HP INC. AND SUBSIDIARIES


                    Management's Discussion and Analysis of
                 Financial Condition and Results of Operations

This Management's Discussion and Analysis of Financial Condition and Results of
Operations ("MD&A") is organized as follows:
•      Overview. A discussion of our business and other highlights affecting the

Company to provide context for the remainder of this MD&A.

• Critical Accounting Policies and Estimates. A discussion of accounting

policies and estimates that we believe are important to understanding the

assumptions and judgments incorporated in our reported financial results.

• Results of Operations. An analysis of our operations financial results

comparing the three and six months ended April 30, 2020 to the prior-year


       period. A discussion of the results of operations is followed by a more
       detailed discussion of the results of operations by segment.

• Liquidity and Capital Resources. An analysis of changes in our cash flows

and a discussion of our liquidity and financial condition.

• Contractual and Other Obligations. An overview of contractual obligations,

retirement and post-retirement benefit plan contributions, cost-saving


       plans, uncertain tax positions and off-balance sheet arrangements of our
       operations.


The discussion of financial condition and results of our operations that follows
provides information that will assist the reader in understanding our
Consolidated Condensed Financial Statements, the changes in certain key items in
those financial statements from year to year, and the primary factors that
accounted for those changes, as well as how certain accounting principles,
policies and estimates affect our Consolidated Condensed Financial Statements.
This discussion should be read in conjunction with our Consolidated Condensed
Financial Statements and the related notes that appear elsewhere in this
document.

OVERVIEW


We are a leading global provider of personal computing and other access devices,
imaging and printing products, and related technologies, solutions, and
services. We sell to individual consumers, SMBs and large enterprises, including
customers in the government, health, and education sectors. We have three
reportable segments: Personal Systems, Printing and Corporate Investments. The
Personal Systems segment offers commercial and consumer desktop and notebook
PCs, workstations, thin clients, commercial mobility devices, retail POS
systems, displays and other related accessories, software, support, and
services. The Printing segment provides consumer and commercial printer
hardware, supplies, solutions and services, as well as scanning devices.
Corporate Investments include HP Labs and certain business incubation and
investment projects.
•      In Personal Systems, our strategic focus is on profitable growth through

market segmentation. This focus is with respect to enhanced innovation in

multi-operating systems, multi-architecture, geography, customer segments


       and other key attributes. Additionally, we are investing in endpoint
       services and solutions. We are focused on services, including Device as a
       Service, as the market begins to shift to contractual solutions. We
       believe that we are well positioned due to our competitive product lineup.


•      In Printing, our strategic focus is on contractual solutions to serve

consumers, SMBs and large enterprises through our Instant Ink Services and

Managed Print Services ("MPS") offerings, providing digital printing

solutions for graphics segments and applications including commercial

publishing, labels, packaging and textiles; as well as expanding our

footprint in the 3D printing and digital manufacturing marketplace.




We continue to experience challenges that are representative of trends and
uncertainties that may affect our business and results of operations. One set of
challenges relates to dynamic market trends, such as forecasted declining PC
Client markets and home printing markets. A second set of challenges relates to
changes in the competitive landscape. Our primary competitors are exerting
competitive pressure in targeted areas and are entering new markets, our
emerging competitors are introducing new technologies and business models, and
our alliance partners in some businesses are increasingly becoming our
competitors in others. A third set of challenges relates to business model
changes and our go-to-market execution in an evolving distribution and reseller
landscape, with increasing online and omnichannel presence. Additional
challenges we face at the segment level are set forth below.
•      In Personal Systems, we face challenges with industry component
       availability and a competitive pricing environment.



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•      In Printing, a competitive pricing environment, including from

non-original supplies (which includes imitation, refill or remanufactured


       alternatives), and a weakened market in certain geographies with
       associated pricing sensitivity of our customers present challenges. We
       also obtain many Printing components from single sources due to
       technology, availability, price, quality or other considerations. For
       instance, we source the majority of our A4 and a portion of our A3

portfolio of laser printer engines and laser toner cartridges from Canon.

Any decision by either party to not renew our agreement with Canon or to

limit or reduce the scope of the agreement could adversely affect our net

revenue from LaserJet products; however, we have a long-standing business

relationship with Canon and anticipate renewal of this agreement.




Our business and financial performance also depend significantly on worldwide
economic conditions. Accordingly, we face global macroeconomic challenges,
tariff-driven headwinds, uncertainty in the markets, volatility in exchange
rates, weaker macroeconomic conditions and evolving dynamics in the global trade
environment. The full impact of these and other global macroeconomic challenges
on our business cannot be known at this time.
To address these challenges, we continue to pursue innovation with a view
towards developing new products and services aligned with generating market
demand and meeting the needs of our customers and partners. In addition, we
continue to work on improving our operations and adapting our business models,
with a particular focus on enhancing our end-to-end processes, analytics and
efficiencies. We also continue to work on optimizing our sales coverage models,
aligning our sales incentives with our strategic goals, improving channel
execution and inventory management, strengthening our capabilities in our areas
of strategic focus, strengthening our pricing discipline and developing and
capitalizing on market opportunities.
Specifically, in October 2019, we announced cost-reduction and operational
efficiency initiatives intended to simplify the way we work, move closer to our
customers and facilitate specific investment in our business. These were further
updated in February 2020. These efforts include transforming our operating model
to integrate our sales force into a single commercial organization and reducing
structural costs across the Company through our restructuring plan approved in
September 2019 (the "Fiscal 2020 Plan"). We expect to invest some of the savings
from these efforts across our businesses, including investing to build our
digital capabilities. Over time, we expect these investments will make us more
efficient and allow us to advance our positions in Personal Systems and
Printing, while also disrupting new industries where we see attractive medium to
long-term growth opportunities. However, the rate at which we are able to invest
in our business and the returns that we are able to achieve from these
investments will be affected by many factors, including the efforts to address
the execution, industry and macroeconomic challenges facing our business as
discussed above. As a result, we may experience delays in the anticipated timing
of activities related to these efforts, and the anticipated benefits of these
efforts may not materialize.
We typically experience higher net revenues in our fourth quarter compared to
other quarters in our fiscal year due in part to seasonal holiday demand.
Historical seasonal patterns should not be considered reliable indicators of our
future net revenues or financial performance.

