Good day, ladies and gentlemen, and welcome to the Hewlett-Packard Q4 FY '05 Earnings Conference Call. My name is Rachel, and I'll be you coordinator today. Operator Instructions As a reminder, ladies and gentlemen, this conference is being recorded for replay purposes. I would now like to turn the presentation over to your host for today's call, Mr. Brian Humphries, VP of Investor Relations.

Thank you, Rachel, and good afternoon, everyone. I'd like to welcome you to our fourth quarter earnings conference call. Joining me today is our CEO and President, Mark Hurd; and CFO, Bob Wayman. Before we get started, I'd like to remind you that this call is being Webcast live. The Webcast and the fourth quarter earnings slide presentation, including GAAP reconciliation tables, can be accessed on HP Investor Relations page under Company Information at www.hp.com. A replay will also be available shortly after the conclusion of the call for approximately one year. Next, it is my duty to inform you that the primary purpose of this call is to provide you with information regarding the fourth quarter. However, some of our comments and responses to your questions may include forward-looking statements. These forward-looking statements are based on certain assumptions and are subject to a number of risks and uncertainties, and actual future results may vary materially. I encourage you to read the risk factors described in the Company's quarterly report on Form 10-Q for the fiscal quarter ended July 31st, 2005, as well as subsequent SEC filings after our FY '04 Form 10-K for an understanding of the factors that may affect the Company's businesses and results. I'd also like to point out that earnings, gross margins, operating expenses, and similar items discussed at the Company level are generally expressed on a non-GAAP basis and, therefore, have been adjusted to exclude certain acquisition-related charges, in-process R&D charges, amortization of goodwill and purchased intangibles, restructuring charges, and net investment losses. A presentation of GAAP financial information for the present quarter and a reconciliation of non-GAAP amounts to GAAP are included in the financial statements accompanying today's earnings release, which is also available on the HP Investor Relations page under hp.com. Finally, we have a lot of people on today's call, and with a view to allowing time for multiple questions from multiple firms, please refrain from asking multi-part questions and please save clarifications for call-back after the call. With that, I'll turn the call over to Mark Hurd.

Thanks, Brian. Well, good afternoon, and thank you for joining us. I'm pleased with our fourth quarter results. We delivered solid operational results, saw margin expansion in some of our key businesses, had good cost discipline, generated strong cash flow, and continued to make progress on key initiatives. The employees of HP have been working hard, and our efforts are paying off. Let me give you some highlights of the quarter. First, net revenue growth of 7%, year-over-year, or 6% in local currency. Non-GAAP EPS growth of 24% year-over-year. Continued operating margin expansion in key businesses, with Personal Systems' operating margins of 2.8%, Enterprise Storage and Servers' margins of 9.1%, and Software margins of 8.7%. Our third consecutive quarter of solid printer hardware unit growth in Imaging and Printing, one of the leading indicators of future supplies growth. Cash flow from operations of 1.9 billion, bringing the year-to-date total to 8 billion, and share repurchases of 1.4 billion, bringing the year-to-date total to 3.5 billion. Our performance in the fourth quarter, coupled with a solid third quarter, triggered significant employee bonuses for the second half of fiscal 2005. And the fourth quarter impact of this is reflected in the segment results. Now turning quickly to the business segments. During the fourth quarter, Imaging and Printing revenue grew 4% year-over-year, to 6.8 billion, with Consumer Hardware revenue down 4% and Commercial Hardware revenue and Supplies revenue up 4% and 7%, respectively. Segment operating profit was 896 million, or 13.2% of revenue. During the quarter, overall printer hardware unit growth was 8%, with consumer printer hardware unit shipments up 6% and commercial printer hardware unit shipments up 16%. Within these categories, we saw strong unit shipment growth in key initiatives, with All-In-One unit shipments up 25% year-over-year, color laser unit shipments up 41% year-over-year, and enterprise multi-function printer shipments up 83%. We are focused on driving unit growth of high-ink consumption units, and we're confident that this will drive solid supplies growth. We've also seen strong acceptance of products based on our recently introduced, Scaleable Print Technology, a breakthrough in the architecture and manufacturing of the ink jet printhead. This allows us to deliver record print speeds in the home and office, and can be scaled to a broad set of high-volume printing applications, making it one of our most significant announcements in recent years. We're also focused on success in the high end, with our digital press wide-format