Stock Report | February 28, 2011 | NYS Symbol: HPQ | HPQ is in the S&P 500

Hewlett-Packard Co
S&P Recommendation STRONG BUY
★★★★★ Price
$43.63 (as of Feb 28, 2011)
12-Mo. Target Price
$59.00
Investment Style
Large-Cap Blend
GICS Sector Information Technology Summary This leading maker of computer products, including printers, servers and PCs, has
Sub-Industry Computer Hardware a large service and support network.

Key Stock Statistics (Source S&P, Vickers, company reports)

52-Wk Range $54.75– 37.32 S&P Oper. EPS 2011E 5.30 Market Capitalization(B) $95.568 Beta 1.99
Trailing 12-Month EPS $3.92 S&P Oper. EPS 2012E 5.90 Yield (%) 0.73 S&P 3-Yr. Proj. EPS CAGR(%) 14
Trailing 12-Month P/E 11.1 P/E on S&P Oper. EPS 2011E 8.2 Dividend Rate/Share $0.32 S&P Credit Rating A
$10K Invested 5 Yrs Ago $13,833 Common Shares Outstg. (M) 2,190.4 Institutional Ownership (%) 68

Price Performance Qualitative Risk Assessment

30-Week Mov. Avg. 10-Week Mov. Avg. GAAP Earnings vs. Previous Year Volume Above Avg. STARS
LOW MEDIUM HIGH
12-Mo. Target Price Relative Strength Up Down No Change Below Avg.
Our risk assessment reflects the intensely price
60
competitive environment in the computer
hardware industry and potential integration risk
50
surrounding planned and completed acquisitions,
40 balanced by our view of the company's broad
worldwide customer base and its successful
30
efforts in reducing its cost structure.

Vol. Quantitative Evaluations

Mil. 414
290
120 S&P Quality Ranking A-
80
40 D C B- B B+ A- A A+
0
5 5
5 4 Relative Strength Rank WEAK
23
1
LOWEST = 1 HIGHEST = 99
O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M

2007 2008 2009 2010 2011

Revenue/Earnings Data
Options: ASE, CBOE, P, Ph
Analysis prepared by Thomas W. Smith, CFA on February 28, 2011, when the stock traded at $ 43.63. Revenue (Million $)
1Q 2Q 3Q 4Q Year
Highlights Investment Rationale/Risk
2011 32,302 -- -- -- --
➤ We project revenue will grow 4.4% in FY 11 ➤ We believe HPQ has the potential to gain mar- 2010 31,177 30,849 30,729 33,278 126,033
(Oct.) and 5.4% in FY 12, reflecting a cyclical up- ket share in PCs, servers, printers, and IT ser- 2009 28,807 27,383 27,585 30,777 114,552
turn in demand for information technology vices. We think new management can maintain 2008 28,467 28,262 28,032 33,603 118,364
goods and services, plus acquisitions. Some product development via greater commitment 2007 25,082 25,534 25,377 28,293 104,286
soft spots appeared in consumer demand for to R&D expressed on November 22. Acquisi- 2006 22,659 22,554 21,890 24,555 91,658
HPQ's products in the first quarter of FY 11, and tions are also helping to broaden the product
we think this may persist in the spring, but busi- line and create more comprehensive data cen- Earnings Per Share ($)
ness demand was strong and will likely remain ter solutions. We believe deals made in the net- 2011 1.17 E1.20 E1.28 E1.46 E5.30
so into FY 12, in our view. New mobile phone working, storage, security and mobile operating 2010 0.95 0.91 0.75 1.10 3.69
and tablet computer products and an improving system areas in FY 10 will help margins. We 2009 0.75 0.71 0.69 0.99 3.14
global economy should help consumer sales in view the valuation as compelling, based on our 2008 0.80 0.81 0.80 0.84 3.25
autumn. P/E analysis. 2007 0.55 0.65 0.80 0.81 2.68
2006 0.42 0.66 0.48 0.60 2.18
➤ We expect operating margins, excluding acqui- ➤ Risks to our recommendation and target price Fiscal year ended Oct. 31. Next earnings report expected: Mid
May. EPS Estimates based on S&P Operating Earnings; historical
sition and restructuring charges, to widen in FY include potential problems integrating acquisi- GAAP earnings are as reported.
11 and FY 12, based on higher volumes, a richer tions, transition challenges with the arrival of
product mix, and cost reduction efforts. We new top leadership, and potential weakening of
Dividend Data (Dates: mm/dd Payment Date: mm/dd/yy)
think acquisitions over the past 12 months in demand for computer hardware generally or for
the data center area (storage, networking and PCs in particular as new tablet computers offer Amount Date Ex-Div. Stk. of Payment
software) should improve prospects for rev- a substitute. ($) Decl. Date Record Date
enues and margins ahead. 0.080 05/20 06/14 06/16 07/07/10
➤ We apply a target multiple near 11X, in the low- 0.080 07/29 09/13 09/15 10/06/10
➤ We estimate operating EPS, excluding restruc- er half of the seven-year historical range for 0.080 11/18 12/13 12/15 12/30/10
0.080 01/20 03/14 03/16 04/06/11
turing charges and pending acquisitions, of HPQ and a discount to the recent average for
Dividends have been paid since 1965. Source: Company reports.
$5.30 for FY 11 and $5.90 for FY 12. We expect Information Technology sector companies in
share buybacks to lend support to per-share re- the S&P 500, to our 12-month forward operating
sults. EPS estimate of $5.38 to arrive at our 12-month
target price of $59.

