Good day, ladies and gentlemen. Thank you very much for your patience andwelcome to the fourth quarter 2007 Hewlett-Packard earnings conference call.(Operator Instructions) I would now like to transfer the conference over toyour host for today’s presentation, Mr. Jim Burns, Vice President of InvestorRelations. Please proceed, sir.

Thank you. Good afternoon and welcome to our fourth quarterearnings conference call with Chairman and CEO Mark Hurd and CFO Cathie Lesjak.This call is being webcast live. A replay of the webcast will be availableshortly after the call for approximately one year. Some information provided during this call may includeforward-looking statements that are based on certain assumptions and aresubject to a number of risks and uncertainties and actual future results mayvary materially. Please refer to the risks described in HP's SEC reports,including our Form 10-Q for the fiscal quarter ended July 31, 2007. The financial information discussed in connection with thiscall includes tax related items, reflects estimates based on informationavailable at this time, and could differ materially from the amount ultimatelyreported in HP's 2007 Form 10-K. Earnings, operating margins, and similar itemsat the company level are sometimes expressed on a non-GAAP basis and have beenadjusted to exclude certain items, including amortization of purchaseintangibles and restructuring charges. The comparable GAAP financialinformation and a reconciliation of non-GAAP to GAAP are included in the tablesand in the fourth quarter earnings slide presentation accompanying today’searnings release, both of which are available on the HP investor relationswebpage under company information at www.hp.com. Finally, I would ask that you please refrain from askingmulti-part questions or clarifications during the Q&A. I will now turn thecall over to Mark. Mark V. Hurd: That request of Jim’s has never worked in any call but Ihope it works today, and with that, good afternoon and thanks for joining us.HP delivered a strong fourth quarter to close out its solid fiscal year. We hadbalanced growth across all regions and executed well in key market segments. For the year, we added over $12 billion of new revenue, grewnon-GAAP operating profit dollars 30%, and returned over $12 billion toshareholders through share repurchases and dividends. Let me walk you through some of the financial highlights ofthe quarter. HP revenue grew 15% to $28.3 billion. Non-GAAP operating marginsexpanded to 9.9% of revenue, which up 90 basis points from last year. Non-GAAPEPS was $0.86, up 26% versus the prior year period and we utilized our strongcash flow to repurchase $2 billion of shares. We generated these results while continuing to invest in ourlong-term strategic initiatives, which we expect will strengthen HP'scompetitiveness and efficiency. We did close 10 acquisitions during the yearand recently announced three more. With MacDermid ColorSpan, we expanded our portfolio ofdigital presses and wide format prints for our growing position in the graphicarts industry. With Atos Origin Middle East, we strengthened our consulting andintegration capabilities in this fast-growing market and by acquiring EYPMission Critical facilities, we’ll further our ability to design and to supportlarge scale data centers. Next I’ll try to spend a few minutes giving you somebusiness highlights and then Cathie will walk you through the actual numbers. We saw meaningful improvement in the TSG group, TechnologySolutions Group, which grew revenue 12% and operating profit 31% versus theprior year quarter. This performance generated $1.4 billion of operating profitrepresenting approximately half the company’s profit for the quarter. HPsoftware, blade servers and technology services all finished the year withespecially strong results. Our solution portfolio is stronger than ever and we areencouraged by the initial results of the enterprise sales force deployment.Building on this success, we will be making additional sales coverageinvestments in 2008 to expand our share of wallet. 2007 marked an important year for HP software. We doubledthe size of the business and strengthened our portfolio with key acquisitions.I am particularly pleased with the success of Mercury and the integration hasgone well. In the fourth quarter, we began to achieve the kind ofoperating margins expected from a scaled software business, one that is now thesixth largest software company in the world. In addition, we recently closedthe acquisition of Opsware, the leading in run-book automation and server andnetwork configuration. Moving forward, we’ll continue to grow the business,reintegrated Opsware, and strategically align our business intelligence andinformation management capabilities under the HP software segment. The personal systems group delivered an impressive fourthquarter to close out an excellent 2007. For the year, revenue grew over $7billion and operating profit increased by $787 million, more than any othersegment at HP. We continue to benefit as demand shifts towards mobility, toconsumer and emerging geographies such as Southeast Asia and Latin America. InChina, we are now selling in over 400 cities with more expansion planned inthis key market. In the fourth quarter, we also closed the acquisition ofNeoware, which will solidify our leadership in the thin client market. The imaging and printing group produced a solid fourthquarter with good momentum in key growth areas, including graphic arts andcommercial printing. For the year, IPG revenue grew 6% and operating marginsexpanded to 15.2%. We saw meaningful growth in our enterprise printing businessthis quarter and will be expanding our sales coverage in this segment. At the same time that we’re investing in our growth markets,we are rationalizing parts of our imaging and printing portfolio. As anexample, earlier this month we announced that we are seeking an alternativecamera business model which will free up capital for more attractivecategories, such as marketing collateral and retail photo solutions. We havesignificant opportunities to further scale the business and we will focus ourenergies in these areas. As a company, we are executing the plans we have laid outand delivering on our commitments to our customers, partners and investors. Weare effectively balancing growth, investments, and cost reduction initiatives.While our fourth quarter results show marked improvement, we still have work todo and investments to make. Next, I’m going to turn it over to Cathie so that she cangive you some further detail on the numbers and I look forward to seeing you inNew York City at the analyst day where we can give you more details of some ofthe things we’ve talked about. Catherine A. Lesjak: Thanks, Mark and good afternoon, everyone. HP deliveredanother solid quarter of balanced revenue and operating profit growth. Revenuefor the fourth quarter totaled $28.3 billion, up 15% year over year or up 11% inconstant currency. Non-GAAP operating profit grew 27% year over year to $2.8billion, or 9.9% of revenue. Looking at revenue by geography, each of our regions grew indouble digits, with Asia-Pacific up 20%, EMEA up 19%, and Americas up 10%. Wecontinue to benefit from our broad geographic reach, with 67% of our revenuecoming from outside of the U.S. Fourth quarter gross margin was 24.7%. Compared to a yearago, gross margin was up 40 basis points driven by a generally favorablecommodity environment and disciplined pricing. Strong performance in HPsoftware offset the negative gross margin mix impact of PSG’s strongperformance at the company level. Non-GAAP operating expenses for the quarter were $4.2billion, or 14.8% of revenue, an improvement of 50 basis points compared with ayear ago. In absolute dollars, operating expenses grew $430 million, drivenpredominantly by 10 acquisitions completed in FY07 and the affects of currency,as well as investments in sales resources. Going forward, we’ll continue to invest in new areas thathave the potential to drive future growth while remaining focused on optimizingour cost structure. Non-GAAP OI&E yielded income of $67 million, or roughly$0.02 per share. Our non-GAAP tax rate was 20% in Q4. Fourth quarter non-GAAPEPS was $0.86, up 26% from the $0.68 that we reported one year ago. GAAP EPS was $0.81, which included $132 million, or $0.05per share in after-tax adjustments, primarily related to the amortization ofpurchased intangibles that were excluded from our non-GAAP results. For the full