Our COVID-19 Response
In late 2019, COVID-19 was first identified, and in March 2020, the World Health
Organization declared the outbreak of COVID-19 to be a pandemic.  As part of
efforts to control and mitigate the spread of COVID-19, governmental authorities
around the world have imposed a variety of restrictions such as travel bans,
stay-at-home orders, quarantines, social distancing measures and temporary
business closures.
This section summarizes our response to the significant impacts related to the
COVID-19 pandemic that we have experienced to date, and we have included
additional details as applicable throughout other sections of this report. As
reflected in the discussions that follow, the impact of the pandemic and actions
taken in response to it have had a variety of impacts on our results of
operations for the second quarter of 2020. Through the date of this report,
these impacts have continued.
•         Our employees. We have been focused on protecting the health and safety
          of our employees during the COVID-19 pandemic, and we quickly pivoted
          the vast majority of our employees to work from home in response to

this. These arrangements have been designed to allow for continued

operation of non-production business-critical functions, including

financial reporting systems and internal controls. For those in

manufacturing and other critical functions that could not transition to

a remote model, we quickly implemented social distancing and additional


          safety and hygiene protocols, to protect the employees in our labs or
          manufacturing and production facilities.



•         Our community. We are committed to taking actions to protect the
          communities we serve. We are also putting our resources behind efforts
          to support local communities and to assist in the public health
          response. We have



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           Financial Condition and Results of Operations (Continued)

donated millions of dollars in technology and support across Personal Systems
and Printing to help students, families, and communities, including hospitals in
affected areas.
•               We have mobilized our 3D Printing team and Digital Manufacturing
                Partner Network to design, validate, and produce essential parts,
                such as face shields, respirators and other items. Along with our
                partners we have produced millions of essential parts. We are
                also ramping up production of 3D printed nasal swabs to help
                widespread testing.


•               We are deploying HP BioPrinters and associated supply cassettes,
                free of charge, to NGOs, state and local government agencies, and
                pharmaceutical companies to accelerate drug and vaccine research
                to combat COVID-19.


•               We made HP Sure Click Pro security software freely available
                through September 2020 to help protect against cyber threats for
                both HP and non-HP Windows 10 PCs as a large portion of the
                population is currently working from home.


•               We have committed to donating millions of dollars in products and
                grants to support blended learning in local communities impacted
                by COVID-19 around the globe as a large portion of the world's
                students are currently learning from home.



•         Our customers and partners. We are committed to our customers and

partners and to meeting their needs. We have taken meaningful actions

to remain close to our customers and partners, including implementing a

variety of relief initiatives to help them navigate their operational


          and financial challenges. We have provided a variety of financing and
          leasing options for end customers. We have provided short-term market

and country-specific incentives for partners. Offers vary by geography


          and are dependent on partner and customer eligibility. We are also
          offering online, on-demand learning options across a variety of topics

including sales skills education, product training and industry-leading

certifications, through HP University, to provide our partners with the

skills and knowledge required to optimize revenue and future-proof


          their business. Partners can opt in for customized online digital
          learning paths designed to meet their specific priorities.


• Supply chain. In the three months ended April 30, 2020, we experienced

disruptions in our manufacturing and supply chain. This included

temporary factory closures in China and Southeast Asia that impacted

our own factories as well as those of our suppliers and outsourcing

partners, resulting in temporary supply shortages. Additionally, we

also experienced logistics challenges, including delays in delivering

to our channels and end-customers as countries went into lockdown. This


          affected our ability to fulfill demand for Personal Systems and
          Printing worldwide. Manufacturing capacity returned to normalized
          levels in April through early May 2020.



•         Demand. COVID-19 has created new and different demand dynamics in the
          market. This is creating both challenges and opportunities across our
          businesses and geographies. In Personal Systems, we saw increased
          demand globally as the focus moved to keeping people connected,
          productive and secure and it reemphasized the essential role that PC

plays in everyday life. In Printing, we saw a significant slowdown in

Office and Graphics as offices closed and large events were canceled.


          During this same time, we also saw increased demand for hardware and
          ink supplies on the Consumer Printing side as countries went into
          lockdown and customers set up home office for remote working and school
          environments for remote learning.


• Liquidity. The global disruptions caused by the COVID-19 pandemic have

negatively impacted our cash flow from operations in the three months


          ended April 30, 2020. While the impacts from COVID-19 pandemic are
          currently expected to be temporary, there is uncertainty around the
          extent and duration of the disruption. As a result, our liquidity and

working capital needs may be impacted in future periods. We believe

that our businesses are strong cash flow generators and we maintain a

strong balance sheet to meet our liquidity needs. Our current cash and

cash equivalents, cash flow from operating activities, available

commercial paper authorization, new borrowings, and our credit

facilities will be sufficient to meet our operating cash requirements,


          planned capital expenditures, interest and principal payments on all
          borrowings, pension and post-retirement funding requirements,
          authorized share repurchases and annual dividend payments.



