuring efforts discussed in a separate press release issued today (http://www8.hp.com/us/en/hp-news/press-release.html?id=1247078), HP expects to record a pre-tax charge of approximately $1.7 billion in fiscal 2012 that will be included in its GAAP financial results for that period. Of that amount, HP expects to record a pre-tax charge of approximately $1.0 billion in its third fiscal quarter. The cash impact associated with the restructuring efforts is expected to be approximately $400 million in fiscal year 2012. Through fiscal 2014, HP expects to record additional pre-tax charges approximating $1.8 billion that will be included in its GAAP financial results for the applicable periods.

In May 2012, HP committed to a change in its PC branding strategy. As a result, HP has commenced an asset impairment analysis to determine the current value of the Compaq trade name acquired in 2002. Based on the preliminary results of that analysis, HP expects to record an impairment charge of up to approximately $1.2 billion that will be included in its GAAP financial results for its third fiscal quarter. There will be no cash impact associated with the impairment charge.

For the third quarter of fiscal 2012, HP estimates non-GAAP diluted EPS to be in the range of $0.94 to $0.97 and GAAP diluted EPS to be in the range of $0.00 to $0.03.

Third quarter fiscal 2012 non-GAAP diluted EPS estimates exclude after-tax costs of approximately $0.94 per share, related primarily to the amortization and impairment of purchased intangible assets, restructuring charges, and acquisition-related charges.

For the full year fiscal 2012, HP now estimates non-GAAP diluted EPS to be in the range of $4.05 to $4.10 and GAAP diluted EPS to be in the range of $2.25 to $2.30.

Full year fiscal 2012 non-GAAP diluted EPS estimates exclude after-tax costs of approximately $1.80 per share, related primarily to the amortization and impairment of purchased intangible assets, restructuring charges and acquisition-related charges.

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 FY12 earnings conference call is accessible via an audio webcast at www.hp.com/investor/2012q2webcast.

About HP HP creates new possibilities for technology to have a meaningful impact on people, businesses, governments and society. 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 net revenue, non-GAAP operating profit, non-GAAP operating margin, non-GAAP net earnings, non-GAAP diluted earnings per share, gross cash and free cash flow. 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 revenue, operating profit, operating margin, net earnings, diluted earnings per share, cash and cash equivalents or cash flow from operations 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, earnings per share, tax provisions, cash flows, benefit obligations, share repurchases, currency exchange rates, the impact of acquisitions or other financial items; any projections of the amount, timing or impact of cost savings, restructuring charges, early retirement programs, workforce reductions or impairment charges; any statements of the plans, strategies and objectives of management for future operations, including the execution of restructuring plans and any resulting cost savings or revenue or profitability improvements; any statements concerning the expected development, performance, market share or competitive performance 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 the impact of macroeconomic and geopolitical trends and events; the competitive pressures faced by HP’s businesses; the development and transition of new products and services and the enhancement of existing products and services to meet customer needs and respond to emerging technological trends; the execution and performance of contracts by HP and its suppliers, customers and partners; the protection of HP’s intellectual property assets, including intellectual property licensed from third parties; integration and other risks associated with business combination and investment transactions; the hiring and retention of key employees; assumptions related to pension and other post-retirement costs and retirement programs; the execution, timing and results of restructuring plans, including estimates and assumptions related to the cost and the anticipated benefits of implementing those 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, 2011 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, 2012. 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, 2012. In particular, determining HP’s actual tax balances and provisions as of April 30, 2012 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.