year, we reported revenue of $104.3 billion,non-GAAP operating margin of 9.2%, and non-GAAP EPS of $2.93. On a GAAP basis, EPS was $2.68, which includes $690 million,or $0.25 per share in after-tax adjustments, primarily related to theamortization of purchased intangibles, restructuring, net pension curtailment,and in-process R&D that were excluded from our non-GAAP results. Drilling in on the performance by business segment, duringthe fourth quarter imaging and printing revenue grew 4% year over year to $7.6billion, with supplies revenue growth of 6% and commercial hardware revenuegrowth of 5%. Consumer hardware revenue declined 5% year over year, primarilydue to the declines in appliance printers and cameras. Total printer hardware units were up 5% year over year. Thisgrowth is slower than recent periods, reflecting our decision to be moredisciplined in our pricing of appliance printers and a tough prior yearcompare. Excluding appliance printers, total printer hardware units were up 9%year over year. In the consumer business, printer units were up 3% from theprior year, led by solid all-in-one unit growth. In the commercial business,printer hardware units were up 15% year over year, led by color laser printershipments up 17% and printer-based MSP shipments up 26%. In the fourth quarter, IPG delivered solid operating profitof $1.1 billion, or 14.5% of revenue, including a charge of $32 millionreflecting changes in the camera business model. This change in our camerastrategy will have unfavorable impact of approximately one percentage point onIPG revenue in FY08. Going forward, you will see us strategically taking outcosts and realigning resources to build on our core business and accelerate ourinvestments in growth initiatives. Personal systems had another outstanding quarter with everyregion reporting double-digit growth, market share gains, and strong marginperformance. For the first time, revenue in the quarter topped the $10 billionmark, increasing 30% year over year. Unit shipments were up 31% from the prioryear period. The market growth continued to be led by the shift tomobility, consumer demand, and emerging markets. These trends are playing toour strengths and in the fourth quarter, we grew notebook units 57% year overyear. Consumer client revenue was up 40% and total revenue fromemerging markets was up 56% from the prior year period with revenue from China,our third largest market for PCs, up more than 100%. We continue to see momentum in the commercial markets withour commercial client revenues up 24%. Our workstation business grew 31% yearover year as we leveraged a solid product offering combined with strong salesexecution and customer loyalty. Segment operating profit was $589 million, or 5.8% ofrevenue. Compared with the prior year period, PSG operating profit increased75% or $253 million, demonstrating solid sales execution, increased attach, andcost discipline. A favorable commodity environment also contributed to thesestrong operating margin results. Moving now to the technology solutions group, enterprisestorage and service continued to show strong growth in the fourth quarter withrevenue growing 10% year over year to $5.2 billion and operating profitincreasing to 13.5% of revenue. Within ESS, industry-standard servers revenue increased 14%year over year, driven by 78% growth in X86 Blade. Revenue in storage was up 7% year over year, with growth of17% in the mid-range EVA business, partially offset by declines in our tapebusiness. While there is still much room for improvement, we are pleased withthe progress the storage team is making. Business critical systems showed growth in every region thisquarter. In total, BCS revenue for the fourth quarter was up 5% year over year,reflecting improvements in sales coverage and execution. While ESS margins werefavorably impacted by component prices, our margin expansion is also driven byimproved sales execution, pricing discipline, and our ability to reduce costsand invest in growth markets. In the fourth quarter, HP services delivered revenue of $4.4billion, up 7% over the prior year period with balanced 7% growth in each ofour three business units. Operating profit for the quarter was $526 million, or 12% ofrevenue. For the full year, operating margins expanded 140 basis points to 11%of revenue, highlighting the sustained efforts of the team to reduce the costof service delivery. HP Software had an outstanding quarter with revenue of $698million and operating margin of 25.4%, or $177 million, reflecting strongoperational performance of the Open View and Mercury businesses, as well as thebenefits that come with scale. For the full year, HP Software delivered revenue of $2.3billion and operating profit of $347 million. HP financial services had revenue of $657 million, up 21%year over year and generated operating margin of 7.3%. We are encouraged withthe growth in our core financing volume and portfolio assets over the lastseveral quarters, as well as the strong performance in end-of-lease renewalsand equipment sales. Moving now to the balance sheet, HP owned inventory ended Q4at $8 billion, or 34 days of supply, down four days compared with a year ago.With regard to channel inventory, we exited Q4 in good shape. Personal systemsended the quarter with approximately four-and-a-half weeks in the channel, up ahalf-a-week compared with last year and well within our target range. Weeks of channel inventory for imaging and printing andenterprise storage and servers were roughly flat year over year. Trade receivables ended the quarter at $13.4 billion. DSOincreased to 43 days in Q4 from 40 days one year ago. Accounts payable endedthe quarter at $11.8 billion. Days payable was 50 days, down from 59 days lastyear. As we’ve discussed in prior quarters, we will continue toleverage our balance sheet to drive shareholder value. Next, property, plants and equipment was up $935 millionyear over year to $7.8 billion. Gross CapEx was $813 million, down 16% yearover year. On a net basis, CapEx was $748 million, down 14% from the prior yearperiod. Capital expenditures were primarily in IT, real estatefacilities, and assets used in our leasing business. Net PP&E as a percentageof revenue now stands at 7.5% of revenue, flat year over year. Moving on to our cash balance and cash flow, Q4 cash flowfrom operations was $3.6 billion and free cash flow was $2.9 billion. Sharerepurchases during Q4 totaled $2.2 billion -- $2 billion in the open market orapproximately 42 million shares. At the end of the quarter, we had roughly $2.7billion remaining in the current share repurchase authorization. We announcedtoday that the board has approved an additional share repurchase authorizationof $8 billion. Finally, we paid our quarterly dividend totaling $206million. For the full fiscal year, we returned over $12 billion toshareholders through share repurchases and dividends. At the same time, wespent $6.8 billion for acquisitions. We closed the year with a strong balancesheet, including total gross cash of $11.6 billion and net cash of $3.4billion. Now, a few comments on our outlook for both the firstquarter and the full fiscal year 2008. We expect Q1 fiscal 2008 revenue to be approximately $27.4billion to $27.5 billion. Similar to last quarter, we do not believe it isprudent to set investor expectations that our personal systems business cancontinue to grow at more than twice the market rate, nor do we think it appropriateto build a cost structure on that basis. For the full fiscal year, we expect revenue will beapproximately $111.5 billion. Regarding earnings, there are a few variables to keep inmind. First, we expect the component pricing environment to be moderately lessfavorable in Q1 than it was in Q4. Second, we estimate non-GAAP OI&E to beabout $0.02 per share in Q1 and approximately $0.10 for the full year 2008.Third, we expect a non-GAAP tax rate of approximately 21% for fiscal ’08. Finally, we expect to continue to repurchase shares in thecoming quarters. Share count will be impacted by share price trends, optionexercise patterns, common stock equivalents, and repurchase activity. Currently, we expect a modest decline in weighted averageshares outstanding in Q1. With that in mind, we estimate Q108 non-GAAP EPS of $0.80.For FY08, we expect non-GAAP EPS to be in the range of $3.32 to $3.37. All in all, we delivered solid results in FY07 and ourincreased outlook for fiscal 2008 reflects our progress to date. With that, we will now take your questions.