graphics initiatives. On November 1st, we closed our acquisition of Scitex, expanding our leadership in large-format printing into the industrial super-wide category. And at PRINT 05, we announced major advances in the digital transformation of the graphics art industry, further consolidating our leadership position. This is a significant opportunity for HP, and we're aligning significant resources behind the commercial print opportunity. Moving now to Personal Systems, we continued to show a balanced approach to revenue growth and operating margin improvements. Revenue grew 9% year-over-year, to 7.1 billion, with particular strength in notebooks, where revenue increased 23%. Our consumer business had another excellent quarter, with revenue growth of 14% year-over-year and strong operating margins. Consumer notebook shipments increased 48% over the prior year period, demonstrating HP's competitive strength and strong retail presence, as well as the shift to mobility. Revenue in commercial clients increased 8% year-over-year, with notebooks posting strong growth and profitability improvements. Our workstation business continues to post solid results, delivering share gains, strong year-over-year revenue growth, and excellent profitability. Segment operating profit was 200 million, or 2.8% of revenue, representing the fifth consecutive quarter of operating margin improvement in Personal Systems. The team has done an excellent job turning around the profitability of the PC business, and operating margins have now increased for each of the last four quarters, with full year fiscal '05 margins at 2.5% of revenue. Enterprise Storage and Servers had a strong quarter, with revenue up 10% year-over-year, to 4.5 billion and operating profit of 405 million, or 9.1% of revenue. Over the past 12 months, the Enterprise Storage and Server team is focused on various operational levers to improve the momentum and profitability of the business. This quarter's results reflect their efforts in turning around the business and demonstrating the financial leverage of the model. Within ESS, revenue in industry-standard servers increased 12% year-over-year, reflecting continued, solid execution on a number of fronts, including discount controls, option attach rates, and unit mix. We continue to see strength in server blades, where revenue increased 65% over the prior-year period. Revenue in business critical systems declined 1% year-over-year. We continue to see solid momentum in Integrity servers, with revenue up 70% year-over-year. And this was offset by weakness in PA-RISC and Alpha. Storage revenue increased 17% year-over-year, reflecting improved execution and solid growth in every product category and every region. We saw ongoing strength in the mid-range, with EVA revenue up 44% year-over-year. We also had solid growth at the high end, where XP revenues increased 32% over the prior-year period. We will continue to work hard on key initiatives, such as sales specialists hiring and our alignment with enterprise VARs to drive sustainable momentum in Storage. Revenue in HP Services grew 6% year-over-year, to 3.9 billion, within HPS, Technology Services grew 4%, Managed Services grew 9%, and Consulting and Integration revenue grew 11%. We're working on driving greater efficiency and leveraging the Services organization, be it delivery model improvements and investments in lower-cost locations. We are also working to leverage the R&D investments in OpenView to reduce the cost structure of Services, and to optimize our R&D road map. Segment operating profit was 322 million, or 8.3% of revenue. As in the third quarter, HP Services' margins were pressured by the Company bonus accrual, given the headcount intensity of the business. If you exclude the fourth quarter bonus accrual, operating margins in Managed Services and Consulting and Integration were at their best levels in two and three years, respectively. And operating margins in Technology Services were at their highest levels in fiscal year '05. However, we need to deliver solid margins, while absorbing the Company bonus payments, and we’ll continue to work hard on the operations of the business to drive to this goal. Turning to Software, revenue grew 11%, to 311 million, with growth in OpenView and OpenCall of 16% and 3%, respectively. Software delivered its first ever operating profit, with segment operating profit of 27 million, or 8.7% of revenue. We are pleased to be in the black, and will continue to work on revenue growth and productivity initiatives, as well as cost discipline. During the quarter, we continued to strengthen our Software offerings with the pending acquisition of Peregrine. The acquisition will add key asset and service management components to the HP OpenView portfolio, a distributed management software suite for business operations and IT. Peregrine's capabilities include: asset tracking, expense controls, process automation, service control, service alignment, and enterprise discovery, IT executive dashboard products, as well as outsourcing business continuity, and consolidation management. I'll leave my segments comments at that for now, and I'd like to turn the call over to Bob.