Please read the Required Disclosures and Analyst Certification on the last page of this report.
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Stock Report | February 28, 2011 | NYS Symbol: HPQ

Hewlett-Packard Co
Business Summary February 28, 2011 Corporate Information

CORPORATE OVERVIEW. Hewlett-Packard provides personal computers, printers, enterprise server and Investor Contact
storage technology, software, and a wide range of related products and services to individual and enter- B. Humphries (650-857-3342)
prise customers worldwide. Revenues in FY 10 (Oct.) came approximately 70% from products and 30% from
services, including financing services.
Office
Workforce restructurings have enabled HPQ to develop a global delivery structure that has improved mar- 3000 Hanover Street, Palo Alto, CA 94304-1112.
gins by taking advantage of low-cost technical expertise. The cost and efficiency campaign was led by
former NCR Corp. CEO Mark Hurd, who was named CEO and president of HPQ effective April 1, 2005. Mr. Telephone
Hurd resigned from the company on August 6, 2010, following an internal investigation that found violations 650-857-1501.
of HPQ's standards of business conduct. On November 1, 2010, Leo Apoteker, a former CEO of software ri-
Website
val SAP AG (SAP 60, Buy), became CEO and president. We expect new leadership to boost R&D and make
http://www.hp.com
acquisitions, especially in the software area, helping spark further growth.

The breadth of the company's customer base is illustrated by the 65% of FY 10 revenues that came from
Officers
outside the U.S., up from 64% in FY 09. Further, no single customer, nor any single country other than the
U.S., accounted for more than 10% of sales in FY 10.
Chrmn EVP & CTO
The company reports in seven segments. Three segments accounting for almost 45% of sales are often R.J. Lane S.V. Robison
grouped together as HP Enterprise Business. These include Enterprise Storage and Servers, representing
approximately 15% of FY 10 sales, Services 27%, and HP Software 3%. Other segments include the Person- Pres & CEO EVP, Secy & General
al Systems Group, representing about 32% of FY 10 sales, the Imaging and Printing Group 20%, HP Finan- L. Apotheker Counsel
cial Services 2%, and Corporate Investments 1%. M.J. Holston
EVP & Chief Admin
PRIMARY BUSINESS DYNAMICS. HPQ's Services segment accounted for almost 36% of earnings from op- Officer
erations in FY 10, despite representing only about 27% of revenues, indicating a high-margin segment for P.J. Bocian
the company. The Imaging and Printing Group contributed about 28% of earnings from operations in FY 10,
despite representing only about 20% of revenues, reflecting, in our view, relatively high margins on sup-
plies related to printers, scanners, copiers and fax machines. Board Members
M. L. Andreessen
In PCs, the company commands the number one position worldwide with about an 18% share of the world L. Apotheker
market, based on PC unit shipment data for 2010 from market research firm Gartner. It is also number one L. T. Babbio, Jr.
in the U.S. PC market, with about a 29% share of fourth-quarter 2010 PC unit shipments. The Personal Sys- S. Baldauf
tems Group (PCs and handheld devices) accounted for only 13% of earnings from operations in FY 10, ver- S. Banerji
sus 32% of revenue, indicating a relatively low margin segment within the company. R. L. Gupta
IMPACT OF MAJOR DEVELOPMENTS. In recent years, HPQ has diversified and enhanced its business J. H. Hammergren
lines via acquisitions, first adding services, then hardware and solutions for data centers and for mobile J. Hyatt
computing. We expect the next round of acquisitions to aim at software for data centers. In FY 08, the com- J. R. Joyce
pany completed nine acquisitions and a minority interest purchase for about $14.6 billion. Key among these R. J. Lane
was the August 2008 acquisition of information technology services provider Electronic Data Systems in a G. M. Reiner
deal worth about $13 billion. The deal significantly expanded the company's services offerings. In FY 09, a P. Russo
slow period for the economy, HPQ completed just two acquisitions for about $390 million, including a stor- R. L. Ryan
age virtualization company. L. S. Salhany
D. Senequier
In FY 10, the company completed 11 acquisitions. In April the company acquired networking equipment G. Thompson
maker 3Com Corp. for about $2.7 billion in cash. In July, it acquired Palm Inc. for about $1.2 billion in cash,
M. C. Whitman
which added an operating system used for developing new smartphone and tablet PC products. In Sep-
tember, the company acquired data storage technology provider 3PAR for approximately $2.35 billion. In
October, it acquired Arcsight, a security and compliance management provider for about $1.7 billion. Domicile
FINANCIAL TRENDS. HPQ is experiencing the benefits of its extensive cost-cutting efforts, in our view, Delaware
and, as a result, it has generated operating leverage. Revenue growth improved to 10% in FY 10, while
Founded
GAAP-basis EPS increased 17.5%, and operating EPS excluding restructuring and acquisition-related
1939
costs rose about 19%. Per-share results benefited from substantial share buybacks in recent years, and
we believe buybacks will continue in FY 11 at a moderate pace, given a rising priority to address debt lev- Employees
els. Long-term debt rose to nearly $15.3 billion at the end of FY 10, from $14.0 billion at the end of FY 09 and 324,600
$7.7 billion at the end of FY 08, reflecting acquisition financing.
Stockholders
126,600

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Stock Report | February 28, 2011 | NYS Symbol: HPQ

Hewlett-Packard Co
Quantitative Evaluations Expanded Ratio Analysis

S&P Fair Value 5+ 1 2 3 4 5 2010 2009 2008 2007

Rank LOWEST HIGHEST Price/Sales 0.79 1.10 0.79 1.31
Based on S&P's proprietary quantitative model, stocks are ranked Price/EBITDA 5.63 7.95 6.56 11.65
from most overvalued (1) to most undervalued (5). Price/Pretax Income 9.10 13.33 8.89 14.94
P/E Ratio 11.40 16.39 11.18 18.87
Fair Value $47.40 Analysis of the stock's current worth, based on S&P's proprietary Avg. Diluted Shares Outstg (M) 2,372.0 2,437.0 2,567.0 2,716.0
quantitative model suggests that HPQ is slightly undervalued by
Calculation $3.77 or 8.6%. Figures based on calendar year-end price