The full extent of the impact of the COVID-19 pandemic on our business, results
of operations and financial position is currently uncertain and will depend on
many factors that are not within our control, including, but not limited to: the
duration and scope of the pandemic; governmental, business and individuals'
actions that have been and continue to be taken in response

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           Financial Condition and Results of Operations (Continued)

to the pandemic; general economic uncertainty in key global markets and
financial market volatility; global economic conditions and levels of economic
growth; and the pace of recovery when the COVID-19 pandemic subsides. See the
section entitled "Risk Factors" in Item 1A of Part II of this report for further
information about related risks and uncertainties.

Unsolicited Exchange Offer
On March 2, 2020, Xerox Holdings Corporation ("Xerox") commenced an unsolicited
exchange offer for all outstanding shares of HP's common stock (the "Offer").
Xerox had also previously nominated candidates for election to HP's Board of
Directors (the "Board") at HP's 2020 annual meeting of stockholders. On March
31, 2020, Xerox announced that the Offer had been terminated and subsequently
withdrew its slate of director nominees. In order to respond to Xerox's actions,
HP incurred significant costs during the three and six months ended April 30,
2020.
For a further discussion of trends, uncertainties and other factors that could
impact our operating results, see the section entitled "Risk Factors" in Item 1A
of Part II of this report as well as in Item 1A of Part I in our Annual Report
on Form 10-K for the fiscal year ended October 31, 2019.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES
MD&A is based on our Consolidated Condensed Financial Statements, which have
been prepared in accordance with U.S. GAAP. The preparation of these financial
statements requires management to make estimates, judgments and assumptions that
affect the reported amounts of assets, liabilities, net revenues and expenses,
and disclosure of contingent liabilities. As of April 30, 2020, the impact of
COVID-19 on our business continued to unfold. As a result, many of our estimates
and assumptions required increased judgment and carry a higher degree of
variability and volatility. As events continue to evolve and additional
information becomes available, our estimates may change in future periods. Our
management believes that there have been no significant changes during the six
months ended April 30, 2020 to the items that we disclosed as our critical
accounting policies and estimates in MD&A in our Annual Report on Form 10-K for
the fiscal year ended October 31, 2019, except as mentioned previously in "Note
1: Basis of Presentation".
ACCOUNTING PRONOUNCEMENTS
For a summary of recent accounting pronouncements applicable to our Consolidated
Condensed Financial Statements see Note 1, "Basis of Presentation", to the
Consolidated Condensed Financial Statements in Item 1 of Part I of this report,
which is incorporated herein by reference.


RESULTS OF OPERATIONS
Revenue from our international operations has historically represented, and we
expect will continue to represent, a majority of our overall net revenue. As a
result, our net revenue growth has been impacted, and we expect it will continue
to be impacted, by fluctuations in foreign currency exchange rates. In order to
provide a framework for assessing performance excluding the impact of foreign
currency fluctuations, we supplement the year-over-year percentage change in net
revenue with the year-over-year percentage change in net revenue on a constant
currency basis, which excludes the effect of foreign currency exchange
fluctuations calculated by translating current period revenues using monthly
average exchange rates from the comparative period and hedging activities from
the prior-year period and does not adjust for any repricing or demand impacts
from changes in foreign currency exchange rates. This information is provided so
that net revenue can be viewed with and without the effect of fluctuations in
foreign currency exchange rates, which is consistent with how management
evaluates our net revenue results and trends, as management does not believe
that the excluded items are reflective of ongoing operating results. The
constant currency measures are provided in addition to, and not as a substitute
for, the year-over-year percentage change in net revenue on a GAAP basis. Other
companies may calculate and define similarly labeled items differently, which
may limit the usefulness of this measure for comparative purposes.
Results of operations in dollars and as a percentage of net revenue were as
follows:

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                    Management's Discussion and Analysis of
           Financial Condition and Results of Operations (Continued)

                                      Three months ended April 30                              Six months ended April 30
                                   2020                        2019                        2020                        2019
                                        % of Net                    % of Net                    % of Net                    % of Net
                          Dollars       Revenue       Dollars       Revenue       Dollars       Revenue       Dollars       Revenue
                                                                      Dollars in millions
Net revenue              $ 12,469      100.0  %      $ 14,036      100.0  %      $ 27,087      100.0  %      $ 28,746      100.0  %
Cost of revenue            (9,976 )    (80.0 )%       (11,307 )    (80.6 )%       (21,722 )    (80.2 )%       (23,405 )    (81.4 )%
Gross profit                2,493       20.0  %         2,729       19.4  %

5,365 19.8 % 5,341 18.6 % Research and development (338 ) (2.7 )% (353 ) (2.5 )%

(738 ) (2.7 )% (697 ) (2.4 )% Selling, general and administrative

             (1,216 )     (9.8 )%        (1,339 )     (9.5 )%        (2,506 )     (9.3 )%        (2,587 )     (9.0 )%
Restructuring and other
charges                       (81 )     (0.7 )%           (69 )     (0.5 )%          (372 )     (1.4 )%          (124 )     (0.5 )%
Acquisition-related
charges                        (3 )        -  %           (11 )     (0.1 )%            (3 )        -  %           (21 )     (0.1 )%
Amortization of
intangible assets             (29 )     (0.2 )%           (29 )     (0.2 )%           (55 )     (0.2 )%           (58 )     (0.2 )%
Earnings from operations      826        6.6  %           928        6.6  %         1,691        6.2  %         1,854        6.4  %
Interest and other, net         -          -  %           (45 )     (0.3 )%            13        0.1  %           (71 )     (0.2 )%
Earnings before taxes         826        6.6  %           883        6.3  %         1,704        6.3  %         1,783        6.2  %
Provision for taxes           (62 )     (0.5 )%          (101 )     (0.7 )%          (262 )     (1.0 )%          (198 )     (0.7 )%
Net earnings             $    764        6.1  %      $    782        5.6  %      $  1,442        5.3  %      $  1,585        5.5  %