Thank you, Mark, and good afternoon, everyone. Let me begin with a quick review of the performance of our Financial Services business. Revenue for HPFS during the quarter was 514 million, up 3% year-over-year and 5% sequentially. Operating margin was 10.1%, up from 3.8% last year, and down from 11.9% in Q3. The improvement in margin is largely due to the fact that Q4 '04 results were adversely impacted by the recording of reserves for certain receivables. During the course of FY '05, the risk profile of the portfolio has steadily improved, and the reserve levels have been adjusted accordingly. Financing volume decreased 1% year-over-year, and was up 21% sequentially. Portfolio assets decreased 3% year-over-year, and increased 1% sequentially. Now, onto the key elements of the P&L. Non-GAAP EPS was $0.51, up from $0.41 a year ago. GAAP EPS for the quarter was $0.14, which included 1.1 billion, or $0.37, in after-tax adjustments that were not included in our non-GAAP results. The majority of the adjustments relate to pre-tax restructuring charges of 1.6 billion, which is a more significant charge than the 1.1 billion that we estimated when we announced our restructuring in July. The increase over our initial estimates is due to the following: approximately 250 million, primarily associated with higher U.S. early retirement program costs versus our original estimates, and incremental expense from the acceleration of vesting and extension of exercise periods on stock options; approximately 200 million, primarily arising from differences in the job mix of terminated employees versus original estimates; and we now expect to include approximately 15,300 employees in our announced restructuring program, approximately 800 more than our original estimate. While some of these additional costs will not yield additional savings, we do expect roughly 150 million in incremental annual gross savings beginning in FY '07, above 1.9 billion in gross savings that we estimated in July. Consistent with our announcement in July, we expect roughly half of these savings to fall to earnings. Note also, that although we took a significant charge in the fourth quarter, we will not begin to yield savings until employees have left the Company. Approximately 4,700 employees left the Company in the fourth quarter related to the July announcement. We still estimate that we will be executing on the plan throughout '06, and savings will increase accordingly. Revenue of 22.9 billion for the quarter was up 7% year-over-year, and up 6% when adjusted for effects in currency. On a regional basis, revenue was up 5% in the Americas, 8% in EMEA, and 12% in Asia-Pacific. When adjusted for the effects in currency, revenue is up 4% in the Americas, 8% in EMEA, and 9% in Asia-Pacific. Gross profit was 5.4 billion for the quarter, or 23.5% of revenue, up from 23.4 a year ago, and 23.2% sequentially. Year-over-year gross margin improvements in ESS, PSG, and to a lesser extent HPFS and Software were partially offset by gross margin declines in IPG and HPS. Non-GAAP operating expense totaled 3.6 billion for the quarter, or 15.9% of revenue, down from 16.4% a year ago, and 17.5% sequentially. Adjusting for currency, expenses were up 3% year-over-year, and 1% sequentially. Given that bonus accrual significantly pressured OpEx relative to the prior year, I am overall pleased with the progress we've made in OpEx, and we'll continue to focus on expense management. Non-GAAP operating profit was 1.7 billion, or 7.6% of revenue, up 245 million year-over-year, and 543 million sequentially. Non-GAAP other income and expense was income of 135 million, or roughly $0.04 per share, above the $0.02 per share we had estimated coming into the quarter. The increase reflects more favorable net interest income and currency impacts than our original estimate. Given current interest rates, projected cash and debt levels, and currency dynamics, we estimate OI&E to be about $0.03 per share per quarter for FY '06. While we may experience some one-time gains or losses from this baseline, these items are difficult to predict, and we will just call them out if and/or when they occur. Our non-GAAP tax rate was 20.0% for the quarter, in line with our guidance. I expect a non-GAAP tax rate of about 20% for fiscal 2006. Next to balance sheet. HP-owned inventory came in at 6.9 billion, down 194 million year-over-year, and up 233 million sequentially. Inventory days of supply stands at 35 days, down from 39 days last year, and 38 days sequentially. Inventory was managed well across each of our businesses. Regarding channel inventory, we ended the quarter in excellent shape across the board, with ESS and PSG at roughly 4 weeks and IPG a bit over 5 weeks. Quarter IPG channel inventory dollars were down year-over-year, while PSG was roughly flat. PSS dollars were up from unusually low prior year levels. Trade receivables ended the quarter at 9.9 billion, down 323 million, or 3% over the prior year, and up 1.1 billion, or 13% sequentially, in line with normal seasonality. As a percentage of revenue, trade receivables were 11.4%, down from 12.8% year-over-year, and up from 10.3% sequentially. DSO now stands at 