HEWLETT-PACKARD COMPANY AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS (Unaudited) (In millions except per share amounts) Three months ended ------------------------------------- April 30, January 31, April 30, 2012 2012 2011 ----------- ----------- ----------- Net revenue $ 30,693 $ 30,036 $ 31,632 Costs and Expenses:(a) Cost of sales 23,541 23,313 23,832 Research and development 850 786 815 Selling, general and administrative 3,540 3,367 3,425 Amortization of purchased intangible assets 470 466 413 Restructuring charges 53 40 158 Acquisition-related charges 17 22 21 ----------- ----------- ----------- Total costs and expenses 28,471 27,994 28,664 ----------- ----------- ----------- Earnings from operations 2,222 2,042 2,968 Interest and other, net (243) (221) (76) ----------- ----------- ----------- Earnings before taxes 1,979 1,821 2,892 Provision for taxes 386 353 588 ----------- ----------- ----------- Net earnings $ 1,593 $ 1,468 $ 2,304 =========== =========== =========== Net earnings per share: Basic $ 0.80 $ 0.74 $ 1.07 Diluted $ 0.80 $ 0.73 $ 1.05 Cash dividends declared per share $ - $ 0.24 $ - Weighted-average shares used to compute net earnings per share: Basic 1,979 1,981 2,150 Diluted 1,987 1,998 2,184 (a) In connection with organizational realignments implemented in the first quarter of fiscal year 2012, certain costs previously reported as Cost of Sales have been reclassified as Selling, General and Administrative expenses to better align those costs with the functional areas that benefit from those expenditures. HEWLETT-PACKARD COMPANY AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS (Unaudited) (In millions except per share amounts) Six months ended ------------------------ April 30, ------------------------ 2012 2011 ----------- ----------- Net revenue $ 60,729 $ 63,934 Costs and expenses:(a) Cost of sales 46,854 48,213 Research and development 1,636 1,613 Selling, general and administrative 6,907 6,542 Amortization of purchased intangible assets 936 838 Restructuring charges 93 316 Acquisition-related charges 39 50 ----------- ----------- Total costs and expenses 56,465 57,572 ----------- ----------- Earnings from operations 4,264 6,362 Interest and other, net (464) (173) ----------- ----------- Earnings before taxes 3,800 6,189 Provision for taxes 739 1,280 ----------- ----------- Net earnings $ 3,061 $ 4,909 =========== =========== Net earnings per share: Basic $ 1.55 $ 2.27 Diluted $ 1.53 $ 2.23 Cash dividends declared per share $ 0.24 $ 0.16 Weighted-average shares used to compute net earnings per share: Basic 1,980 2,166 Diluted 1,995 2,203 (a) In connection with organizational realignments implemented in the first quarter of fiscal year 2012, certain costs previously reported as Cost of Sales have been reclassified as Selling, General and Administrative expenses to better align those costs with the functional areas that benefit from those expenditures. 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 Three Three months months months ended Diluted ended Diluted ended Diluted April earnings January earnings April earnings 30, per 31, per 30, per 2012 share 2012 share 2011 share ------- -------- ------- -------- ------- -------- GAAP net earnings $ 1,593 $ 0.80 $ 1,468 $ 0.73 $ 2,304 $ 1.05 Non-GAAP adjustments: Amortization of purchased intangible assets 470 0.23 466 0.24 413 0.19 Restructuring charges 53 0.03 40 0.02 158 0.07 Acquisition- related charges 17 0.01 22 0.01 21 0.01 Wind down of the webOS device business(a) (36) (0.02) - - - - Adjustments for taxes (148) (0.07) (164) (0.08) (179) (0.08) ------- -------- ------- -------- ------- -------- Non-GAAP net earnings $ 1,949 $ 0.98 $ 1,832 $ 0.92 $ 2,717 $ 1.24 ======= ======== ======= ======== ======= ======== GAAP earnings from operations $ 2,222 $ 2,042 $ 2,968 Non-GAAP adjustments: Amortization of purchased intangible assets 470 466 413 Restructuring charges 53 40 158 Acquisition- related charges 17 22 21 Wind down of the webOS device business(a) (36) - - ------- ------- ------- Non-GAAP earnings from operations $ 2,726 $ 2,570 $ 3,560 ======= ======= ======= GAAP operating margin 7% 7% 9% Non-GAAP adjustments 2% 2% 2% ------- ------- ------- Non-GAAP operating margin 9% 9% 11% ======= ======= ======= (a) Primarily includes adjustments to expenses for supplier-related obligations related to winding down the webOS device business. 