(Operator Instructions) Your first question comes from theline of Laura Conigliaro of Goldman Sachs. Please proceed. Laura Conigliaro -Goldman Sachs: Great. Well, starting with printers, printer unit growth hasbeen coming down pretty noticeably over the past three quarters, as suppliesgrowth too. You’ve got another hard compare in the Jan quarter, suggestinganother mid-single digit unit growth rate and another weak supplies growthrate. How should we be viewing growth in these categories after that? And since you have been working at trying to separatesupplies growth from unit growth, at what point might we start to actually seesome benefit from that without the help of much incremental hardware unitgrowth? Mark V. Hurd: I’ll start. First, I think good question. We’re prettycomfortable with mid to high single digit supplies growth and I think thatfavorably helps our business model. We’re also comfortable with mid-range,mid-single digit unit growth. To your point, we gained a heck of a lot of share coming offof a pretty rough 2003, 2004 and we’re also being picky about the categorieswe’re competing. Some of the areas, as Cathie noted, in the appliance printerarea, we’re not seeing the supplies connect rate that you might want and sotherefore, we’re putting our money into areas that we think give us betterconnects. So we feel pretty comfortable with where we are headed.Cathie also mentioned that if you actually took out the appliance growth rateon units and then looked at the core inkjet and laserjet, we had a prettyhealthy unity growth rate in the quarter, certainly comparable to what we’veseen in other quarters over the past two-and-a-half years. I think you should think about those rates. If we get intothose levels, which we feel good about, we’ll get favorable treatment in thebusiness model. We feel good about that and we’re continuing to be very toughin this IPG 2.0 transformation to be very focused on making sure that we lookat every piece of the business and look at the value it brings so that we go tothe real core places that we think we have opportunity to improve the business,which is what you saw in the camera business model decision that we described. We’re also working very hard, Laura, and I don’t mean to betoo verbose with this but I want to make sure I give you a clear answer tothis, we’ve worked very hard to ensure that we have channel alignment onsupplies inventory relative to the hardware opportunity during the quarter aswell. So it’s really all of those dynamics tied up together andnet net, you saw that if you took the camera charge out, IPG profit improvedduring the quarter, so we feel pretty good about our opportunities here but westill have a lot of work to do.