Net Revenue
For the three months ended April 30, 2020, total net revenue decreased 11.2%
(decreased 10.1% on a constant currency basis) as compared to the prior-year
period. U.S. net revenue decreased 7.7% to $4.3 billion, while net revenue from
international operations decreased 12.9% at $8.2 billion. The decrease in total
net revenue was primarily driven by decline in Desktops, Supplies, Commercial
Printing Hardware and unfavorable foreign currency impacts. The decline is
driven by lower demand in Printing, as businesses have temporarily closed and
office workers transitioned to working from home, as well as manufacturing and
supply chain disruptions.
For the six months ended April 30, 2020, total net revenue decreased 5.8%
(decreased 4.7% on a constant currency basis) as compared to the prior-year
period. U.S. net revenue decreased 4.2% to $9.1 billion, while net revenue from
international operations decreased 6.6% to $17.9 billion. The decrease in total
net revenue was primarily driven by decline in Supplies, Desktops, Commercial
Printing Hardware and unfavorable foreign currency impacts partially offset by
Notebooks. The decline is driven by lower demand in Printing, as businesses have
temporarily closed and office workers transitioned to working from home, as well
as manufacturing and supply chain disruptions.
A detailed discussion of the factors contributing to the changes in segment net
revenue is included in "Segment Information" below.
Gross Margin
For the three months ended April 30, 2020, our gross margin increased by 0.6
percentage points, as compared to the prior-year period. The increase is
primarily driven by higher rate in Personal Systems due to favorable commodity
costs, partially offset by unfavorable segment mix and unfavorable rate in
Printing.
For the six months ended April 30, 2020, our gross margin increased by 1.2
percentage point as compared to the prior-year period. The increase is primarily
driven by higher rate in Personal Systems due to favorable commodity costs,
partially offset by unfavorable segment mix.
A detailed discussion of the factors contributing to the changes in segment
gross margins is included under "Segment Information" below.
Operating Expenses
Research and Development ("R&D")
R&D expense decreased 4.2% for the three months ended April 30, 2020, as
compared to the prior-year period, primarily due to structural savings and
expense management partially offset by continuing investments in innovation and
key growth initiatives. R&D expenses increased 5.9% for the six months ended
April 30, 2020 as compared to the prior-year period,

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           Financial Condition and Results of Operations (Continued)

primarily due to continuing investments in innovation and key growth initiatives
partially offset by structural savings and expense management.
Selling, General and Administrative ("SG&A")
SG&A expense decreased 9.2% and 3.1% for the three and six months ended
April 30, 2020, respectively, as compared to the prior-year period, driven by
structural cost savings from transformation program and the benefits of
temporary discretionary cost actions.
Restructuring and Other Charges
Restructuring and other charges for the three and six months ended April 30,
2020 relate primarily to the Fiscal 2020 Plan.
Amortization of Intangible Assets
Amortization of intangible assets for the three and six months ended April 30,
2020 relates primarily to intangible assets resulting from prior acquisitions.
Interest and Other, Net
Interest and other, net expense decreased by $45 million and $84 million for the
three months and six months ended April 30, 2020, respectively, as compared to
the prior-year period, primarily driven by Net Periodic Post-retirement Benefit
Cost.
Provision for Taxes
Our effective tax rate was 7.6% and 11.4% for the three months ended April 30,
2020 and 2019, respectively, and 15.4% and 11.1% for the six months ended April
30, 2020 and 2019, respectively. The difference between the U.S. federal
statutory tax rate of 21% and our effective tax rate for the three and six
months ended April 30, 2020 is primarily due to audit settlements in various
jurisdictions and favorable tax rates associated with certain earnings from our
operations in lower-tax jurisdictions throughout the world. For the three and
six months ended April 30, 2019, our effective tax rate generally differs from
the U.S. federal statutory rate of 21%, primarily due to favorable tax rates
associated with certain earnings from our operations in lower-tax jurisdictions
throughout the world.
During the three and six months ended April 30, 2020, we recorded $59 million
and $66 million respectively, of net tax benefits related to discrete items in
the provision for taxes. These amounts included tax benefits of $42 million and
$40 million related to audit settlements in various jurisdictions, $11 million
and $17 million related to acquisition charges, and $7 million and $55 million
related to restructuring charges for the three and six months ended April 30,
2020, respectively. These benefits were partially offset by uncertain tax
position charges of $3 million and $51 million for the three and six months
ended April 30, 2020, respectively. For the three and six months ended April 30,
2020, excess tax benefits associated with stock options, restricted stock units
and performance-adjusted restricted stock units were immaterial.
During the three and six months ended April 30, 2019, we recorded $40 million
and $49 million, respectively, of net income tax benefits related to discrete
items in the provision for taxes. These amounts included tax benefits of $42
million and $48 million related to one-time items for the three and six months
ended April 30, 2019, respectively, and $14 million and $26 million related to
restructuring charges for the three and six months ended April 30, 2019,
respectively. These benefits were partially offset by uncertain tax position
charges of $12 million and $32 million for the three and six months ended April
30, 2019, respectively and other charges of $4 million and $14 million for the
three and six months ended April 30, 2019, respectively. The six months ended
April 30, 2019 also included a tax benefit of $21 million related to final tax
reform adjustments. In addition to the discrete items mentioned above, we
recorded $20 million of excess tax benefits associated with stock options,
restricted stock units and performance-adjusted restricted stock units for the
six months ended April 30, 2019.
We record a valuation allowance to reduce deferred tax assets to the amount that
we are more likely than not to realize. During the three and six months ended
April 30, 2020, we determined that no material adjustments were required to our
valuation allowances due to the COVID-19 pandemic and its resulting impact to
our business. We will continue to monitor projections and their potential impact
on our assessment regarding the realizability of our deferred tax asset
balances.