Investability 79 Key Growth Rates and Averages

Quotient LOWEST = 1 HIGHEST = 100
Percentile HPQ scored higher than 79% of all companies for which an S&P Past Growth Rate (%) 1 Year 3 Years 5 Years 9 Years
Report is available.
Sales 10.02 5.50 7.92 11.14
Net Income 14.37 4.90 23.02 NM
Volatility LOW AVERAGE HIGH
Ratio Analysis (Annual Avg.)
Technical NEUTRAL Since February, 2011, the technical indicators for HPQ have been Net Margin (%) 6.95 6.89 6.88 4.82
NEUTRAL. % LT Debt to Capitalization 27.23 22.82 17.21 14.93
Evaluation
Return on Equity (%) 21.64 20.81 19.57 12.97
Insider Activity UNFAVORABLE NEUTRAL FAVORABLE

Company Financials Fiscal Year Ended Oct. 31

Per Share Data ($) 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001
Tangible Book Value NM 0.34 NM 4.91 6.57 6.04 6.06 6.08 5.35 7.20
Cash Flow 5.73 5.10 4.56 3.67 3.00 1.63 1.93 1.65 0.48 1.01
Earnings 3.69 3.14 3.25 2.68 2.18 0.82 1.15 0.83 -0.37 0.32
S&P Core Earnings 3.69 3.14 2.97 2.56 2.10 0.74 0.94 0.65 -0.65 0.16
Dividends 0.32 0.32 0.32 0.32 0.32 0.32 0.32 0.32 0.32 0.32
Payout Ratio 9% 10% 10% 12% 15% 39% 28% 39% NM 100%
Prices:High 54.75 52.95 50.98 53.48 41.70 30.25 26.28 23.90 24.12 37.95
Prices:Low 37.32 25.39 28.23 38.15 28.37 18.89 16.08 14.18 10.75 12.50
P/E Ratio:High 15 17 16 20 19 37 23 29 NM NM
P/E Ratio:Low 10 8 9 14 13 23 14 17 NM NM

Income Statement Analysis (Million $)

Revenue 126,033 114,552 118,364 104,286 91,658 86,696 79,905 73,061 56,588 45,226
Operating Income 17,736 15,798 14,196 11,773 9,372 7,520 7,017 6,713 4,570 3,192
Depreciation 4,820 4,773 3,367 2,705 2,353 2,344 2,395 2,527 2,119 1,369
Interest Expense 505 259 467 289 249 334 247 277 212 234
Pretax Income 10,974 9,415 10,473 9,177 7,191 3,543 4,196 2,888 -1,052 702
Effective Tax Rate NA 18.6% 20.5% 20.9% 13.8% 32.3% 16.7% 12.1% NM 11.1%
Net Income 8,761 7,660 8,329 7,264 6,198 2,398 3,497 2,539 -923 624
S&P Core Earnings 8,773 7,659 7,598 6,913 5,992 2,150 2,886 1,983 -1,635 285

Balance Sheet & Other Financial Data (Million $)

Cash 10,934 13,334 10,246 11,293 16,400 13,911 12,663 14,188 11,192 4,197
Current Assets 54,184 52,539 51,728 47,402 48,264 43,334 42,901 40,996 36,075 21,305
Total Assets 124,503 114,799 113,331 88,699 81,981 77,317 76,138 74,708 70,710 32,584
Current Liabilities 49,403 43,003 52,939 39,260 2,490 31,460 28,588 26,630 24,310 13,964
Long Term Debt 15,258 13,980 7,676 4,997 2,490 3,392 4,623 6,494 6,035 3,729
Common Equity 40,449 40,517 38,942 38,526 38,144 37,176 37,564 37,746 36,262 13,953
Total Capital 56,039 54,497 49,292 43,523 40,634 40,568 42,187 44,240 42,297 17,682
Capital Expenditures 4,133 3,695 2,990 3,040 2,536 1,995 2,126 1,995 1,710 1,527
Cash Flow 13,581 12,433 11,696 9,969 8,551 4,742 5,892 5,066 1,196 1,993
Current Ratio 1.1 1.2 1.0 1.2 1.3 1.4 1.5 1.5 1.5 1.5
% Long Term Debt of Capitalization 27.2 25.7 15.4 11.5 6.1 8.4 11.0 14.7 14.3 21.1
% Net Income of Revenue 7.0 6.7 7.0 7.0 6.8 2.8 4.4 3.5 NM 1.4
% Return on Assets 7.3 6.7 8.3 8.5 7.8 3.1 4.6 3.5 NM 1.9
% Return on Equity 21.6 19.3 21.5 19.0 16.5 6.4 9.3 6.9 NM 4.4

Data as orig reptd.; bef. results of disc opers/spec. items. Per share data adj. for stk. divs.; EPS diluted. E-Estimated. NA-Not Available. NM-Not Meaningful. NR-Not Ranked. UR-Under Review.