Our next question comes from the line of Bill Shope withJ.P. Morgan.

Okay, great. Thanks. Can you give us a bit more color onwhat you saw in component pricing and availability situation for the quarter,particularly as you saw it in PCs and as you saw it in servers and how weshould look at that relative to your guidance for next quarter? Mark V. Hurd: I’ll start, Bill. Commodity pricing was a bit more favorablethan we predicted, particularly in memory. As it relates to Q1, it’s aseasonally tight market as we approach the holidays and supply usuallytightens. The pricing environment is expected to be I’d say generallyfavorable, albeit maybe a little bit less than Q4. We’re navigating sometightness in some categories and yet there are other categories that there’spretty ample supply. So that’s probably my best characterization of thecommodity environment.

Our next question comes from Richard Gardner, Citigroup. Richard Gardner -Citigroup: Thanks very much. The thing that really stuck out to me inthe quarter was the strength that you had in business critical server and I washoping that you could provide some color on that. Mark V. Hurd: Well, I mean again, we’re just doing better. I mean, I wishI could give you a whole -- we’ve been obviously looking at this quite a bit.When you look at BCS, which is what we call business critical systems, to yourpoint, we spent a lot of time getting ISVs ported, and we’re up to over 13,000was the last count I saw. And it’s taken us time to get those ISVs ported. It’staken us time to really get our sales force wrapped around it and it’s also --you also have to look at the blend of BCS relative to blades, because there issome alignment of what happens within our user base and the construct of both,and I think the really nice thing about the quarter is the fact that we gotgrowth in BCS and still had the kind of blade growth of 78% blade growth. Thosetwo numbers combined are actually a very, very impressive performance for us. So it’s when you get both combined that you really start tofeel good about the health of our market position out there. Richard Gardner -Citigroup: Mark, is it just a combination of application ports andbetter sales execution and the fact that the old alpha and PA risk stuff isgetting to be a smaller part of the business, or are there any particularcustomer segments or applications where you are really starting to see somegood traction with Itanium? Mark V. Hurd: There is no one deal or two deals, so I can put that torest, that drove that answer. It is everything you describe. We obviously hadsome PA risk and alpha comps to have to get through but I would tell you thatsales execution is -- I’ll just word it this way; a great opportunity for us atHewlett-Packard and I think we saw a better version of that in Q4 and wecertainly feel good about it.

Our next question comes from the line of Brian Alexander ofRaymond James. Brian Alexander -Raymond James: Mark, just on the revenue guidance for FY08 of 7%, you’veconsistently talked about [the business] as more of a 4% to 6% growth rate. Allthe segments except software for the last couple of years have been guided inthat 4% to 6% range. Obviously you’ve done better than that but I guess thequestion is with increasing economic uncertainty and the law of large numberscreating a bigger hurdle, what gives you the confidence to step up the growthrate for the company and specifically what segments do you expect to do betterthan you’ve gotten before? Mark V. Hurd: Well, we’re not trying to step up expectations really toofar beyond the model that we described, so at the end of the day you have topeel back the currency impact and then really stare at those local currencygrowth rates. And I think right now what’s in the numbers that Cathie describedto you, as she mentioned is a couple of things. We’ve looked at currency in Q1and we’ve got a pretty good idea of where currency will fall, given how wehedge currencies and how we look at them in the quarter. We are more uncertain about currency in Q2, Q3, and Q4.We’ve seen obviously drastic changes in the Euro and other currencies thatleave us without a precise landing point on where those will be throughout therest of the year, so think of us as giving you a Q1 that we feel pretty goodabout from a currency perspective with a Q2 through Q4 with a little lesscertainty. That said, at the end of the day we like our position inmany of the markets that we are in. We are working very hard on our coststructure. We are realigning within the context of the cost structure that yousee and if you were to peel back even our SG&A and took out acquisitionsand took out currency, we’ve had very little increase in SG&A over the --and driving all of this growth with very little increase and yet even withinthat little increase, we’ve been able to put more feet on the street. So as Cathie mentioned, and I think it’s worth reiterating,we build business models that don’t have exorbitant growth rates in them. Webuild them on the model that you just reiterated back to me. We then putpressure on our expense structure and then we try to align as much go-to-marketcapacity and R&D capacity inside that tighter business model. And what thatallows us to do is if the growth is there, we’re able to take it or participatein it, let me put it that way, and then able to see it roll within our businessmodel. So we’re doing more of the same, Brian. That’s what I woulddescribe to you and that’s how we see fiscal year ’08. We’ll let the economywork its way through. Hopefully it’s better than some of the doomsayers predictand if it is, we hope to be able to benefit from that.