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 Six months ended Diluted ended Diluted April 30, earnings April 30, earnings 2012 per share 2011 per share ---------- ---------- ---------- ---------- GAAP net earnings $ 3,061 $ 1.53 $ 4,909 $ 2.23 Non-GAAP adjustments: Amortization of purchased intangible assets 936 0.47 838 0.39 Restructuring charges 93 0.05 316 0.14 Acquisition-related charges 39 0.02 50 0.02 Wind down of the webOS device business(a) (36) (0.02) - - Adjustments for taxes (312) (0.15) (366) (0.17) ---------- ---------- ---------- ---------- Non-GAAP net earnings $ 3,781 $ 1.90 $ 5,747 $ 2.61 ========== ========== ========== ========== GAAP earnings from operations $ 4,264 $ 6,362 Non-GAAP adjustments: Amortization of purchased intangible assets 936 838 Restructuring charges 93 316 Acquisition-related charges 39 50 Wind down of the webOS device business(a) (36) - ---------- ---------- Non-GAAP earnings from operations $ 5,296 $ 7,566 ========== ========== GAAP operating margin 7% 10% Non-GAAP adjustments 2% 2% ---------- ---------- Non-GAAP operating margin 9% 12% ========== ========== (a) Primarily includes adjustments to expenses for supplier-related obligations related to winding down the webOS device business. HEWLETT-PACKARD COMPANY AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS (In millions) April 30, October 31, 2012 2011 ----------- ----------- (unaudited) ASSETS Current assets: Cash and cash equivalents $ 8,311 $ 8,043 Accounts receivable 16,609 18,224 Financing receivables 3,139 3,162 Inventory 7,306 7,490 Other current assets 14,324 14,102 ----------- ----------- Total current assets 49,689 51,021 ----------- ----------- Property, plant and equipment 12,236 12,292 Long-term financing receivables and other assets 11,018 10,755 Goodwill and purchased intangible assets 54,746 55,449 ----------- ----------- Total assets $ 127,689 $ 129,517 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Notes payable and short-term borrowings $ 4,252 $ 8,083 Accounts payable 12,900 14,750 Employee compensation and benefits 3,609 3,999 Taxes on earnings 871 1,048 Deferred revenue 7,582 7,449 Other accrued liabilities 13,585 15,113 ----------- ----------- Total current liabilities 42,799 50,442 ----------- ----------- Long-term debt 25,825 22,551 Other liabilities 17,368 17,520 Stockholders' equity: HP stockholders' equity 41,288 38,625 Non-controlling interests 409 379 ----------- ----------- Total stockholders' equity 41,697 39,004 ----------- ----------- Total liabilities and stockholders' equity $ 127,689 $ 129,517 =========== =========== HEWLETT-PACKARD COMPANY AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited) (In millions) Three months Six months ended ended April 30, April 30, 2012 2012 ------------ ------------ Cash flows from operating activities: Net earnings $ 1,593 $ 3,061 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 1,285 2,588 Stock-based compensation expense 169 344 Provision for bad debt and inventory 95 147 Restructuring charges 53 93 Deferred taxes on earnings (45) (155) Excess tax benefit from stock-based compensation (1) (12) Other, net 196 240 Changes in operating assets and liabilities: Accounts and financing receivables (832) 1,479 Inventory (91) 89 Accounts payable 525 (1,851) Taxes on earnings (42) (54) Restructuring (100) (274) Other assets and liabilities (332) (2,029) ------------ ------------ Net cash provided by operating activities 2,473 3,666 ------------ ------------ Cash flows from investing activities: Investment in property, plant and equipment (1,080) (1,963) Proceeds from sale of property, plant and equipment 128 224 Purchases of available-for-sale securities and other investments (565) (565) Maturities and sales of available-for-sale securities and other investments 250 346 Payments made in connection with business acquisitions, net of cash acquired - (141) Proceeds from business divestiture, net - 81 ------------ ------------ Net cash used in investing activities (1,267) (2,018) ------------ ------------ Cash flows from financing activities: Repayment of commercial paper and notes payable, net (185) (2,792) Issuance of debt 2,017 5,052 Payment of debt (2,561) (2,661) Issuance of common stock under employee stock plans 321 634 Repurchase of common stock (350) (1,130) Excess tax benefit from stock-based compensation 1 12 Cash dividends paid (251) (495) ------------ ------------ Net cash used in financing activities (1,008) (1,380) ------------ ------------ Increase in cash and cash equivalents 198 268 Cash and cash equivalents at beginning of period 8,113 8,043 ------------ ------------ Cash and cash equivalents at end of period $ 8,311 $ 8,311 ============ ============ HEWLETT-PACKARD COMPANY AND SUBSIDIARIES SEGMENT INFORMATION (Unaudited) (In millions) Three months ended ------------------------------------- April 30, January 31, April 30, 2012 2012 2011 ----------- ----------- ----------- Net revenue:(a) Personal Systems Group $ 9,452 $ 8,873 $ 9,415 Services 8,831 8,626 8,916 Imaging and Printing Group 6,132 6,258 6,843 Enterprise Servers, Storage and Networking 5,211 5,018 5,516 Software 970 946 797 HP Financial Services 968 950 885 Corporate Investments 18 58 42 ----------- ----------- ----------- Total segments 31,582 30,729 32,414 Eliminations of intersegment net revenue and other (889) (693) (782) ----------- ----------- ----------- Total HP consolidated net revenue $ 30,693 $ 30,036 $ 31,632 =========== =========== =========== Earnings before taxes:(a) Personal Systems Group $ 524 $ 464 $ 533 Services 997 905 1,372 Imaging and Printing Group 808 761 1,136 Enterprise Servers, Storage and Networking 585 562 760 Software 172 162 158 HP Financial Services 96 91 83 Corporate Investments (49) (48) (199) ----------- ----------- ----------- Total segment earnings from