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Stock Report | February 28, 2011 | NYS Symbol: HPQ

Hewlett-Packard Co
Sub-Industry Outlook
Our fundamental outlook for the S&P Computer
Hardware sub-industry for the next 12 months is
positive. We believe that the computer hardware
industry began to recover from a cyclical downturn
in the second half of 2009 and should remain in an
expansion phase for several years. Personal
computers represent a big part of the industry and
global PC unit shipments grew only about 4% in
2009, followed by growth of about 14% in 2010, as
tracked by market research firm IDC. We project PC
unit sales will continue to grow, at about a 12% pace
in 2011, and by 13% in 2012, based on further
economic expansion and satisfaction of pent-up
demand. Since mid-2010, PC unit sales appear to
have suffered from people substituting tablet
computers, which are smaller and less robust than
traditional PCs and not generally counted as PCs, for
a laptop PC. While this substitution effect may
pressure PC sales, the computer hardware industry
overall benefits from the growth in tablets. Also, the
growing popularity of robust mobile computing
devices stimulates data traffic to be handled by
servers, creating another spur to the overall
industry.
Stock Performance
communications, creates an appetite for a wide GICS Sector: Information Technology
range of technology products. Computer hardware Sub-Industry: Computer Hardware
is also playing more of a role in point-of-sale
terminals in retail venues. Based on S&P 1500 Indexes
Month-end Price Performance as of 02/28/11
We foresee growing demand for Internet-based
computing solutions because they offer companies
opportunities to reduce costs and improve customer 250
service. Accordingly, servers and data-center
computing hardware should benefit from rising
demand. However, we also see price competition in 200
servers. We think that hardware vendors have been
seeking to offset the negative impact on profits by
offering higher-margin services, software, and
storage products. 150
Year to date through February 4, the S&P Computer
Hardware Index increased 8.4%, compared to a 100
4.1% gain for the S&P 1500 Index. In 2010, the S&P
Computer Hardware Index rose 17.6%, surpassing a
14.2% rise in the S&P 1500 Index.
50
--Thomas W. Smith, CFA

Price competition and a long-term trend toward 0

lower average selling prices for PCs should keep 2007 2008 2009 2010 2011
global PC industry revenue growth rates below the
pace of units sales by about 500 to 600 basis points Sub-Industry Sector S&P 1500
in 2011 and 2012. We think computer hardware
vendors will continue their efforts to take costs out
of their infrastructures as they strive for profitability NOTE: All Sector & Sub-Industry information is based on the
despite price competition and rising component Global Industry Classification Standard (GICS)
costs we foresee for 2011.

We see longer-term fundamentals in the computer

hardware industry remaining attractive, albeit with
lively price competition and pressure on margins.
We think that a global need for better computing
and communications, especially mobile

Sub-Industry : Computer Hardware Peer Group*: Computer Hardware - Large System Vendors
Stk.Mkt. Recent 52 Fair S&P Return on LTD to
Stock Cap. Stock Week Yield P/E Value Quality IQ Revenue Cap
Peer Group Symbol (Mil. $) Price($) High/Low($) Beta (%) Ratio Calc.($) Ranking %ile (%) (%)
Hewlett-Packard HPQ 93,487 42.68 54.75/37.32 1.99 0.7 11 47.40 A- 79 7.0 27.2
Dell Inc DELL 29,205 15.13 17.52/11.34 1.54 Nil 11 20.30 B+ 98 4.3 39.9
Toshiba Corp TOSBF 21,065 6.51 6.66/4.56 NA Nil NM NA NR 17 1.7 30.9

NA-Not Available NM-Not Meaningful NR-Not Rated. *For Peer Groups with more than 15 companies or stocks, selection of issues is based on market capitalization.

Source: S&P.
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Stock Report | February 28, 2011 | NYS Symbol: HPQ