Our next question comes from Ben Reitzes of UBS. Benjamin Reitzes -UBS: Good afternoon, thanks. Just with regard to the economy,Mark, could you just talk a little bit more about that? In context, are youstill a third consumer, would you say? And can you talk about your exposure tofinancials and just in general, you’re still guiding for the next quarter 9% to10% growth, so it seems like HP is plugging along. Just putting your ownperformance in context with the market a little more and talking a little bitmore in consumer in certain segments, especially financials, would be helpful,if you can. Mark V. Hurd: Well, I’ll do my best but I mean I just -- again, I don’twant to be confused with an economist in any way, shape or form. We’re just --we know a lot about our company and we know a lot about our funnels and thevisibility of that and frankly, that’s what I’ll comment on. You know, we saw again, if you looked at our performance, wesaw solid growth across all businesses and regions and in remembering ourdemographics, 67% of our revenue comes from outside the U.S. If you looked at,as I mentioned, the brick countries of Brazil, Russia, India and China, we grew37%. It’s now 9% of our revenue and we saw strong growth in all of thoseregions. We’re executing well in some of our key markets -- PCs, blades,software. I mean, you’ve heard that story today. So on a worldwide basis, to give you some context onfinancial services, we are probably not the best one to ask about that marketbecause we just actually -- we have limited exposure to the financial servicesmarket. I won’t give you a precise number but it’s not a big number. Now, within that not a big number, we saw really no materialweakness in financial services and again, we’re largely under-penetrated inthat market so it’s -- big markets for us inside financial services aresub-segments like stock exchanges, which even in this market are actually doingpretty well. I wish I could give you more but we’re not -- we’re actuallytrying to get more exposed to financial services by actually selling more intothat industry. We see it as a big opportunity for us but currently it’s notnearly as big as we’d like it. But again, we saw no material weakness in itduring the quarter.

Our next question comes from Toni Sacconaghi of SanfordBernstein.

Thank you. I just wanted to follow-up on that previousquestion. Mark, the United States was the only region whose growth rate actuallydecelerated in the quarter and your guidance is calling for revenue growth atconstant currency to go from 10% this quarter to 5% next quarter. I appreciatethe not wanting to get ahead of yourselves in terms of PCs, but to hit thatrevenue growth rate, PCs has to decelerate from about 30% revenue growth to asingle-digit number. So are you being conservative overall or is there anythingthat I’m inferring about what we saw in the deceleration in the U.S. and yourguidance that is causing you to be more conservative? Catherine A. Lesjak: Toni, I think it’s really the deceleration in PSG that isdriving our guidance in Q1, and I don’t really see it as single-digityear-over-year growth deceleration but there is some deceleration. It still isfaster than the market and we still expect to increase market share in Q1. But again, we’ve been cautious about our PSG businessbasically each and every quarter, not wanting to get a cost structure ahead ofwhere our revenue is going to come in. So that’s really what’s driving a lot ofour revenue seasonality Q4 to Q1.

And any comment on the deceleration in the U.S. thisquarter, relative to all other regions in the world? Mark V. Hurd: No, not really. It’s kind of again a broad story, and Iusually don’t like to get into too much detail in all this, but I will for thesake of this call, since I know there’s interest. We did grow 7% so overall, itwas faster than the high end of our 4% to 6% range that we typically give thecompany. When we grow 7% overall, even though we’ve had other quarters betterthan that, we don’t feel too bad because it treats our business model veryfavorably. Now, inside that, we had some better performance in theenterprise than we’ve seen in the past and again, I’ve heard a lot of commentsabout enterprise but if you looked at it sequentially, we actually saw someimprovements in enterprise in the U.S. PSG continued along roughly where it hasbeen in the U.S. and then we did do some of our work in the printing segment inthe U.S. that I described earlier to an earlier question, so that was kind ofthe story in the U.S. for us, overall at 7% was not a bad quarter for us.

Our next question comes from the line of Harry Blount of LehmanBrothers.

