Key questions and answers from the first quarter fiscal 2008 earnings call conducted by Hewlett-Packard Co. on February 19, 2008.

Ben Reitzes (UBS): On the macro economic environment, going into the quarter, there was a lot of speculation about things having slowed in January and your guidance is indicating that. Can you confirm any linearity in the quarter? Can you comment on what gives you confidence on the raising guidance, given the economic backdrop?

Mark Hurd: We saw a good linearity at the HP level during the quarter, and there was no story in terms of one month being better than the others, so it was smooth. We have a good position from a geographic deployment perspective. When you look across our segments and our businesses, we had solid growth across all businesses and regions. Again, 69% of our revenue was outside the United States, so that's probably an asset. We've got multiple stories to go on, remembering it's only 31% of our revenue. But relative to what you see in some tech peers, we have an enterprise business, but frankly we're putting more go-to-market resources in, and there is an effect to a degree of that investment in growth. We are putting more effort into the US than we have in the past. I'm not sure we're the best person to compare specifically year-over-year comps, because of the effort we are putting in to improve our position. In the US, at the end of the quarter, we saw a little bit more caution in the consumer segment than what we've seen in the past. But again, in the context of the big picture on a global basis, we saw steady growth across all of our businesses and segments.

Cathie Lesjak: We have built capacity in our plans for fiscal 2008, so that we can adjust if the demand isn't there that we are expecting. We have a good line of sight on our cost cuts. That combined with the investments that we have made to, improve our position in accounts, in terms of the share of wallet, and our recurring revenue, it gives us a lot of confidence in our EPS guidance.

Richard Gardner (Citigroup): This quarter, the supplies revenue growth accelerated, despite the fact you had a tougher year-over-year compare, and you were a little bit better than seasonal norms for the quarter. Can you give your views on what's driving the strength in supplies revenue growth, and whether it was toner or ink?

Mark Hurd: There was no meaningful difference between toner and ink trends in the quarter. Again, we have the benefit of a large install base. During the quarter, we shipped our 500 millionth printer. When you look at the pure scale of the business and the size of the install base, it's a big one and we've invested from a unit perspective into that base for a while. When you look at camera and you look at the appliances and we were very cautious about appliance placements. There are radical transformation we're doing inside IPG. We're working on a lot of cost that we're trying to take out of the business. We're investing in growth markets that are giving us subsequent growth that. Graphics and the Enterprise performed very nicely from a growth perspective for us in the quarter. We're taking money and investing in those categories and it is showing up. At the same time, as we have a core business, we're picking our spots, as to where we feel makes sense to work on.

David Bailey (Goldman Sachs): Your overall printer unit growth has come down four quarters in a row, and given the weakness that we see in inkjet demand across the industry, should we think this is a trend that should continue? Or are there some reasons that you should start to see some stabilization, as we go through the year?

Mark Hurd: We reported 1% unit growth. There is couple of points in unit growth tied up in the appliance piece. The laser growth in the quarter was 13%, so very significant double-digit laser growth. When you think a couple of points on the inkjet side, our total units would have come back through the appliance side, plus we left a couple of points on the table that we thought we could have. You got two different tails here. You’ve got laser business that's 13% growth. You’ve got the inkjet business that has some of the characteristics. When we talk about inkjet units, we lose the context that what happens in SITEX growth and Indigo growth in the high-end commercial printing, has as much to do with our future. We may wind up with a slight disconnect in trying to model unit growth in inkjet to supplies growth, because what happens is, an Indigo printer when it goes out, is worth thousands and thousands of inkjet consumer printers going out. As those businesses grow, you can start to get a disconnect from what the supplies growth looks like, and what the inkjet unit growth looks like. You are going to hear us talking a lot more about trying to get you some transparency to what that page growth looks like, and the implications it has, long-term, on our supplies business.

Bill Shope (JP Morgan): Can you comment on ASP trends, specifically in PCs? Have you seen any material changes in pricing patterns, particularly over the holiday season? If not, how much room do you think you have here to possibly get more aggressive on pricing to gain share and counter some potential macro pressures on units?

Mark Hurd: It was tame in Q4. It was fairly tame again in Q1. I wouldn't say that we're seeing pricing pressure beyond the norm. We did not see a big change in the quarter. We'll look to pick our spots based on market and segments that make sense.

Andrew Neff (Bear Stearns): You gave an update on the data center consolidation. Can you comment on how that's coming together, where you think you are and what the implications are for HP?

Mark Hurd: Our team has done a superb job. We still have more work to do, and as we talked about much of the savings that comes along with it trails, certainly as opposed to lead. But we are a long way through, and it starts with us with a process change, then an application consolidation and application modernization process, and then that allows us to consolidate infrastructure and therefore close data centers. It falls in that flow. We run the company. We started running the company, and we were running the company in early 2005 on roughly 6,000 applications. We're running the company right now on a little more than 3,000 applications, so we're about halfway through the application consolidation. We're a little further ahead in the infrastructure consolidation and data centers that trail us. That's roughly where we are.

Andrew Neff (Bear Stearns): You talked about getting most of it done during fiscal 2008. Are you still comfortable with that?

Mark Hurd: We're making a lot of progress. We had a very strong quarter, in terms of IT getting its work done. It's very important to us too, because it's not only the fact that we save money, but we also get a simpler infrastructure. We use to have 75 separate consumer support applications at Hewlett Packard, so we had a separate consumer support application in each country for our consumer PC and consumer printer business. We now consolidated those to one application that now supports our entire consumer support across the company, which means IT can now do one modification to our code base, drop it down one time, whereas before we had to do 75 different modifications to be able to get that done. That not only lowers our cost, but increases our speed. It makes us more nimble, and this gives us a better platform to run the company. We're on track and we feel good about it, we still have work to do.

Cathie Lesjak: We still fully expect to have a run rate savings for the full year fiscal 2009 of a $1 billion related to IT. The beauty in this model is also that, with that reduced spend you are still getting a much more significant percentage of spend, focused on innovation, than you do on maintenance, because with the simpler application and infrastructure your maintenance costs go down dramatically. Our businesses are very excited about getting more innovations.

Brian Alexander (Raymond James): You mentioned that you have reduced more cost this year than last year. Are you accelerating any of the actions that you previously announced in light of the macro environment, or has that been the plan coming into the fiscal year? Is there any change in thinking on reinvestment versus flow through of those savings in light of the environment?

Mark Hurd: No. We're on the same trajectory. When somebody tells me because of the macro environment are you doing something else, it implies there were some inefficiency we weren't going after anyway. We've got our cost structure headed in right direction. We're very focused on getting it right. We have opportunities to do it. From a reinvestment back in the scale of our sales organization, we are on trajectory to do it and we're continuing to try to balance the cost take out relative to the investment.

Katie Huberty (Morgan Stanley): How purposeful was the reduction in inventory in late January ahead of the expectations of potentially slower PC growth? Were there any product segments that you feel inventory was constraint at the end of the quarter?

Cathie Lesjek: It wasn't purposeful, other than to say that we've been working on our inventory management since Q1 last year, there has been a real intense focuses in the company on that, and this is the result of many quarters of hard work. I wouldn't read anything more into it other than much better inventory management.

Louis Miscioscia (Cowen and Company): You had in your press release that you added 2000 more sales people. Could you give us the total number of sales people you have? Do you think you have finally hit the level that you're reasonably happy with? Did a lot of this went into the emerging markets?