Hewlett-Packard Co
S&P Analyst Research Notes and other Company News
Banerji joined Booz Allen Hamilton in 1993 and has served clients in both the
public and private sector. Earlier in his career, he was a member of the faculty at
February 24, 2011
the University of Chicago Graduate School of Business. Gary Reiner, 56, serves as
02:07 pm ET ... S&P REITERATES STRONG BUY OPINION ON SHARES OF
a special advisor to private equity firm General Atlantic, providing strategic
HEWLETT-PACKARD (HPQ 42.55*****): The shares of HPQ fell after it reported
counsel to the firm and the companies it partners with worldwide. During his
Jan-Q earnings on 2/22, as the company described softness in short-term service
career at GE, he served as senior vice president and chief information officer,
signings, which we view as a situation that should improve by summer, as new
head of GE Information Services, and as vice president, Corporate Business
leadership tackles the issue. Spotty demand appeared for consumer PCs, but we
Development. Reiner's responsibilities included overseeing IT, operations,
see potential for a multi-year cyclical expansion for the computer industry and
sourcing, mergers and acquisitions and quality for the company's global
new HPQ mobility products to help sales. Long-term service signings and most
operations, including GE's renowned Six Sigma quality initiative. Earlier in his
hardware areas remain on track for growth in our view. We see compelling
career, Reiner was a partner at Boston Consulting Group, where he focused on
valuation and are reiterating our 12-month target price of $59. /T.Smith-CFA
strategic and process issues for high-technology businesses. Patricia Russo, 58,
is the former chief executive officer of Alcatel-Lucent, a global communication
February 23, 2011 solutions provider. She also previously served as chairman and CEO of Lucent
HPQ posts $1.36 vs. $1.07 Q1 non-GAAP EPS on 4% revenue rise. Street was Technologies, president of Eastman Kodak and chairman of Avaya, which was
looking for EPS of $1.29. Sees Q2 revenue of $31.4B-$31.6B, non-GAAP EPS of spun off from Lucent. Earlier in her career, she held management positions at
$1.19-$1.21. For FY 11, HPQ sees revenue of $130B-$131.5B, non-GAAP EPS of AT&T and IBM. Currently, Russo serves on the board of directors of General
$5.20-$5.28 (vs. Street's $5.24). Co. notes weak consumer demand for its PCs. Motors, Merck & Co. and ALCOA Inc. Dominique Senequier, 57, is chief executive
officer of AXA Private Equity. She joined AXA Investment Managers in 1996 and
founded the subsidiary AXA Private Equity that same year. Senequier is a
February 23, 2011
member of the Institut des Actuaries Francais (French Actuarial Institute) and a
09:21 am ET ... HEWLETT-PACKARD COMPANY (HPQ 48.23) UNCHANGED,
non-voting member of the supervisory board of Schneider Electric SA. Prior to
HEWLETT-PACKARD (HPQ) POSTS STRONG Q1, DISAPPOINTING VIEW.
joining AXA Investment Managers, she created and developed the subsidiary
NEEDHAM CUTS TARGET.... Analyst Richard Kugele tells salesforce $1.36 Q1 EPS
"GAN Participations" at GAN, an insurance firm. Meg Whitman, 54, is best known
beat his $1.25 est., but Q2 EPS guidance of $1.19-$1.21, FY 11 (Oct.) of $5.20-$5.28
for her 10-year tenure as president and CEO of eBay Inc., a global ecommerce
disappointed, due to weakness in consumer PCs, service signings. Despite
and payments company. She ran the company from 1998 to 2008. Prior to working
guidance, says he keeps turning to fundamental analysis for solace, noting IT
for eBay, she held management positions at Bain & Company, the Stride Rite
spending is poised to see 5%-7%+ growth this year, driven by servers, PCs, data
Corporation, the Walt Disney Company, Procter & Gamble Co., FTD and Hasbro.
center upgrades. With HPQ shares sharply lower in pre-market trading, sees
She also is a former board member of the eBay Foundation, Procter & Gamble
greater upside risk than downside. As such, keeps strong buy, but cuts $60 tgt to
and DreamWorks SKG, having resigned in 2009 in preparation for her California
$53, based on 10x his $5.24 FY 11 EPS est. B.Egli
gubernatorial bid. Whitman became the third woman in a 20-year period to run for
the office and won the Republican primary in 2010.
February 23, 2011
08:01 am ET ... S&P REITERATES STRONG BUY RECOMMENDATION ON SHARES
January 26, 2011
OF HEWLETT-PACKARD (HPQ 48.23*****): HPQ posts Jan-Q operating EPS of
Hewlett-Packard Company announced that Meg Whitman named to the
$1.36 (excl. $0.19 restructuring and other charges), vs. $1.07 (excl. $0.14), topping
Hewlett-Packard Co. board of directors and indicating she wants to stay involved
our $1.30 estimate. Revenues rose 4%, below our estimate of 6%, as enterprise
in politics. She also indicated in a brief interview with the San Francisco
demand outpaced consumer demand. We project a cyclical expansion for
Chronicle that she plans to take on other public roles.
computer hardware to lead to better sales through FY 12 (Oct). We expect a
richer product mix to help margins. We are maintaining our operating EPS
estimates of $5.30 for FY 11, and $5.90 for FY 12. Rolling ahead a quarter in our
P/E-based valuation, we are raising our 12-month target price to $59 from $58.
/T.Smith-CFA

February 11, 2011

Hewlett-Packard Company has announced the appointment of Graham Vorster as
HP Networking Country Manager for HP South Africa, with immediate effect.
Vorster has been in the ICT sector since the late 80s and his skills profile is a
combination of executive management, enterprise management, channel,
marketing, technology, strategy and sales management. He has joined the HP
Networking team from Alcatel-Lucent SA where he was employed as the Chief
Executive Officer of Alcatel-Lucent SA Ltd. In the past, Vorster has been involved
in numerous large account engagements across the service provider and
enterprise sectors, as well as various strategic channel engagements across a
variety of ICT and industry verticals. He has also served as a C-level executive at
various multinational and local organisations.

January 26, 2011

Hewlett-Packard Company announced that its board of directors has appointed
five new members, effective Jan. 21, bringing the total number of board members
to 13. The new directors are Shumeet Banerji, chief executive officer of Booz &
Company; Gary Reiner, former chief information officer of General Electric
Company and a current special advisor to private equity firm General Atlantic;
Patricia Russo, former chief executive officer of Alcatel-Lucent; Dominique
Senequier, chief executive officer of AXA Private Equity; and Meg Whitman,
former president and chief executive officer of eBay Inc. The five new directors
also will stand for re-election at HP's next Annual Meeting of Stockholders in
March. In addition, HP announced that incumbent directors Joel Hyatt, John
Joyce, Robert Ryan and Lucille Salhany are not standing for re-election at the
company's Annual Meeting of Stockholders. Shumeet Banerji, 51, is chief
executive officer of Booz & Company, a global management consulting firm. Most
recently, he has focused on counseling government ministries and financial
services institutions on the impact of changing demographics around the globe.

Source: S&P.
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Stock Report | February 28, 2011 | NYS Symbol: HPQ

Hewlett-Packard Co
Analysts' Recommendations Wall Steet Consensus Opinion

Monthly Average Trend Buy Buy/Hold Hold Weak Hold Sell No Opinion HPQ Trend BUY/HOLD
B BH H WH S