operations 3,133 2,897 3,843 Corporate and unallocated costs and eliminations (203) (153) (153) Unallocated costs related to stock- based compensation expense (168) (174) (130) Amortization of purchased intangible assets (470) (466) (413) Restructuring charges (53) (40) (158) Acquisition-related charges (17) (22) (21) Interest and other, net (243) (221) (76) ----------- ----------- ----------- Total HP consolidated earnings before taxes $ 1,979 $ 1,821 $ 2,892 =========== =========== =========== (a) Certain fiscal 2012 organizational reclassifications have been reflected retroactively to provide improved visibility and comparability. For each of the quarters in fiscal year 2011, the reclassifications resulted in the transfer of revenue and operating profit among the Services, Imaging and Printing Group, Enterprise Servers, Storage and Networking, Software and Corporate Investments financial reporting segments. Reclassifications between segments included the transfer of the Indigo Scitex support and the LaserJet and enterprise solutions trade support businesses from Services to the Imaging and Printing Group, the transfer of the business intelligence services business from Corporate Investments to Services, the transfer of the information management services business from Software to Services, and the transfer of the TippingPoint business from Enterprise Servers, Storage and Networking to Software. There was no impact on the previously reported financial results for the Personal Systems Group and HP Financial Services segments. HEWLETT-PACKARD COMPANY AND SUBSIDIARIES SEGMENT INFORMATION (Unaudited) (In millions) Six months ended April 30, ------------------------ 2012 2011 ----------- ----------- Net revenue:(a) Personal Systems Group $ 18,325 $ 19,864 Services 17,457 17,445 Imaging and Printing Group 12,390 13,574 Enterprise Servers, Storage and Networking 10,229 11,115 Software 1,916 1,522 HP Financial Services 1,918 1,712 Corporate Investments 76 104 ----------- ----------- Total Segments 62,311 65,336 Eliminations of intersegment net revenue and other (1,582) (1,402) ----------- ----------- Total HP consolidated net revenue $ 60,729 $ 63,934 =========== =========== Earnings before taxes:(a) Personal Systems Group $ 988 $ 1,205 Services 1,902 2,753 Imaging and Printing Group 1,569 2,255 Enterprise Servers, Storage and Networking 1,147 1,590 Software 334 278 HP Financial Services 187 162 Corporate Investments (97) (377) ----------- ----------- Total segment earnings from operations 6,030 7,866 Corporate and unallocated costs and eliminations (356) (4) Unallocated costs related to stock-based compensation expense (342) (296) Amortization of purchased intangible assets (936) (838) Restructuring charges (93) (316) Acquisition-related charges (39) (50) Interest and other, net (464) (173) ----------- ----------- Total HP consolidated earnings before taxes $ 3,800 $ 6,189 =========== =========== (a) Certain fiscal 2012 organizational reclassifications have been reflected retroactively to provide improved visibility and comparability. For each of the quarters in fiscal year 2011, the reclassifications resulted in the transfer of revenue and operating profit among the Services, Imaging and Printing Group, Enterprise Servers, Storage and Networking, Software and Corporate Investments financial reporting segments. Reclassifications between segments included the transfer of the Indigo Scitex support and the LaserJet and enterprise solutions trade support businesses from Services to the Imaging and Printing Group, the transfer of the business intelligence services business from Corporate Investments to Services, the transfer of the information management services business from Software to Services, and the transfer of the TippingPoint business from Enterprise Servers, Storage and Networking to Software. There was no impact on the previously reported financial results for the Personal Systems Group and HP Financial Services segments. HEWLETT-PACKARD COMPANY AND SUBSIDIARIES SEGMENT / BUSINESS UNIT INFORMATION (Unaudited) (In millions) Growth rate Three months ended (%) ------------------------------------- ----------- April 30, January 31, April 30, 2012 2012 2011 Q/Q Y/Y ----------- ----------- ----------- ---- ---- Net revenue:(a) Personal Systems Group Notebooks $ 4,900 $ 4,942 $ 5,039 (1%) (3%) Desktops 3,827 3,206 3,641 19% 5% Workstations 537 535 541 0% (1%) Other 188 190 194 (1%) (3%) ----------- ----------- ----------- Total Personal Systems Group 9,452 8,873 9,415 7% 0% ----------- ----------- ----------- Services Infrastructure Technology Outsourcing 3,669 3,701 3,786 (1%) (3%) Technology Services 2,638 2,562 2,629 3% 0% Application and Business Services(b) 2,524 2,363 2,501 7% 1% ----------- ----------- ----------- Total Services 8,831 8,626 8,916 2% (1%) ----------- ----------- ----------- Imaging and Printing Group Supplies 4,060 4,079 4,612 0% (12%) Commercial Hardware 1,479 1,489 1,536 (1%) (4%) Consumer Hardware 593 690 695 (14%) (15%) ----------- ----------- ----------- Total Imaging and Printing Group 6,132 6,258 6,843 (2%) (10%) ----------- ----------- ----------- Enterprise Servers, Storage and Networking Industry Standard Servers 3,186 3,072 3,387 4% (6%) Storage 990 955 980 4% 1% Business Critical Systems 421 405 546 4% (23%) Networking 614 586 603 5% 2% ----------- ----------- ----------- Total Enterprise Servers, Storage and Networking 5,211 5,018 5,516 4% (6%) ----------- ----------- ----------- Software 970 946 797 3% 22% ----------- ----------- ----------- HP Financial Services 968 950 885 2% 9% ----------- ----------- ----------- Corporate Investments 18 58 42 (69%) (57%) ----------- ----------- ----------- Total segments 31,582 30,729 32,414 3% (3%) ----------- ----------- ----------- Elimination of intersegment net revenue and other (889) (693) (782) 28% 14% ----------- ----------- ----------- Total HP consolidated net revenue $ 30,693 $ 30,036 $ 31,632 2% (3%) =========== =========== =========== (a) Certain fiscal 2012 organizational reclassifications have been reflected retroactively to provide improved visibility and comparability. For each of the quarters in fiscal year 2011, the reclassifications resulted in the transfer of revenue among the Services, Imaging and Printing Group, Enterprise Servers, Storage and Networking, Software and Corporate Investments financial reporting segments. Reclassifications between segments included the transfer of Indigo Scitex support and the LaserJet and enterprise solutions trade support businesses from Services to the Imaging and Printing Group, the transfer of the business intelligence services business from Corporate Investments to Services, the transfer of the information management services business from Software to Services, and the transfer of the TippingPoint business from Enterprise Servers, Storage and Networking to Software. In addition, revenue was transferred among the business units within the Services segment. There was no impact on the previously reported financial results for the Personal Systems Group and HP Financial Services segments. (b) The former Application Services, Business Process Outsourcing and Other Services business units were consolidated into a new Application and Business Services business unit in fiscal 2012. HEWLETT-PACKARD COMPANY AND SUBSIDIARIES SEGMENT / BUSINESS UNIT INFORMATION (Unaudited) (In millions) Six months ended April 30, ------------------------ 2012 2011 ----------- ----------- Net revenue:(a) Personal Systems Group Notebooks $ 9,842 $ 10,847 Desktops 7,033 7,537 Workstations 1,072 1,076 Other 378 404 ----------- ----------- Total Personal Systems Group 18,325 19,864 ----------- ----------- Services Infrastructure Technology Outsourcing 7,370 7,430 Technology Services 5,200 5,143 Application and Business Services(b) 4,887 4,872 ----------- ----------- Total Services 17,457 17,445 ----------- ----------- Imaging and Printing Group Supplies 8,139 8,970 Commercial Hardware 2,968 3,101 Consumer Hardware 1,283 1,503 ----------- ----------- Total Imaging and Printing Group 12,390 13,574 ----------- ----------- Enterprise Servers, Storage and Networking Industry Standard Servers 6,258 6,835 Storage 1,945 1,992 Business Critical Systems 826 1,101 Networking 1,200 1,187 ----------- ----------- Total Enterprise Servers, Storage and Networking 10,229 11,115 ----------- ----------- Software 1,916 1,522 ----------- ----------- HP Financial Services 1,918 1,712 ----------- ----------- Corporate Investments 76 104 ----------- ----------- Total segments 62,311 65,336 ----------- ----------- Elimination of intersegment net revenue and other (1,582) (1,402) ----------- ----------- Total HP consolidated net revenue $ 60,729 $ 63,934 =========== =========== (a) Certain fiscal 2012 organizational reclassifications have been reflected retroactively to provide improved visibility and comparability. For each of the quarters in fiscal year 2011, the reclassifications resulted in the transfer of revenue among the Services, Imaging and Printing Group, Enterprise Servers, Storage and Networking, Software and Corporate Investments financial reporting segments. Reclassifications between segments included the transfer of Indigo Scitex support and the LaserJet and enterprise solutions trade support businesses from Services to the Imaging and Printing Group, the transfer of the business intelligence services business from Corporate Investments to Services, the transfer of the information management services business from Software to Services, and the transfer of the TippingPoint business from Enterprise Servers, Storage and Networking to Software. In addition, revenue was transferred among the business units within the Services segment. There was no impact on the previously reported financial results for the Personal Systems Group and HP Financial Services segments. (b) The former Application Services, Business Process Outsourcing and Other Services business units were consolidated into a new Application and Business Services business unit in fiscal 2012. HEWLETT-PACKARD COMPANY AND SUBSIDIARIES SEGMENT NON-GAAP OPERATING MARGIN SUMMARY DATA (Unaudited) (In millions) Three months Change in Operating ended Margin (pts) ------------ ---------------------- April 30, 2012 Q/Q Y/Y ------------ ---------- ---------- Non-GAAP operating margin:(a) Personal Systems Group 5.5% 0.3 pts (0.2 pts) Services 11.3% 0.8 pts (4.1 pts) Imaging and Printing Group 13.2% 1.0 pts (3.4 pts) Enterprise Servers, Storage and Networking 11.2% 0.0 pts (2.6 pts) Software 17.7% 0.6 pts (2.1 pts) HP Financial Services 9.9% 0.3 pts 0.5 pts Corporate Investments (472.2%) (389.4 pts) 1.6 pts Total segments 9.8% 0.4 pts (2.1 pts) Total HP consolidated non-GAAP operating margin 8.9% 0.3 pts (2.4 pts) (a) Certain fiscal 2012 organizational reclassifications have been reflected retroactively to provide improved visibility and comparability. For each of the quarters in fiscal year 2011, the reclassifications resulted in the transfer of revenue and operating profit among the Services, Imaging and Printing Group, Enterprise Servers, Storage and Networking, Software and Corporate Investments financial reporting segments. Reclassifications between segments included the transfer of Indigo Scitex support and the LaserJet and enterprise solutions trade support businesses from Services to the Imaging and Printing Group, the transfer of the business intelligence services business from Corporate Investments to Services, the transfer of the information management services business from Software to Services, and the transfer of the TippingPoint business from Enterprise Servers, Storage and Networking to Software. There was no impact on the previously reported financial results for the Personal Systems Group and HP Financial Services segments. HEWLETT-PACKARD COMPANY AND SUBSIDIARIES CALCULATION OF NET EARNINGS PER SHARE (Unaudited) (In millions except per share amounts) Three months ended ------------------------------------- April 30, January 31, April 30, 2012 2012 2011 ----------- ----------- ----------- Numerator: GAAP net earnings $ 1,593 $ 1,468 $ 2,304 =========== =========== =========== Non-GAAP net earnings $ 1,949 $ 1,832 $ 2,717 =========== =========== =========== Denominator: Weighted-average shares used to compute basic EPS 1,979 1,981 2,150 Dilutive effect of employee stock plans 8 17 34 ----------- ----------- ----------- Weighted-average shares used to compute diluted EPS 1,987 1,998 2,184 =========== =========== =========== GAAP net earnings per share: Basic(a) $ 0.80 $ 0.74 $ 1.07 Diluted(c) $ 0.80 $ 0.73 $ 1.05 Non-GAAP net earnings per share: Basic(b) $ 0.98 $ 0.92 $ 1.26 Diluted(c) $ 0.98 $ 0.92 $ 1.24 (a) GAAP basic earnings per share were calculated based on GAAP net earnings and the weighted-average number of shares outstanding during the reporting period. (b) Non-GAAP basic earnings per share were calculated based on non-GAAP net earnings and the weighted-average number of shares outstanding during the reporting period. (c) Diluted net 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, ------------------------ 2012 2011 ----------- ----------- Numerator: GAAP net earnings $ 3,061 $ 4,909 =========== =========== Non-GAAP net earnings $ 3,781 $ 5,747 =========== =========== Denominator: Weighted-average shares used to compute basic EPS 1,980 2,166 Dilutive effect of employee stock plans 15 37 ----------- ----------- Weighted-average shares used to compute diluted EPS 1,995 2,203 =========== =========== GAAP net earnings per share: Basic(a) $ 1.55 $ 2.27 Diluted(c) $ 1.53 $ 2.23 Non-GAAP net earnings per share: Basic(b) $ 1.91 $ 2.65 Diluted(c) $ 1.90 $ 2.61 (a) GAAP basic earnings per share were calculated based on GAAP net earnings and the weighted-average number of shares outstanding during the reporting period. (b) Non-GAAP basic earnings per share were calculated based on non-GAAP net earnings and the weighted-average number of shares outstanding during the reporting period. (c) Diluted net 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 To supplement HP’s consolidated condensed financial statements presented on a GAAP basis, HP provides non-GAAP net revenue, non-GAAP operating profit, non-GAAP operating margin, non-GAAP net earnings, non-GAAP diluted earnings per share, gross cash and free cash flow. HP also provides forecasts of non-GAAP diluted earnings per share. These non-GAAP financial measures are not in accordance with, or an alternative for, generally accepted accounting principles in the United States. The GAAP measure most directly comparable to non-GAAP net revenue is net revenue. The GAAP measure most directly comparable to non-GAAP operating profit is earnings from operations. The GAAP measure most directly comparable to non-GAAP operating margin is operating margin. The GAAP measure most directly comparable to non-GAAP net earnings is net earnings. The GAAP measure most directly comparable to non-GAAP diluted earnings per share is diluted net earnings per share. The GAAP measure most directly comparable to gross cash is cash and cash equivalents. The GAAP measure most directly comparable to free cash flow is cash flow from operations. Reconciliations of each of these non-GAAP financial measures to GAAP information are included in the tables above.