Segment Information
A description of the products and services for each segment can be found in
Note 2, "Segment Information" to the Consolidated Condensed Financial Statements
in Item 1 of Part I of this report, which is incorporated herein by reference.
Future changes to this organizational structure may result in changes to the
segments disclosed.


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           Financial Condition and Results of Operations (Continued)


Personal Systems
                                   Three months ended April 30                Six months ended April 30
                                 2020            2019       % Change       2020          2019       % Change
                                                           Dollars in millions
Net revenue                  $    8,313       $  8,921        (6.8 )%   $  18,205     $ 18,578        (2.0 )%
Earnings from operations     $      552       $    385        43.4  %   $   1,214     $    795        52.7  %
Earnings from operations as
a % of net revenue                  6.6 %          4.3 %                      6.7 %        4.3 %

The components of net revenue and the weighted net revenue change by business unit were as follows:


                                         Three months ended April 30                       Six months ended April 30
                                                               Weighted Net                                       Weighted Net
                                        Net Revenue              Revenue                 Net Revenue                Revenue
                                                                Change(1)                                          Change(1)
                                     2020          2019                               2020            2019
                                                                Percentage                                         Percentage
                                    Dollars in millions           Points             Dollars in millions             Points

Notebooks                        $     5,083     $ 5,099          (0.2 )        $    11,057        $ 11,018           0.2
Desktops                               2,409       2,940          (5.9 )              5,332           5,797          (2.5 )
Workstations                             439         569          (1.5 )              1,033           1,131          (0.5 )
Other                                    382         313           0.8                  783             632           0.8
Total Personal Systems           $     8,313     $ 8,921          (6.8 )    

$ 18,205 $ 18,578 (2.0 )





(1) Weighted Net Revenue Change Percentage Points measures contribution of each
business unit towards overall segment revenue growth. It is calculated by
dividing the change in revenue of each business unit from the prior-year period
by total segment revenue for the prior-year period.

Three months ended April 30, 2020 compared with three months ended April 30,
2019
Personal Systems net revenue decreased 6.8% (decreased 5.6% on a constant
currency basis) for the three months ended April 30, 2020 as compared to the
prior-year period. The net revenue decrease was primarily due to decline in
Desktops and Workstations, and unfavorable foreign currency impacts, partially
offset by Notebooks. The net revenue decrease was driven by a 5.0% decline in
unit volume and 1.9% decline in average selling prices ("ASPs"), as compared to
the prior-year period. The decrease in unit volume was driven by decline in
Desktops and Workstations, partially offset by growth in Notebooks. Units
shipments were impacted by demand dynamics as well as supply chain disruptions
resulting from COVID-19. The decrease in ASPs was due to lower rate and
unfavorable foreign currency impacts, partially offset by positive mix shifts.
Consequently, Consumer revenue decreased 6.9% and Commercial revenue decreased
6.8% for the three months ended April 30, 2020 as compared to the prior-year
period.
Net revenue decreased 18.1% in Desktops and 22.8% in Workstations and 0.3% in
Notebooks as compared to the prior-year period.
Personal Systems earnings from operations as a percentage of net revenue
increased by 2.3 percentage points for the three months ended April 30, 2020 as
compared to the prior-year period, driven by increase in gross margin due to
favorable commodity costs partially offset by lower ASPs and increase in
logistics costs.

Six months ended April 30, 2020 compared with six months ended April 30, 2019
Personal Systems net revenue decreased 2.0% (decreased 0.7% on a constant
currency basis) for the six months ended April 30, 2020 as compared to the
prior-year period. The net revenue decrease was primarily due to decline in
Desktops and unfavorable foreign currency impacts, partially offset by
Notebooks. The net revenue decrease was driven by a 1.6% decrease in ASPs and
unit volume decreased by 0.4%, as compared to the prior-year period. The
decrease in ASPs was due to lower rate and unfavorable currency impacts
partially offset by positive mix shifts. The decrease in unit volume was
primarily due to decline in Desktops, partially offset by growth in Notebooks.
Consumer revenue decreased 6.7% as compared to prior-year

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period, driven by units decline in Desktops and lower ASPs. Commercial revenue
increased 0.2% as compared to the prior-year period, driven by growth in
Notebooks.
Net revenue decreased 8.0% in Desktops and 8.7% in Workstations and increased
0.4% in Notebooks, as compared to the prior-year period.
Personal Systems earnings from operations as a percentage of net revenue
increased 2.4 percentage points for the six months ended April 30, 2020 as
compared to the prior-year period. The increase was primarily due to an increase
in gross margin partially offset by an increase in operating expenses as a
percentage of net revenue. The increase in gross margin was primarily due to
favorable commodity costs, partially offset by lower ASPs. Operating expenses as
a percentage of net revenue increased primarily due to increased investments in
key growth initiatives.
Printing
                                   Three months ended April 30               Six months ended April 30
                                 2020           2019       % Change       2020          2019       % Change
                                                           Dollars in millions
Net revenue                  $   4,158       $  5,116       (18.7 )%   $   8,882     $ 10,172       (12.7 )%
Earnings from operations     $     548       $    839       (34.7 )%   $   1,302     $  1,660       (21.6 )%
Earnings from operations as       13.2 %         16.4 %                     14.7 %       16.3 %
a % of net revenue