Wall Street Average Companies Offering Coverage

B
Over 30 firms follow this stock; not all firms are
BH
displayed.
H
Argus Research Company
WH
Atlantic Equities
S
BMO Capital Markets-us
Number of Analysts Following Stock Barclays Capital
Battle Road Research
50 Bofa Merrill Lynch
Brean Murray, Carret & Co.
40
Capstone Investments
30 Caris & Company
Citi
Cleveland Research Company
Stock Price ($)
Collins Stewart LLC
80
Credit Agricole Securities
Cross Research
60
Crowell, Weedon & Co.
Deutsche Bank North America
40
Dolmen Securities
First Global Stockbroking Ltd.
20
M A M J J A S O N D J F M A M J J A S O N D J F
Gleacher & Company
Goldman Sachs & Co.
2009 2010 2011
Hamburger Sparkasse (haspa)
ISI Group
Of the total 42 companies following HPQ, 38 analysts currently publish recommendations.
JMP Securities
Janney Montgomery Scott LLC
No. of Ratings % of Total 1 Mo. Prior 3 Mos. Prior Jpmorgan
Buy 13 34 14 15 Kaufman Bros.
Buy/Hold 15 39 15 13 Morgan Stanley
Hold 6 16 5 7 Morningstar, Inc.
Weak Hold 2 5 2 2 Needham & Company
Sell 0 0 0 0 Nutmeg Securities
No Opinion 2 5 1 1
Total 38 100 37 38
Wall Street Consensus Estimates Wall Street Consensus vs. Performance

For fiscal year 2011, analysts estimate that HPQ

Estimates 2010 2011 2012 2010 Actual $3.69 will earn $5.24. For the 1st quarter of fiscal year
6 2011, HPQ announced earnings per share of $1.17,
representing 22% of the total annual estimate. For
5 fiscal year 2012, analysts estimate that HPQ's
earnings per share will grow by 9% to $5.69.
4

3 O N D J F M A M J J A S O N D J F

2009 2010 2011

Fiscal Years Avg Est. High Est. Low Est. # of Est. Est. P/E
2012 5.69 5.91 5.04 34 7.7
2011 5.24 5.33 5.06 33 8.3
2012 vs. 2011 9% 11% -0.4% 3% -7%

Q2'12 1.35 1.42 1.23 24 32.3

Q2'11 1.21 1.26 1.19 31 36.1
Q2'12 vs. Q2'11 12% 13% 3% -23% -11%

A company's earnings outlook plays a major part in any investment decision. Standard & Poor's organizes the earnings estimates of over 2,300
Wall Street analysts, and provides their consensus of earnings over the next two years. This graph shows the trend in analyst estimates over
the past 15 months.

Source: S&P,I/B/E/S International, Inc.

