HP calculates basic earnings per share ("EPS") using net earnings and the weighted-average number of shares outstanding during the reporting period. Diluted EPS includes any dilutive effect of outstanding stock options, PRUs, IPRUs, restricted stock units and restricted stock.

The reconciliation of the numerators and denominators of the basic and diluted EPS calculations was as follows:

		Three months ended April 30				Six months ended April 30

		2011		2010		2011		2010
		In millions, except per share amounts
Numerator:
	Net earnings⁽¹⁾	$	2,304	$	2,200	$	4,909	$	4,450

Denominator:
	Weighted-average shares used to compute basic EPS		2,150		2,345		2,166		2,352
	Dilutive effect of employee stock plans		34		61		37		60

	Weighted-average shares used to compute diluted EPS		2,184		2,406		2,203		2,412

Net earnings per share:
	Basic	$	1.07	$	0.94	$	2.27	$	1.89
	Diluted	$	1.05	$	0.91	$	2.23	$	1.84

HP excludes options with exercise prices that are greater than the average market price for HP's common stock from the calculation of diluted EPS because their effect would be anti-dilutive. For the three and six months ended April 30, 2011, HP excluded from the calculation of diluted EPS options to purchase 6 million shares, compared to 17 million shares and 18 million shares for the three and six months ended April 30, 2010, respectively.

In addition, HP also excludes options whose combined exercise price, unamortized fair value and excess tax benefits are greater than the average market price for HP's common stock because their effect would be anti-dilutive. For the three and six months ended April 30, 2011, HP excluded from the calculation of diluted EPS options to purchase an additional 1 million shares, compared to an additional 2 million shares and 3 million shares for the three and six months ended April 30, 2010, respectively.