The components of net revenue and the weighted net revenue change by business unit were as follows:


                                     Three months ended April 30                     Six months ended April 30

                                    Net Revenue           Weighted Net             Net Revenue            Weighted Net
                                                             Revenue                                         Revenue
                                 2020          2019         Change(1)           2020           2019         Change(1)
                                                           Percentage                                      Percentage
                                Dollars in millions          Points            Dollars in millions           Points
Supplies                     $    2,841     $  3,331          (9.6 )       $   5,882        $  6,598          (7.0 )
Commercial Hardware                 808        1,179          (7.2 )           1,884           2,269          (3.8 )
Consumer Hardware                   509          606          (1.9 )           1,116           1,305          (1.9 )
Total Printing               $    4,158     $  5,116         (18.7 )       $   8,882        $ 10,172         (12.7 )



(1) Weighted Net Revenue Change Percentage Points measures contribution of each
business unit towards overall segment revenue growth. It is calculated by
dividing the change in revenue of each business unit from the prior-year period
by total segment revenue for the prior-year period.

Three months ended April 30, 2020 compared with three months ended April 30,
2019
Printing net revenue decreased 18.7% (decreased 17.9% on a constant currency
basis) for the three months ended April 30, 2020 as compared to the prior-year
period. The decline in net revenue was driven by declines in Supplies,
Commercial Hardware and Consumer Hardware. Net revenue for Supplies decreased
14.7% as compared to the prior-year period, primarily driven by demand weakness
as businesses have temporarily closed and office workers transitioned to working
from home. Printer unit volume decreased 22.5% and ASPs decreased 14.0% as
compared to the prior-year period. The decrease in printer unit volume was
driven by unit decreases in both Commercial and Consumer Hardware. Printer ASPs
decreased primarily due to lower rate in Commercial Hardware.
Net revenue for Commercial Hardware decreased by 31.5% as compared to the
prior-year period, primarily due to a 28.2% decrease in ASPs and a 24.7%
decrease in printer unit volume. The decrease in ASPs was driven by lower rate.
The printer unit volume decline was due to lower demand for Commercial Hardware
as businesses have temporarily closed and office workers transitioned to working
from home.
Net revenue for Consumer Hardware decreased 16.0% as compared to the prior-year
period, primarily due to a 22.1% decrease in printer unit volume partially
offset by 7.8% increase in ASPs. The printer unit volume decrease was primarily
due to supply chain disruptions due to COVID-19. The increase in ASPs was
primarily driven by higher rate, positive mix shifts partially offset by
unfavorable foreign currency impact.

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                            HP INC. AND SUBSIDIARIES
                    Management's Discussion and Analysis of
           Financial Condition and Results of Operations (Continued)

Printing earnings from operations as a percentage of net revenue decreased by
3.2 percentage points for the three months ended April 30, 2020 as compared to
the prior-year period, primarily due to lower Hardware and Supplies net revenue.

Six months ended April 30, 2020 compared with six months ended April 30, 2019
Printing net revenue decreased 12.7% (decreased 11.9% on a constant currency
basis) for the six months ended April 30, 2020 as compared to the prior-year
period. The decline in net revenue was primarily driven by a decline in
Supplies, Commercial Hardware, Consumer Hardware and unfavorable foreign
currency impacts. Net revenue for Supplies decreased 10.9% as compared to the
prior-year period, due to lower demand and COVID-19 related impacts. Printer
unit volume decreased 16.1% and ASPs decreased 6.9% as compared to the
prior-year period. The decrease in printer unit volume was primarily driven by
unit decreases in both Commercial and Consumer Hardware. Printer ASPs decreased
primarily due to lower rate and unfavorable foreign currency impact.
Net revenue for Commercial Hardware decreased by 17.0% as compared to the
prior-year period, primarily due to a 18.1% decrease in printer volume and a
decrease in ASPs by 11.8%. The printer unit volume decline was due to lower
demand in Commercial Hardware as businesses have temporarily closed and office
workers transitioned to working from home. The decrease in ASPs was driven by
lower rate, mix shifts and unfavorable foreign currency impacts.
Net revenue for Consumer Hardware decreased 14.5% as compared to the prior-year
period due to a decrease in printer unit volume by 15.8% partially offset by
1.4% increase in ASPs. The printer unit volume decrease was driven by supply
chain disruptions due to COVID-19 and lower demand in the first quarter. The
increase in ASPs was primarily due to higher rate, partially offset by
unfavorable foreign currency impacts.
Printing earnings from operations as a percentage of net revenue decreased by
1.6 percentage points for the six months ended April 30, 2020 as compared to the
prior-year period, primarily due to lower Hardware and Supplies net revenue.
Corporate Investments
The loss from operations in Corporate Investments for the three and six months
ended April 30, 2020 was primarily due to expenses associated with our
incubation projects.
LIQUIDITY AND CAPITAL RESOURCES
We use cash generated by operations as our primary source of liquidity. The
global disruptions caused by the COVID-19 pandemic have negatively impacted our
cash flow from operations in the three months ended April 30, 2020. While the
impacts from the COVID-19 pandemic are currently expected to be temporary, there
is uncertainty around its extent and duration and our liquidity and working
capital needs may be impacted in the future periods. We believe that current
cash, cash flow from operating activities, new borrowings, available commercial
paper authorization and the credit facilities will be sufficient to meet HP's
operating cash requirements, planned capital expenditures, interest and
principal payments on all borrowings, pension and post-retirement funding
requirements, authorized share repurchases and annual dividend payments.
Additionally, in the event that suitable businesses are available for
acquisition that offer good return opportunities, the Company may obtain all or
a portion of the financing for these acquisitions through additional borrowings.
While our access to capital markets may be constrained and our cost of borrowing
may increase under certain business, market and economic conditions, our access
to a variety of funding sources to meet our liquidity needs is designed to
facilitate continued access to capital resources under all such conditions. Our
liquidity is subject to various risks including the risks identified in the
section entitled "Risk Factors" in Item 1A of Part II of this report as well as
in Item 1A of Part I in our Annual Report on Form 10-K for the fiscal year ended
October 31, 2019 and the market risks identified in the section entitled
"Quantitative and Qualitative Disclosures about Market Risk" in Item 3 of Part I
of this report, which are incorporated herein by reference.
On February 22, 2020, HP's Board of Directors increased HP's share repurchase
authorization to $15.0 billion.
Our cash and cash equivalents balances are held in numerous locations throughout
the world. We utilize a variety of planning and financing strategies in an
effort to ensure that our worldwide cash is available when and where it is
needed. Amounts held outside of the United States are generally utilized to
support non-U.S. liquidity needs and may from time to time be distributed to the
United States. The Tax Cuts and Jobs Act ("TCJA") made significant changes to
the U.S. tax law, including a one-time transition tax on accumulated foreign
earnings. The payments associated with this one-time transition tax will be paid
over eight years and began in fiscal year 2019. We expect a significant portion
of the cash and cash equivalents held by our foreign subsidiaries will no longer
be subject to U.S. income tax consequences upon a subsequent repatriation to the
United States as a result of the transition tax on accumulated foreign earnings.
However, a portion of this cash may still be subject to foreign income tax or
withholding tax consequences upon repatriation. As we evaluate the future cash
needs of our operations, we may revise the amount of foreign earnings considered
to be permanently reinvested in our foreign subsidiaries and how to utilize such
funds, including reducing our gross debt level, or other uses.