Redistribution or reproduction is prohibited without written permission. Copyright ©2011 The McGraw-Hill Companies,Inc.
Stock Report | March 1, 2011 | NYS Symbol: HPQ
Hewlett-Packard Co
Glossary
S&P STARS
Since January 1, 1987, Standard & Poor’s Equity
Research Services has ranked a universe of U.S.
common stocks, ADRs (American Depositary Receipts),
and ADSs (American Depositary Shares) based on a
given equity’s potential for future performance. Similarly,
Standard & Poor’s Equity Research Services has used
STARS® methodology to rank Asian and European
equities since June 30, 2002. Under proprietary STARS
(STock Appreciation Ranking System), S&P equity
analysts rank equities according to their individual
forecast of an equity’s future total return potential versus
the expected total return of a relevant benchmark (e.g., a
regional index (S&P Asia 50 Index, S&P Europe 350®
Index or S&P 500® Index)), based on a 12-month time
horizon. STARS was designed to meet the needs of
investors looking to put their investment decisions in
perspective.
S&P Quality Ranking
(also known as S&P Earnings & Dividend Rankings)-
Growth and stability of earnings and dividends are
deemed key elements in establishing S&P’s earnings and
dividend rankings for common stocks, which are
designed to capsulize the nature of this record in a single
symbol. It should be noted, however, that the process
also takes into consideration certain adjustments and
modifications deemed desirable in establishing such
rankings. The final score for each stock is measured
against a scoring matrix determined by analysis of the
scores of a large and representative sample of stocks.
The range of scores in the array of this sample has been
aligned with the following ladder of rankings:
A+ Highest B Below Average
A High B- Lower
A- Above Average C Lowest
B+ Average D In Reorganization
NR Not Ranked
S&P Issuer Credit Rating
A Standard & Poor’s Issuer Credit Rating is a current
opinion of an obligor’s overall financial capacity (its
creditworthiness) to pay its financial obligations. This
opinion focuses on the obligor’s capacity and willingness
to meet its financial commitments as they come due. It
does not apply to any specific financial obligation, as it
does not take into account the nature of and provisions
of the obligation, its standing in bankruptcy or liquidation,
statutory preferences, or the legality and enforceability
of the obligation. In addition, it does not take into
account the creditworthiness of the guarantors, insurers,
or other forms of credit enhancement on the obligation.
S&P Core Earnings
Standard & Poor's Core Earnings is a uniform
methodology for adjusting operating earnings by
focusing on a company's after-tax earnings generated
from its principal businesses. Included in the Standard &
Poor's definition are employee stock option grant
expenses, pension costs, restructuring charges from
ongoing operations, write-downs of depreciable or
amortizable operating assets, purchased research and
development, M&A related expenses and unrealized
gains/losses from hedging activities. Excluded from the
definition are pension gains, impairment of goodwill
charges, gains or losses from asset sales, reversal of
prior-year charges and provision from litigation or
insurance settlements.
S&P 12-Month Target Price
The S&P equity analyst’s projection of the market price a
given security will command 12 months hence, based on
a combination of intrinsic, relative, and private market
valuation metrics.
Redistribution or reproduction is prohibited without written permission. Copyright © 2011 Standard & Poor's Financial Services LLC.
STANDARD & POOR’S, S&P, S&P 500, S&P Europe 350 and STARS are registered trademarks of Standard & Poor’s Financial Services LLC.
S&P Equity Research Services
Standard & Poor’s Equity Research Services U.S.
includes Standard & Poor’s Investment Advisory
Services LLC; Standard & Poor’s Equity Research
Services Europe includes Standard &Poor’s LLC-
London; Standard & Poor’s Equity Research Services
Asia includes Standard & Poor’s LLC’s offices in
Singapore, Standard & Poor’s Investment Advisory
Services (HK) Limited in Hong Kong, Standard & Poor’s
Malaysia Sdn Bhd, and Standard & Poor’s Information
Services (Australia) Pty Ltd.
Abbreviations Used in S&P Equity Research Reports
CAGR- Compound Annual Growth Rate; CAPEX- Capital
Expenditures; CY- Calendar Year; DCF- Discounted Cash
Flow; EBIT- Earnings Before Interest and Taxes; EBITDA-
Earnings Before Interest, Taxes, Depreciation and
Amortization; EPS- Earnings Per Share; EV- Enterprise
Value; FCF- Free Cash Flow; FFO- Funds From Operations;
FY- Fiscal Year; P/E- Price/Earnings ; PEG Ratio-
P/E-to-Growth Ratio; PV- Present Value; R&D- Research
& Development; ROE- Return on Equity; ROI- Return on
Investment; ROIC- Return on Invested Capital; ROA-
Return on Assets; SG&A- Selling, General &
Administrative Expenses; WACC- Weighted Average
Cost of Capital
Dividends on American Depository Receipts (ADRs) and
American Depository Shares (ADSs) are net of taxes
(paid in the country of origin).
Required Disclosures
In contrast to the qualitative STARS recommendations
covered in this report, which are determined and
assigned by S&P equity analysts, S&P’s quantitative
evaluations are derived from S&P’s proprietary Fair
Value quantitative model. In particular, the Fair Value
Ranking methodology is a relative ranking methodology,
whereas the STARS methodology is not. Because the
Fair Value model and the STARS methodology reflect
different criteria, assumptions and analytical methods,
quantitative evaluations may at times differ from (or even
contradict) an equity analyst’s STARS recommendations.
As a quantitative model, Fair Value relies on history and
consensus estimates and does not introduce an element
of subjectivity as can be the case with equity analysts in
assigning STARS recommendations.
S&P Global STARS Distribution
In North America: As of December 31, 2010, research
analysts at Standard & Poor's Equity Research Services
North America recommended 35.0% of issuers with buy
recommendations, 56.4% with hold recommendations
and 8.6% with sell recommendations.
In Europe: As of December 31, 2010, research analysts at
Standard & Poor's Equity Research Services Europe
recommended 33.6% of issuers with buy
recommendations, 45.6% with hold recommendations
and 20.8% with sell recommendations.
In Asia: As of December 31, 2010, research analysts at
Standard & Poor's Equity Research Services Asia
recommended 39.4% of issuers with buy
recommendations, 51.8% with hold recommendations
and 8.8% with sell recommendations.
Globally: As of December 31, 2010, research analysts at
Standard & Poor's Equity Research Services globally
recommended 35.2% of issuers with buy
recommendations, 54.0% with hold recommendations
and 10.8% with sell recommendations.
★★★★★ 5-STARS (Strong Buy): Total return is
expected to outperform the total return of a relevant
benchmark, by a wide margin over the coming 12
months, with shares rising in price on an absolute basis.
★★★★★ 4-STARS (Buy): Total return is expected to
outperform the total return of a relevant benchmark over
the coming 12 months, with shares rising in price on an
absolute basis.
★★★★★ 3-STARS (Hold): Total return is expected to
closely approximate the total return of a relevant
benchmark over the coming 12 months, with shares
generally rising in price on an absolute basis.
★★★★★ 2-STARS (Sell): Total return is expected to
underperform the total return of a relevant benchmark
over the coming 12 months, and the share price not
anticipated to show a gain.
★★★★★1-STARS (Strong Sell): Total return is
expected to underperform the total return of a relevant
benchmark by a wide margin over the coming 12 months,
with shares falling in price on an absolute basis.
Relevant benchmarks: In North America the relevant
benchmark is the S&P 500 Index, in Europe and in Asia,
the relevant benchmarks are generally the S&P Europe
350 Index and the S&P Asia 50 Index.
For All Regions: All of the views expressed in this
research report accurately reflect the research analyst's
personal views regarding any and all of the subject
securities or issuers. No part of analyst compensation
was, is, or will be directly or indirectly, related to the
specific recommendations or views expressed in this
research report.
S&P Global Quantitative Recommendations Distribution
In Europe: As of December 31, 2010, Standard & Poor's
Quantitative Services Europe recommended 46.0% of
issuers with buy recommendations, 19.0% with hold
recommendations and 33.0% with sell recommendations.
In Asia: As of December 31, 2010, Standard & Poor's
Quantitative Services Asia recommended 39.4% of
issuers with buy recommendations, 20.0% with hold
recommendations and 34.0% with sell recommendations.
Globally: As of December 31, 2010, Standard & Poor's
Quantitative Services globally recommended 43.0% of
issuers with buy recommendations, 19.0% with hold
recommendations and 36.0% with sell recommendations.
Additional information is available upon request.
Other Disclosures
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& Poor's ("S&P"), in the United Kingdom by Standard &
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Poor's Malaysia Sdn Bhd ("S&PM") which is regulated by
the Securities Commission; in Australia by Standard &
Poor's Information Services (Australia) Pty Ltd ("SPIS")
which is regulated by the Australian Securities &
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The research and analytical services performed by
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& Poor's.
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to, or otherwise have a financial interest in, certain
issuers of securities, including exchange-traded
investments whose investment objective is to
substantially replicate the returns of a proprietary
Stock Report | March 1, 2011 | NYS Symbol: HPQ
Hewlett-Packard Co
Standard & Poor's index, such as the S&P 500. In cases
where Standard & Poor's or an affiliate is paid fees that
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returns do not include payment of any sales charges or
fees an investor would pay to purchase the securities
they represent. Such costs would lower performance. It
is not possible to invest directly in an index.
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or services they may recommend, rate, include in model
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the past twelve months.
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With respect to reports issued to clients in Japan and in
the case of inconsistencies between the English and
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Past performance is not necessarily indicative of future
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statements of opinion as of the date they are expressed
and not statements of fact or recommendations to
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investment decisions. Standard & Poor’s assumes no
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be relied on and are not substitutes for the skill,
judgment and experience of the user, its management,
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investment and other business decisions. Standard &
Redistribution or reproduction is prohibited without written permission. Copyright © 2011 Standard & Poor's Financial Services LLC.
STANDARD & POOR’S, S&P, S&P 500, S&P Europe 350 and STARS are registered trademarks of Standard & Poor’s Financial Services LLC.
Poor’s rating opinions do not address the suitability of
any security. Standard & Poor’s does not act as a
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U.S. STARS Cumulative Model Performance
Hypothetical Growth Due to Price Appreciation of $100
For the Period 12/31/1986 through 02/28/2011
S&P 500 5 STARS 4 STARS 3 STARS 2 STARS 1 STARS
2,400
1,600
800
0
'92 '94 '96 '98 '0 '02 '04 '06 '08 '10
The performance above represents only the results of
Standard & Poor’s model portfolios. Model performance
has inherent limitations. Standard & Poor’s maintains the
models and calculates the model performance shown,
but does not manage actual assets. The U.S. STARS
model performance chart is only an illustration of
Standard & Poor’s (S&P) research; it shows how U.S.
common stocks, ADRs (American Depositary Receipts)
and ADSs (American Depositary Shares), collectively
“equities”, that received particular STARS rankings
performed. STARS categories are models only; they are
not collective investment funds. The STARS performance
does not show how any actual portfolio has performed.
STARS model performance does not represent the
results of actual trading of investor assets. Thus, the
model performance shown does not reflect the impact
that material economic and market factors might have
had on decision-making if actual investor money had
been managed. Performance is calculated using a
time-weighted rate of return. While model performance
for some or all STARS categories performed better than
the S&P 500 for the period shown, the performance
during any shorter period may not have, and there is no
assurance that they will perform better than the S&P 500
in the future. STARS does not take into account any
particular investment objective, financial situation or
need and is not intended as an investment
recommendation or strategy. Investments based on the
STARS methodology may lose money. High returns are
not necessarily the norm and there is no assurance that
Stock Report | March 1, 2011 | NYS Symbol: HPQ

