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Global Operations Building world-class cost structures

Global Operations Building world-class cost structures. Jeff Clarke Executive Vice President Global eBusiness Advisory Council 12 June 2003. HP delivers more. Why should customers have to choose between: Innovation & price? Functionality & simplicity? Stability & agility?

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Global Operations Building world-class cost structures

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  1. Global OperationsBuilding world-class cost structures Jeff ClarkeExecutive Vice President Global eBusiness Advisory Council 12 June 2003

  2. HP delivers more Why should customers have tochoose between: Innovation & price? Functionality & simplicity? Stability & agility? Cost & high customer satisfaction? HP delivers: High tech + low cost + best customer experience Jeff Clarke – Global eBusiness Advisory Council

  3. Competitive positioning: high-tech, low-cost Highcost Cost structure Lowcost Lowtech Technologylevel Hightech Jeff Clarke – Global eBusiness Advisory Council

  4. Non-GAAP margin progress 3Q024Q021Q032Q03 Gross profit 25.5% 25.9% 26.5% 27.1% R&D + SG&A 22.3% 21.0% 20.3% 20.7% Operating 3.2% 4.9% 6.2% 6.4% Net 2.5% 4.0% 4.9% 4.9% See bridge slides for reconciliation of non-GAAP to GAAP financial information. Jeff Clarke – Global eBusiness Advisory Council

  5. Segment trend of operating margins 3Q024Q021Q032Q03 IPG 17.8% 16.8% 16.2% 16.6% PSG -2.9% -1.4% 0.6% 0.4% ESG -8.7% -3.2% -2.2% -0.2% HPS 9.4% 11.8% 11.5% 9.9% HPFS -4.1% -18.8% 2.7% 4.2% Total segments 3.5% 5.2% 6.5% 6.7% * Total segments includes corporate investments. Jeff Clarke – Global eBusiness Advisory Council

  6. U.S. 40% Americas EMEA 40% Canada/ Latin America 6% Asia Pacific 11% Japan 4% Balance: portfolio & regional diversification 2Q03 revenue by business 2Q03 revenue by region • Benefits: • Reduced volatility • Strong presence in high volume & high margin businesses • Greater access to high growth markets Jeff Clarke – Global eBusiness Advisory Council

  7. HP’s R&D investment$4B a year • Investing in focused innovation across HP • Labs • Products • Services • Portfolio of 19,000 patents worldwide, 2,000 in 6 months • Key initiatives • Rich digital media • Mobility • Management software • Security solutions 10% 30% 60% Jeff Clarke – Global eBusiness Advisory Council

  8. Enterprise Systems Group Revenue Operating profit In millions In millions • Q/Q revenue performance: industry-standard servers up 7%, storage up 5%, business-critical systems down 4%, software down 2% • Introduced 125 new & enhanced products in 1H • Another record quarter for Superdome shipments, including biggest win to date with the China State Administration of Taxation • Hardware profitable Jeff Clarke – Global eBusiness Advisory Council

  9. HP Services Revenue Operating profit In millions In millions • Q/Q revenue performance: customer support up 4%, consulting & integration up 2%, managed services down 2% • HP now firmly established as a major player in managed services, signing more than 200 contracts in the last year, 55 in the past quarter, all against major competitors • Finalized 10-year, $3B contract with P&G and announced 7-year, $600M contract with Bank of Ireland Jeff Clarke – Global eBusiness Advisory Council

  10. Personal Systems Group Revenue Operating profit In millions In millions • Q/Q revenue performance: desktops down 4%, notebooks up 6%, workstations up 15%, handhelds down 13% • Strong demand for notebooks versus desktop PCs, reflecting a shift toward mobility • Balanced performance in each region offset normal domestic post-holiday declines Jeff Clarke – Global eBusiness Advisory Council

  11. Market share: desktop & notebooks WW Client PC shipments1 WW DT shipments1 WW Portable PC Shipments1 17.8% 15.9% 16.9% 15.1% 15.3% 14.5% 14.3% 5.1% 4.3% Dell HP IBM Dell HP IBM HP Dell Toshiba Source: 1 IDC WW PC Tracker, 2 June 2003 Jeff Clarke – Global eBusiness Advisory Council

  12. Imaging & Printing Group Revenue Operating profit In millions In millions • Y/Y revenue performance: business hardware up 9%, home hardware up 8%, supplies up 15%, digital imaging up 5% • Q/Q revenue performance: business hardware down 5%, home hardware down 5%, supplies up 7%, digital imaging down 38% • 142% Y/Y shipment growth in All-in-Ones & 22% in total inkjet shipments • Major digital publishing wins with VW & FedEx Jeff Clarke – Global eBusiness Advisory Council

  13. Quotes Hewlett-Packard: Job well done J.P. Morgan (Bill Shope, CFA) Hewlett-Packard: Surprises even the bulls Morgan Stanley (Runkle, R/Huberty, K) But last week, HP took the #1 worldwide position in total server revenue from IBM. It's an incredible achievement, it's the first time it's happened, and it posted second-quarter earnings that beat the Wall Street estimates handily. James Cramer, CNBC-TV / 3 June 2003 HPQ's Q2 results were strong on every dimension, highlighted by strength in enterprise computing Bernstein (Sacconaghi, Toni) HP exceeded Q2 expectations on both the top & bottom line CSFB Americas (McCarthy, Kevin) Jeff Clarke – Global eBusiness Advisory Council

  14. Jeff Clarke – Global eBusiness Advisory Council

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