39 days, down from 43 days last year, and up sequentially from 38 days. Next, property plant and equipment was down $198 million year-over-year, and up 21 million sequentially, to 6.5 billion. Gross CapEx was 522 million, down 29% year-over-year, and up 57% sequentially. On a net basis, CapEx was 446 million, down 30% year-over-year, and up 114% sequentially, primarily reflecting a lease reclassification that I mentioned last quarter. Financing assets accounted for a significant portion of CapEx during the quarter. Net PP&E as a percent of revenue now stands at 7.4%, down from 8.3% year-over-year, and 7.5% sequentially. Regarding accounts payable, days payable closed the quarter at 52 days, up from 51 days both sequentially and year-over-year. Next some comments on cash. Cash flow from operations was 1.9 billion for the quarter, despite paying approximately 900 million in funding to the pension plans and 300 million in tax payments related to repatriation. For the full year, we generated 8 billion of cash from operations, up 58% up year-over-year. Free cash flow, that is, operating cash flow, less net CapEx, was 6.6 billion, up 93% over last year. Both operating cash flow and free cash flow are the highest in the Company's history. For Q1 cash flow planning purposes do keep in mind that we expect significant cash outlays associated with our restructuring actions and Company bonus payment. During the quarter, we repurchased 1.4 billion in stock, and paid 229 million in our normal dividend. For the full year '05, we repurchased 3.5 million in stock and paid over 900 million in dividends. We closed the quarter with total gross cash of 13.9 billion, down from 14.6 billion sequentially, and up from 13.0 billion year-over-year. Our weighted average shares outstanding remained flat from Q3 to Q4, in line with the guidance we gave you last quarter. Going forward, I expect weighted average shares outstanding to remain about flat with our Q4 exit level of 2,915 billion. This expectation takes into account our continuing share repurchase activities and the current year appreciation in the stock price. There will, of course, be some variation based on our level of share repurchases and on the subsequent share price and its impact on option exercise patterns and common stock equivalents. Now, a few full year P&L highlights. For the full year, revenue was 86.7 billion, up 8% year-over-year, or 6% when adjusted for the effects of currency. On a full-year basis, non-GAAP EPS was $1.62, up 22%, from 1.33 last year. GAAP EPS for the year was $0.82, which included 2.3 billion, or $0.80 in after-tax adjustments that were not included in our non-GAAP results. Now for a few comments on our outlook for Q1 and the full year fiscal '06. On a constant currency basis, revenue typically declines by approximately 2 to 3% from Q4 into Q1, in line with normal business seasonality. However, given the significant currency movements over the last few months, we are faced with an additional sequential headwind of approximately 1% in Q1, if exchange rates stay roughly where they are today. With this in mind, we expect revenue of 22.3 to 22.6 billion in Q1 '06. The full year impact of currency fluctuations is more difficult to predict. However, given the euro traded in the 1.25 to 1.35 range for the majority of FY '05, we expect an adverse full year currency impact of approximately 2 to 3% for FY '06, with our current modeling suggesting that Q2 '06 growth may be the most adversely affected. When looking forward to the full year and taking these currency effects into account, we estimate FY '06 revenue growth of roughly 3 to 5%, suggesting FY '06 revenue of approximately $89.5 to $91.0 billion. On a constant-currency basis, this would reflect similar growth to the 6% constant-currency growth we achieved in FY '05. Before addressing EPS guidance, a few comments on stock compensation. Effective Q1 '06, we are adopting FAS123R, which requires us to include expenses related to stock compensation based on their fair values. We are providing non-GAAP EPS estimates with and without option expenses for comparability purposes. However, we will include stock compensation in our reported non-GAAP results and ask that all analysts include stock compensation expense in their officially submitted estimates. We are adopting FAS123R prospectively, and as such, we will not be restating prior period financial results. To assist you in analyzing trends in our stock compensation, we have provided two slides in our earnings presentation which include stock compensation functionalized between cost of goods sold, and operating expenses for the last eight quarters. Also, for FY '06 we currently intend to hold FAS123R expenses at the corporate level and not allocate them to our operating segments. We expect Q1 '06 non-GAAP EPS of $0.46 to $0.48, excluding stock compensation, or $0.42 to $0.44, including approximately $0.03 or $0.04 from stock-based compensation. For FY '06, we expect non-GAAP EPS of $1.88 to $1.95, excluding stock compensation, or $1.75 to $1.82, including approximately $0.13 from stock-based compensation. With that, I'll turn it over to you, Operator, to begin the Q&A.