Hewlett-Packard Co
they can be sustained. Past model performance of
STARS is no guarantee of future performance.

For model performance calculation purposes, the

equities within each STARS category at December 31,
1986 were equally weighted. Thereafter, additions to the
composition of the equities in each STARS category are
made at the average value of the STARS category at the
preceding month end with no rebalancing. Deletions are
made at the closing price of the day that the deletion is
made. Performance was calculated from inception
through March 31, 2003 on a monthly basis. Thereafter,
performance is calculated daily. Equities in each STARS
category will change over time, and some or all of the
equities that received STARS rankings during the time
period shown may not have maintained their STARS
ranking during the entire period.

The model performance does not consider taxes and

brokerage commissions, nor does it reflect the deduction
of any advisory or other fees charged by advisors or
other parties that investors will incur when their
accounts are managed in accordance with the models.
The imposition of these fees and charges would cause
actual performance to be lower than the performance
shown. For example, if a model returned 10 percent on a
$100,000 investment for a 12-month period (or $10,000)
and an annual asset-based fee of 1.5 percent were
imposed at the end of the period (or $1,650), the net
return would be 8.35 percent (or $8,350) for the year.
Over 3 years, an annual 1.5% fee taken at year end with
an assumed 10% return per year would result in a
cumulative gross return of 33.1%, a total fee of $5,375
and a cumulative net return of 27.2% (or $27,200). Fees
deducted on a frequency other than annual would result
in a different cumulative net return in the preceding
example.

The Standard & Poor’s 500 index is the benchmark for

U.S. STARS. The S&P 500 index is calculated in U.S.
dollars and does not take into account the reinvestment
of dividends. Indexes are unmanaged, statistical
composites and their returns do not include payment of
any sales charges or fees an investor would pay to
purchase the securities they represent. Such costs
would lower performance. It is not possible to invest
directly in an index. The S&P 500 index includes a
different number of constituents and has different risk
characteristics than the STARS equities. Some of the
STARS equities may have been included in the S&P 500
index for some (but not necessarily all) of the period
covered in the chart, and some such equities may not
have been included at all. The S&P 500 excludes ADRs
and ADSs. The methodology for calculating the return of
the S&P 500 index differs from the methodology of
calculating the return for STARS. Past performance of
the S&P 500 index is no guarantee of future
performance.

An investment based upon the models should only be

made after consulting with a financial advisor and with
an understanding of the risks associated with any
investment in securities, including, but not limited to,
market risk, currency risk, political and credit risks, the
risk of economic recession and the risk that issuers of
securities or general stock market conditions may
worsen, over time. Foreign investing involves certain
risks, including currency fluctuations and controls,
restrictions on foreign investments, less governmental
supervision and regulation, less liquidity and the
potential for market volatility and political instability. As
with any investment, investment returns and principal
value will fluctuate, so that when redeemed, an
investor’s shares may be worth more or less than their
original cost.

Redistribution or reproduction is prohibited without written permission. Copyright © 2011 Standard & Poor's Financial Services LLC.
STANDARD & POOR’S, S&P, S&P 500, S&P Europe 350 and STARS are registered trademarks of Standard & Poor’s Financial Services LLC.