I’m actually going to come back to the full year FY08guidance, sorry to do this but it looks to me like if we assume you guys dobenefit from the dollar, say the dollar stays flat just where it’s at and takea look at where the average price of the dollar was in fiscal ’07, it lookslike you might be getting three to four points currency benefit there, and ifyou make another point or two of acquisitions, it almost looks like theguidance is assuming very low single digit organic year-over-year growth, andI’d love for you to comment on that a little bit. Catherine A. Lesjak: As Mark mentioned, we feel pretty comfortable with thecurrency for Q1 and we factored that into our Q1 guidance but it’s just too uncertainwhat Q2 to Q4 is going to look like, and so we took a very conservative stanceon currency. If currency turns out to be more favorable than what we’vegot, then we will have built a cost structure that will allow for some niceexpansion on the bottom line with the increase in growth. Mark V. Hurd: Harry, while Cathie gives you a great analytical answer, Iwant to make sure I’m clear that I hope you just don’t go bake in all thecurrent currency into your model because we’re just unsure of where this thingis going to land. We’ve done that within the context of Q1, as I mentionedearlier, because we think we’ve got pretty good visibility over the course ofthe next 75 days, but that’s kind of where our visibility runs out. Now, to your point, if currency stays where it is or gets alittle better, we may do better but again, our business model is what we’vebeen describing all along. We try to make sure that we are very disciplined inour ability to align costs to growth and it’s very easy to get into a currencymodel that justifies a whole lot of spending. And I can tell you that I am notup for that. What I am up for is a disciplined approach to the year andwithin the cost structure that we can afford, at a revenue level that we canhave visibility to that we realign our cost structure to put us in the bestposition to capture that revenue if it shows up. We’ll see how the year unfolds but that’s how we built ourmodel and that’s where we are.

Got it. I was just -- it looks like in the context of theoverall marketplace, it looks like you guys are being very conservative on anyassumptions for organic growth. Mark V. Hurd: Well, thank you, Harry.

Our next question comes from the line of Andrew Neff of BearStearns.

Sure. I just wanted to go back to question earlier thatasked about the consumer outlook. I guess if Mark, if you could just talk aboutthe consumer side of the business, is it still around a third of your business?What were you seeing in different regions as to what consumer behavior was? Anysigns -- you talked about the commercial activity, that you weren’t seeing anysigns of weakness there. Just give us a sense about what the consumer istelling you at this point. Mark V. Hurd: I’ll do my best. The numbers you described are roughlyright. I mean, within a third, a third, a third, that being a third consumer, athird being what’s a broader definition of small and medium business, and thena third being the enterprise. Within that, I gave you some color. The color Iwas giving you was particularly on the U.S. enterprise earlier about seeingsome improvement there. Again, I wouldn’t run away with excitement on thatimprovement. When you look at it actual numbers, we improved sequentially overthe course of the year in our position in the enterprise in the U.S. Within the consumer market, to try to give you more color,we saw strong growth in certain product categories so -- and this is again alittle bit more depth than I usually give but I know it’s a topic of keeninterest. We saw very strong consumer desire for notebooks, so demand wasstrong. Demand was strong in some printer categories more than others, so therewas sort of a mix within the printer category, as there was a mix in the PCcategory. I think when you knit the whole consumer segment togetherglobally and across all product lines, we saw steady demand across the consumerand that’s a global-across-all-product-lines sort of statement. I know a lot ofdata, but unfortunately there’s a lot of points to cover and that’s roughlywhat I would describe our position as.

Do you sense any hesitance on the part of the channel incarrying inventories going into -- are they concerned about the consumer? Mark V. Hurd: I think it again goes back to, without taking in theindividual retailer’s position, so let’s take that aside, on a broad statementbasis it still comes back to the categories. I think when you look at the categories,there are some printer segments where the channel is very excited. There aresome PC segments where the channel is very excited and I tried to give youcolor, so I think the channel behavior pretty much mirrors the consumer demandstory that I just described. And we’re seeing no -- if your question is giventhat consumer demand, are you seeing aberative behavior on the part of the retailersbecause of say the credit crunch, and I’m putting words in your mouth andthat’s not what you asked, but my answer to that question would be no, we’renot seeing that.

Our next question comes from the line of Shannon Cross ofCross Research.

Good afternoon. Looking at your cash flow, inventory wasextremely solid quarter over quarter but AR continued to trend up. How shouldwe think about cash flow and working capital management as we go into fiscal2008, especially with the $8 billion share repurchase and what should we thinkabout -- maybe we’re jumping the gun here from what you’re going to be tellingus at the analyst day in a couple of weeks, but any color you can give would begreat. Catherine A. Lesjak: Sure. We’re going to continue to leverage our balance sheetto drive shareholder value. We’ve got a really strong balance sheet and we wantto take the best use of it, so we are making economic trade-offs to takeadvantage of cash discounts from suppliers, adjusting payment terms with ourcustomers that will allow us to drive more profitable growth, and we’ll continueto look at these trade-ups. We look at them very analytically to make sure thatthey do in fact add value, and that’s really what has driven the extension ofDSO and frankly the contraction of accounts payable. The other item on accounts payable is that we did change thelinearity of purchases in this quarter and that was heavily driven by somestrategic buys that we made early in the quarter that were really there todrive and assure us supply, especially in LCDs. So we made some very early andwise purchases in the quarter, which changes the linearity and of course thenthe mass for how DPOs actually calculated. Mark V. Hurd: I also would like to make sure that the inventory work wedid over the quarter was a lot of work on the part of the company. We’ve hadsome issues in Q1 and we wanted to make sure we really did the right job hereand I would tell you, this is not a demand signal either. This was just ustrying to get the optimal inventory conclusion at the end of the year. So to Cathie’s point, we are very mindful of the alignmentbetween DSO, DPO being payables, of course, and then the inventory and howthose asset metrics play again back into the total performance of the business. I mean, inventory -- just that one metric could be a very confusingmetric because you can describe that less inventory is good but to be veryblunt, you can in some cases have more inventory and increase your profitmargins. So when you look at the way you use logistics and the way you leveragelogistics across the globe, so we actually have a bit more complex process thatwe go through than just simply let’s lower inventory and let’s get payables tothe highest number we possibly can. We have to align the balance sheet metricand we have to align it with the income statement and then we have to look atthe best return on our invested capital that we get for the alignment of allthose metrics. So it’s a case where -- you know, I like metrics but you canget over-metricized in this area if you’re not careful. You have to look at theintegration of these metrics, and so what we do and Cathie and I spent a lot oftime on this, and I would tell you that Cathie’s done a great job aligning theclarity of these metrics to make sure we clearly understand what drives more shareholdervalue.