Use and Economic Substance of Non-GAAP Financial Measures Used by HP

Non-GAAP net revenue reflects the elimination of contra revenue associated with sales incentive programs implemented in the fourth fiscal quarter of 2011 in connection with the wind down of HP’s webOS device business, net of webOS device revenue for the period. Non-GAAP operating profit and non-GAAP operating margin are defined to exclude the effects of any restructuring charges, charges relating to the impairment of goodwill and purchased intangible assets, charges relating to the amortization of purchased intangible assets, and acquisition-related charges recorded during the relevant period. Non-GAAP net earnings and non-GAAP diluted earnings per share consist of net earnings or diluted net earnings per share excluding those same charges. In addition, non-GAAP net earnings and non-GAAP diluted earnings per share are adjusted by the amount of additional taxes or tax benefit associated with each non-GAAP item. HP’s management uses these non-GAAP financial measures for purposes of evaluating HP’s historical and prospective financial performance, as well as HP’s performance relative to its competitors. HP’s management also uses these non-GAAP measures to further its own understanding of HP’s segment operating performance. HP believes that excluding those items mentioned above from these non-GAAP financial measures allows HP management to better understand HP’s consolidated financial performance in relationship to the operating results of HP’s segments, as management does not believe that the excluded items are reflective of ongoing operating results. More specifically, HP’s management excludes each of those items mentioned above for the following reasons:

-- In the fourth quarter of fiscal 2011, HP announced that it would wind down its webOS device business. Non-GAAP net revenue reported in the fourth quarter of fiscal 2011 reflects the elimination of contra revenue associated with sales incentive programs implemented in connection with the wind down of that business, net of webOS device revenue for the period. Because the winding down of HP businesses is inconsistent in amount and frequency, HP believes that eliminating these amounts for purposes of calculating non-GAAP net revenue facilitates a more meaningful evaluation of HP's current operating performance and comparisons to HP's past and future operating performance. -- Goodwill is the excess of the purchase price of acquired companies over the estimated fair value of the tangible and intangible assets acquired and liabilities assumed. Purchased intangible assets consist primarily of customer contracts, customer lists, distribution agreements, technology patents, and products, trademarks and trade names purchased in connection with acquisitions. In the fourth quarter of fiscal 2011, HP recorded impairment charges to goodwill and certain intangible assets associated with the acquisition of Palm Inc. The charges relate to HP's decision to wind-down the webOS device business. Impairment charges are inconsistent in amount and frequency. HP excludes these charges for purposes of calculating these non-GAAP measures to facilitate a more meaningful evaluation of HP's current operating performance and comparisons to HP's past and future operating performance. -- HP incurs charges relating to the amortization of purchased intangibles. HP also incurs charges relating to the amortization of amounts assigned to intangible assets to be used in research and development projects. All of those charges are included in HP's GAAP presentation of earnings from operations, operating margin, net earnings and net earnings per share. Such charges are inconsistent in amount and frequency and are significantly impacted by the timing and magnitude of HP's acquisitions. Consequently, HP excludes these charges for purposes of calculating these non-GAAP measures to facilitate a more meaningful evaluation of HP's current operating performance and comparisons to HP's past and future operating performance. -- Restructuring charges consist of costs associated with a formal restructuring plan and are primarily related to (i) employee termination costs and benefits, and (ii) costs to vacate duplicative facilities. HP excludes these restructuring costs (and any reversals of charges recorded in prior periods) for purposes of calculating these non-GAAP measures because it believes that these historical costs do not reflect expected future operating expenses and do not contribute to a meaningful evaluation of HP's current operating performance or comparisons to HP's past and future operating performance. -- HP incurs costs related to its acquisitions, most of which are treated as non-capitalized expenses. Because non-capitalized, acquisition-related expenses are inconsistent in amount and frequency and are significantly impacted by the timing and nature of HP's acquisitions, HP believes that eliminating the non-capitalized expenses for purposes of calculating these non-GAAP measures facilitates a more meaningful evaluation of HP's current operating performance and comparisons to HP's past and future operating performance.

Gross cash is a non-GAAP measure that is defined as cash and cash equivalents plus short-term investments and certain long-term investments that may be liquidated within 90 days pursuant to the terms of existing put options or similar rights. Free cash flow is defined as cash flow from operations less net capital expenditures. HP’s management uses gross cash and free cash flow for the purpose of determining the amount of cash available for investment in HP’s businesses, funding strategic acquisitions, repurchasing stock and other purposes. HP’s management also uses gross cash and free cash flow for the purposes of evaluating HP’s historical and prospective liquidity, as well as to further its own understanding of HP’s segment operating results. Because gross cash includes liquid assets that are not included in GAAP cash and cash equivalents, HP believes that gross cash provides a more accurate and complete assessment of HP’s liquidity and segment operating results. Because free cash flow includes the effect of capital expenditures that are not reflected in GAAP cash flow from operations, HP believes that free cash flow provides a more accurate and complete assessment of HP’s liquidity and capital resources.

