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?
Mark Hurd: We don''t release headcount information at that level of detail, but we''re obviously more than 2000 sales people, since we added to them, that many. We are very under covered, and we''re very under represented in the market, and it’s an issue for us. We have a superb lineup of products and capabilities. It’s frustrating to us, because we under distribute them in the market. We''ve got a very strong line up of partners out there. We have 144,000 resellers and partners that help us, but at the end of day, when you go through a detailed market, mapping by market segment, by geography, by product segment, even by industry, where it make sense certainly in the context of the mid-market and the enterprise, we are dramatically under covered. We''re not off by 10% or 20%, we''re off by more than that. We''re trying hard to be fit up.
Scott Craig (Banc of America): Can you talk about the component cost environment a little bit? You mentioned that you don''t see it as being as favorable going forward. Can you be more specific?
Cathie Lesjak: In Q1, it was clearly more favorable than we had expected, and you saw that in the margin expansion at the HP Co level, as well as the operating margin expansion at the PSG and Enterprise Server and Storage level. In terms of an outlook, we think that the supply generally looks good. We are starting to see a memory pricing environment that seems to be stabilizing a bit or getting more solid. There could be an uptick there, but we''re certainly not seeing the same declines that we''ve seen in the last couple of quarters. We''re basically pricing in, or thinking about the fact that memory will be a bit tougher than it was in last couple of quarters, and factoring that into our guidance.
David Wong (Wachovia): Can you give the unit growth on your Industry Standard Servers and also the absolute levels of channel inventory?
Mark Hurd: The unit growth was in high teens. We typically don''t give the absolute channel inventory numbers. As we give them out, we give them in terms of weeks, and we give them in terms of compares. ESS inventory was healthy and very well positioned coming out of Q1 and that was again purposeful on our part to position ourselves well going into the rest of the year.
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