Okay, and so as we look at fiscal ’08 to fiscal 2008 -- orsorry, fiscal ’07 to fiscal ’08, is there anything that’s dramatically changingfrom any of the metrics from a working capital standpoint? Or should we assumebusiness as usual as we factor in and try to figure out our cash flow numbersfor ’08? Catherine A. Lesjak: You should assume business as usual. There will be no -- atthis point, we don’t anticipate any big changes to our working capital metricsbut the reality is we look at this on a fairly real-time basis to make sure wemake the right decisions to drive the best value for the shareholder. But ingeneral, we’re basically calling for them to be about this level. Mark V. Hurd: I think the big wildcard really is if we have more successin the enterprise, and the enterprise has some different DSO metrics and thosecan affect you. It’s sort of like if you are successful, there are some thingsthat come with the price of success that we have to deal with. So if we arevery successful this year, it could throw us off a bit on those metrics butagain, that’s not what we’ve got blended into our models. We think we knowwhere we are headed in the enterprise and I would agree with Cathie -- this is businessas usual for us and we are going to continue to be very focused on thesemetrics. Catherine A. Lesjak: And before we get off of the topic of receivables, I thinkyou should never walk away feeling that we have any concern about our abilityto collect receivables. We don’t see any degradation in credit quality, so ourreceivables move out with a conscious decision and a reflection of theenterprise growth that we are getting and we are very comfortable that we’llcollect the receivables and generate the cash.

Great. Thank you.

Our next question comes from the line of Katie Huberty ofMorgan Stanley. Katie Huberty -Morgan Stanley: Mark, do you have any insight as to whether the recentacceleration in emerging market PC unit growth is coming from real secularimprovements and adoption rates that should continue into next year versus moreshort-term cyclical or currency factors that would be driving that incrementaldemand? Mark V. Hurd: They’re not currency factors, Katie. I think it’s a verygood question, the one that you raise. I do think as we’ve mentioned inprevious calls, this explosion of content that’s going on around the planet isa big driver, so when you think of the content, there’s words out there,analysis out there that the sheer size of global content, whether it’s producedby ESPN or News Corp or coming off the web at Yahoo!, the content is doublingevery 18 months. And when you get people across the globe that want access tothat content and you take places in some of these markets you’re describingwhere the only access that the person has to that content is through a notebookand a wireless card, because land lines are not nearly as pervasive as whatyou’ll see in markets like the U.S. And that’s why I always caution people, theU.S. is 5% of the world’s consumers. Ninety-five percent of them are not hereand when you look at some of the emerging markets, the necessity of some ofthis technology is more of a staple than I think what some of us typicallythink. We see good growth in those markets and our distribution inmarkets like China and in markets like India and markets like Eastern Europeare increasing. So we feel very good about the trends we are seeing in terms ofthe number of people that want access to that content and our opportunity tocompete for that. I feel good about it. I would not call any of this unitgrowth you are seeing there as currency driven, at least from what we areseeing. We think it is strong, natural demand based on the content and theaccess to it.

We’ll take two more questions, Operator.