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                            HP INC. AND SUBSIDIARIES
                    Management's Discussion and Analysis of
           Financial Condition and Results of Operations (Continued)

Liquidity

Our key cash flow metrics were as follows:


                                             Six months ended April 30
                                              2020              2019
                                                    In millions

Net cash provided by operating activities $ 775 $ 1,723 Net cash used in investing activities

           (380 )               (22 )
Net cash used in financing activities           (878 )            (3,311 )

Net decrease in cash and cash equivalents $ (483 ) $ (1,610 )




Operating Activities
Compared to the corresponding period in fiscal year 2019, net cash provided by
operating activities decreased by $0.9 billion for the six months ended
April 30, 2020, primarily due to back-end loaded manufacturing activities
impacted by the COVID-19 pandemic.
Key Working Capital Metrics
Management utilizes current cash conversion cycle information to manage our
working capital level. Our working capital metrics and cash conversion cycle
impacts were as follows:
                                           As of                                As of
                             April 30,    October 31,             April 30,    October 31,
                                2020         2019       Change       2019         2018       Change     Y/Y Change
Days of sales outstanding in     37           35            2         35           30           5             2
accounts receivable ("DSO")
Days of supply in inventory      57           41           16         43           43           -            14
("DOS")
Days of purchases
outstanding in accounts        (128 )       (107 )        (21 )     (110 )       (105 )        (5 )         (18 )
payable ("DPO")
Cash conversion cycle           (34 )        (31 )         (3 )      (32 )        (32 )         -            (2 )


April 30, 2020 as compared to April 30, 2019
The cash conversion cycle is the sum of days of DSO and DOS less DPO. Items
which may cause the cash conversion cycle in a particular period to differ from
a long-term sustainable rate include, but are not limited to, changes in
business mix, changes in payment terms, extent of receivables factoring,
seasonal trends and the timing of revenue recognition and inventory purchases
within the period.
DSO measures the average number of days our receivables are outstanding. DSO is
calculated by dividing ending accounts receivable, net of allowance for doubtful
accounts, by a 90-day average net revenue. The increase in DSO was primarily due
to unfavorable revenue linearity due to the impact of COVID-19.
DOS measures the average number of days from procurement to sale of our product.
DOS is calculated by dividing ending inventory by a 90-day average cost of
revenue. The increase in DOS was primarily due to increased strategic buys in
Personal Systems and lower cost of revenue primarily due to the impact of
COVID-19.
DPO measures the average number of days our accounts payable balances are
outstanding. DPO is calculated by dividing ending accounts payable by a 90-day
average cost of revenue. The increase in DPO was primarily due to increased
strategic inventory purchases and lower cost of revenue primarily due to the
impact of COVID-19.
Investing Activities
Compared to the corresponding period in fiscal year 2019, net cash used in
investing activities increased by $0.4 billion for the six months ended
April 30, 2020, primarily due to a decrease in sale of investments classified as
available-for-sale investments within Other current assets of $0.7 billion,
partially offset by lower net payments for acquisitions of $0.4 billion.