Material Limitations Associated with Use of Non-GAAP Financial Measures 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. Some of the limitations in relying on these non-GAAP financial measures are:

-- 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 operating margin, non-GAAP net earnings and non-GAAP diluted earnings per share and therefore does not reflect the full economic effect of the loss in value of those intangible assets. -- Items such as restructuring charges that are excluded from non-GAAP operating profit, non-GAAP operating margin, non-GAAP net earnings and non-GAAP diluted earnings per share can have a material impact on cash flows and earnings per share. -- HP may not be able to liquidate immediately the long-term investments included in gross cash, which may limit the usefulness of gross cash as a liquidity measure. -- Other companies may calculate non-GAAP net revenue, non-GAAP operating profit, non-GAAP operating margin, non-GAAP net earnings, non-GAAP diluted earnings per share, gross cash and free cash flow differently than HP does, limiting the usefulness of those measures for comparative purposes.

Compensation for Limitations Associated with Use of Non-GAAP Financial Measures HP compensates for the limitations on its use of non-GAAP net revenue, non-GAAP operating profit, non-GAAP operating margin, non-GAAP net earnings, non-GAAP diluted earnings per share, gross cash and free cash flow by relying primarily on its GAAP results and using non-GAAP financial measures only supplementally. HP also provides robust and detailed reconciliations of each non-GAAP financial measure to its most directly comparable GAAP measure within this press release and in other written materials that include these non-GAAP financial measures, and HP encourages investors to review carefully those reconciliations.

Usefulness of Non-GAAP Financial Measures to Investors HP believes that providing non-GAAP net revenue, non-GAAP operating profit, non-GAAP operating margin, non-GAAP net earnings, non-GAAP diluted earnings per share, gross cash and free cash flow to investors 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. HP further believes that providing this information better enables HP’s investors to understand HP’s operating performance and to evaluate the efficacy of the methodology and information used by management to evaluate and measure such performance. Disclosure of these non-GAAP financial measures also facilitates comparisons of HP’s operating performance with the performance of other companies in HP’s industry that supplement their GAAP results with non-GAAP financial measures that are calculated in a similar manner.

Copyright 2012 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.

SOURCE: HP

May 23, 2012

HP Windows 8 Tablet Possibly Shown in Leaked Slide

Brad Sams over at Neowin is reporting that the above slide is a real leak from part of an HP slide presentation. It depicts a mock-up of the “HP Slate 8,” a 10.1-inch tablet running Windows 8’s Metro user interface. Possible features of the tablet device are also listed, including digital pen input, a TPM embedded security device, and 8-10 hours of battery life. As Sams also notes in the article at Neowin, it seems as if this tablet, if real, would be marketed to business professionals. But is it real? From the Neowin story:

We know that the slide above is a bit rough around the edges but our source is adamant that this is a working spec list and the render above is an early mockup for the tablet.

Never mind that “Slate 8” sounds dumb when spoken aloud. Whether this particular tablet is real or a fabrication, it’s a given that HP will have a Windows 8 tablet soon, probably even sometime at the end of this year if the company wants to ride the Windows 8 hype this holiday season. Other manufacturers will also have tablets and ultrabooks with touch capabilities running Windows 8, since touch devices are clearly what the operating system was designed to run on.

What do you think? Do these specs seem realistic for an HP tablet running Windows 8 Professional? Will anyone, even business professionals, want to ditch their iPad for a Windows 8 tablet? Leave a comment below and let me know.

(from Neowin via Gizmodo)

April 27, 2012

HP Shareholders Want HP To Be Like Apple

By all accounts, HP has had a rough year. A series of questionable business moves have left the company struggling to remain profitable. In an effort to set things right, HP CEO Meg Whitman has taken several steps to bring the company back onto firmer ground. As part of that, HP announced yesterday that they were beginning a massive reorganization of the company.

HP also held a shareholder meeting yesterday, and according to a report from AppleInsider, Whitman found herself faced with several tough questions about what HP was doing to duplicate the success of its rival in both the computer and mobile markets, Apple. One question focused on HP’s ability to innovate and produce “disruptive technology,” something Apple has made a habit of doing in recent years. Whitman replied by acknowledging that HP has stumbled in this area in recent years and has focused more heavily on incremental updates to existing product lines rather than on more innovative projects.

Another question dealt with HP’s presence in the retail space, pointing out that servicing HP products – particularly printers – can be extremely difficult, as replacement parts have to come from HP facilities that may be far away from where customers are located. The shareholder suggested that HP learn from Apple’s retail store model as a means of interacting with customers more directly. Whitman replied that HP does currently have retail locations in Brazil, and that the company was looking at how such stores might fare economically in the U.S.

The third investor noted a statement by Steve Jobs some years previously that Apple was far ahead of its competition in many areas, especially mobile, and asked whether HP was being innovative enough in light of the fact that Apple has such a significant lead over HP in so many ways. Whitman applauded Apple’s success, calling it “one of the great business renaissance stories of our generation,” but also noted that HP is at or near the top of every business in which the company competes, and stressed that HP remained committed to continued innovation.

March 22, 2012

Tag: HP