Our next question comes from the line of Bill Fearnley ofFTN Midwest. William Fearnley -FTN Midwest Securities: Good afternoon. I wanted to shift gears, if I could, tostorage, Mark. Could you provide more color on the segment, the demand and thepricing environment for HP storage in light of some of the cautious commentaryfrom some of your competitors? And should we expect any M&A moves by HP,especially in storage hardware or storage software segments here in theupcoming year? Thanks. Mark V. Hurd: While I know this is an [imminent] call, I probably wouldn’tgo into much M&A detail on this call, other than to say we continue to havea filter of something that makes strategic sense, it makes financial sense, andwe can actually run it and operate it. Storage again, given what’s happeningwith the world’s content, it’s got to be created, it’s got to be moved, it’sgot to be processed, it’s got to be stored and it’s got to be visualized andgot to be printed, and storage is one of those key attributes. So storage is a place that we have interest in growing ourposition. That said, organically our position improved. I mean, EVA growth, ourmid-range EVA systems grew 17%, which is one of the better numbers that we’veseen and so we are happy with EVA growth. I continue to think you are going to see growth, Bill, morein that low-end mid-range area, particularly as those storage capabilitiesbegin to have more -- I don’t know what the right word for it is --reliability. They are now more accepted in the enterprise, not just through themid-market. So we feel good about our position there but we grew 7% here in thequarter and while we feel good about that, we could do better. We still have a tape business that is not growing the way wewould like and the high end is still behaving more like the mainframe market,as opposed to like the mid-range market and the lower end of the storage market. So even within storage, Bill, there’s a number of differentdimensions you have to get under. We feel very good about our MSA, which is ourlow end, and our mid-range EVA line and our opportunity to scale in that marketand we’ll continue to invest into that.

Let’s take one last question, please.

Our final question comes from the line of Keith Bachman ofBank of Montreal.

Under the wire -- Mark, a question on the profitabilityside, what was traditionally enterprise systems or ESG. The systems in thesoftware side had noticeable improvements in the operating margin. I thinksoftware had some noticeable help from the Merc fall-off on the accountingside, but how should we be thinking about sustained levels of profitability inthese two divisions in particular? Thanks. Mark V. Hurd: I’ll start and let Cathie chime in. I think on software, wegave a range a year ago of getting the software business to look like what ascaled software business ought to look like, and we gave ranges in ’08 ofroughly 18% to 22%. We’ve done nothing to change that view. We believe that thesoftware business has done a nice job integrating Mercury, as well as severalother acquisitions during the year, Keith. It wasn’t just Mercury. They’ve also done a nice job organically of building up ourorganic capabilities at the same time as we’ve been doing some integration, sowe feel real good about the operationalization of all that and I think you’llsee that platform that I described with the Mercury integration generating thekind of profit levels that we described. Now, as Cathie mentioned in her prepared statements that shementioned, we’ve got a couple of things that we’re going to move in and thatincludes our business intelligence offering and our information managementofferings, and those segments have typically been in ESS, and we are movingthem in because we think they are strategically better aligned in thego-to-market model of software than they are in ESS. And they are embryonic innature, which -- or I can use the word strategic or embryonic, most of themmean that they don’t generate great operating income at the current time but wethink the will in the future. So we are going to move them into software sowhat you’ll see in ’08 is us reporting the traditional way we think of softwareas we reported this quarter, which we think is healthy and projected to behealthy, relative to the models we described, plus these new segments that comein. So if you didn’t fall asleep listening to all that, I amgoing to let Cathie give you some more color. Catherine A. Lesjak: We will provide additional guidance in Q1 on exactly whatthe impact was of moving these embryonic businesses from ESS and the support piecefrom HP Services, but it’s important to note that the software margin will bedampened by, at least at the beginning of the year, by the move of these assetsinto software for next year.

And how about on the system side, Cathie? Catherine A. Lesjak: So we saw good improvement on system margins, both fromcommodity prices but it was actually way more than that. We also had goodwarranty improvement, good attach, good channel -- I’m sorry, not channel,supply chain efficiencies as well, and so we are feeling very, very good aboutthe ESS performance and our ability to continue to improve in that area. Andfrankly, take expenses out where appropriate with respect to our businesscritical systems business. As its gross margin has come down, we’ve also beenable to realign our cost structure in that area. Mark V. Hurd: Keith, ESS did a very nice job from a productivityperspective. To Cathie’s point, they generated the kind of growth that wereported today and did a very nice job on their expense structure as they didit, so again it’s an example of us -- ESS is not a place, Keith, that we wentout with big revenue projections going forward. Now they’ve delivered on thatbecause we’ve been able to keep our expenses very contained and even withinESS, as I mentioned, we’ve actually been able to align more of that to pureR&D and to the go-to-market model. And so as a result, when we see theopportunity in blades or BCS, we are now able to go do more work and bring thatrevenue into the company. So I think that’s a group that -- I’ll give it ashort-term thing because they’ll probably listen to the call and I don’t wantto laud anybody too much, but in this quarter did what we really -- we’d expectthem to do.

Okay. Thanks, guys. Mark V. Hurd: Okay, let me close up from there and I really do appreciateyour questions. I’ll summarize today’s call by saying that we had a strongquarter, characterized by double-digit growth across all of our regions, sharegains in key businesses, margin expansion, expense discipline, and significantshare repurchases. We did this while continuing to make progress on improvingour cost structure and investing in our strategic initiatives that we believe willstrengthen Hewlett-Packard’s long-term competitive positioning. Given the solid fundamentals within our business, we areincreasing non-GAAP EPS guidance for the ninth consecutive quarter and I ampleased with our progress to date and I am confident that we can continue toexecute with discipline and produce another year of strong financial returns. Finally, we do look forward to seeing you in New York Cityat our annual securities analyst meeting on December 11th, and I thank youagain for joining the call.

Thank you very much, sir and thank you, ladies andgentlemen, for your participation in today’s presentation. You may nowdisconnect. Have a good day.