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                            HP INC. AND SUBSIDIARIES
                    Management's Discussion and Analysis of
           Financial Condition and Results of Operations (Continued)

Financing Activities
Compared to the corresponding period in fiscal year 2019, net cash used in
financing activities decreased by $2.4 billion for the six months ended
April 30, 2020, primarily due to an increase in commercial paper amount of $1.5
billion, lower payment of debt of $0.4 billion and lower share repurchases
amount of $0.6 billion .
Capital Resources
Debt Levels
We maintain debt levels that we establish through consideration of a number of
factors, including cash flow expectations, cash requirements for operations,
investment plans (including acquisitions), share repurchase activities, our cost
of capital and targeted capital structure. Depending on these factors, we may,
from time to time, incur additional indebtedness or refinance existing
indebtedness. Outstanding borrowings increased to $5.5 billion as of April 30,
2020 as compared to $5.1 billion as of October 31, 2019, bearing
weighted-average interest rates of 4.3% and 4.6% for April 30, 2020 and
October 31, 2019, respectively.
Our weighted-average interest rate reflects the effective rate on our borrowings
prevailing during the period and reflects the effect of interest rate swaps. For
more information on our interest rate swaps, see Note 8, "Financial
Instruments", to the Consolidated Condensed Financial Statements in Item 1 of
Part I of this report, which is incorporated herein by reference.
As of April 30, 2020, we maintain a senior unsecured committed revolving credit
facility with aggregate lending commitments of $4.0 billion, which will be
available until March 30, 2023 and is primarily to support the issuance of
commercial paper. On May 29, 2020, we entered into a 364-day revolving credit
facility providing for a senior unsecured revolving credit facility with
aggregate lending commitments of $1.0 billion, which will be available until May
28, 2021. Funds borrowed under these revolving credit facilities may be used for
general corporate purposes.

Available Borrowing Resources
We had the following resources available to obtain short or long-term financing
in addition to the commercial paper and revolving credit facilities discussed
above:
                                   As of April 30, 2020
                                       In millions
2019 Shelf Registration Statement           Unspecified
Uncommitted lines of credit       $                 725


For more information on our borrowings, see Note 9, "Borrowings", to the
Consolidated Condensed Financial Statements in Item 1 of Part I of this report,
which is incorporated herein by reference.
Credit Ratings
Our credit risk is evaluated by major independent rating agencies based upon
publicly available information as well as information obtained in our ongoing
discussions with them. While we do not have any rating downgrade triggers that
would accelerate the maturity of a material amount of our debt, previous
downgrades have increased the cost of borrowing under our credit facilities,
have reduced market capacity for our commercial paper and have required the
posting of additional collateral under some of our derivative contracts. In
addition, any further downgrade to our credit ratings by any rating agencies may
further impact us in a similar manner, and, depending on the extent of any such
downgrade, could have a negative impact on our liquidity and capital position.
We can access alternative sources of funding, including drawdowns under our
credit facilities, if necessary, to offset potential reductions in the market
capacity for our commercial paper.

CONTRACTUAL AND OTHER OBLIGATIONS
Retirement and Post-Retirement Benefit Plan Contributions
As of April 30, 2020, we anticipate making contributions for the remainder of
fiscal year 2020 of approximately $52 million to our non-U.S. pension plans, $21
million to cover benefit payments to U.S. non-qualified pension plan
participants and $3 million to cover benefit claims for our post-retirement
benefit plans. Our policy is to fund our pension plans so that we meet at least
the minimum contribution required by local government, funding and taxing
authorities. For more information on our retirement and post-retirement benefit
plans, see Note 4, "Retirement and Post-Retirement Benefit Plans", to the
Consolidated Condensed Financial Statements in Item 1 of Part I of this report,
which is incorporated herein by reference.

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                            HP INC. AND SUBSIDIARIES
                    Management's Discussion and Analysis of
           Financial Condition and Results of Operations (Continued)

Cost Savings Plan
As a result of our approved restructuring plans, including the Fiscal 2020 Plan,
we expect to make future cash payments of approximately $0.7 billion. We expect
to make future cash payments of $0.2 billion in fiscal year 2020 with remaining
cash payments through fiscal year 2023. For more information on our
restructuring activities that are part of our cost improvements, see Note 3,
"Restructuring and Other Charges", to the Consolidated Condensed Financial
Statements in Item 1 of Part I of this report, which is incorporated herein by
reference.
Uncertain Tax Positions
As of April 30, 2020, we had approximately $585 million of recorded liabilities
and related interest and penalties pertaining to uncertain tax positions. We are
unable to make a reasonable estimate as to when cash settlement with the tax
authorities might occur due to the uncertainties related to these tax matters.
Payments of these obligations would result from settlements with taxing
authorities. For more information on our uncertain tax positions, see Note 5,
"Taxes on Earnings", to the Consolidated Condensed Financial Statements in
Item 1 of Part I of this report, which is incorporated herein by reference.
Payment of one-time transition taxes under the TCJA
The TCJA made significant changes to U.S. tax law resulting in a one-time gross
transition tax of $3.0 billion on accumulated foreign earnings. We expect the
actual cash payments for the tax to be much lower as we expect to reduce the
overall liability by more than half once existing and future credits and other
balance sheet attributes are used. The payments associated with this one-time
transition tax will be paid over eight years which began fiscal year 2019.

OFF-BALANCE SHEET ARRANGEMENTS
As part of our ongoing business, we have not participated in transactions that
generate material relationships with unconsolidated entities or financial
partnerships, such as entities often referred to as structured finance or
special purpose entities, which would have been established for the purpose of
facilitating off-balance sheet arrangements or other contractually narrow or
limited purposes.
We have third-party short-term financing arrangements intended to facilitate the
working capital requirements of certain customers. For more information on our
third-party short-term financing arrangements, see Note 6, "Supplementary
Financial Information", to the Consolidated Condensed Financial Statements in
Item 1 of Part I of this report, which is incorporated herein by reference.

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