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Hewlett Packard Co – ‘10-Q’ for 1/31/01

On: Friday, 3/16/01, at 5:09pm ET · For: 1/31/01 · Accession #: 912057-1-7696 · File #: 1-04423

Previous ‘10-Q’: ‘10-Q/A’ on 9/13/00 for 7/31/00 · Next: ‘10-Q’ on 6/13/01 for 4/30/01 · Latest: ‘10-Q’ on 2/28/24 for 1/31/24 · 24 References:

  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

 3/16/01  Hewlett Packard Co                10-Q        1/31/01    4:112K                                   Merrill Corp/FA

Quarterly Report — Form 10-Q
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-Q        Quarterly Report                                      31    165K 
 2: EX-3.(B)    Articles of Incorporation/Organization or By-Laws      2±     6K 
 3: EX-10.(AA)  Material Contract                                      4     19K 
 4: EX-12       Statement re: Computation of Ratios                    1      8K

10-Q — Quarterly Report
Document Table of Contents

Page	(sequential)	\|	(alphabetic)	Top
			Alternative Formats (Word, et al.) Adoption of the Euro Cost of products sold and services Exhibits and Reports on Form 8-K Extraordinary item Factors That Could Affect Future Results Financial Statements Impairment losses on investments Interest income and other, net Management's Discussion and Analysis of Financial Condition and Results of Operations Market Risk Net earnings before extraordinary item Notes to Consolidated Condensed Financial Statements (Unaudited) Quantitative and Qualitative Disclosures About Market Risk Signature Submission of Matters to a Vote of Security Holders
1	1st Page - Filing Submission
2	Item 1. Financial Statements
6	Notes to Consolidated Condensed Financial Statements (Unaudited)
15	Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
16	Cost of products sold and services
"	Interest income and other, net
"	Impairment losses on investments
17	Net earnings before extraordinary item
"	Extraordinary item
21	Factors That Could Affect Future Results
23	Market Risk
25	Adoption of the Euro
"	Item 3. Quantitative and Qualitative Disclosures About Market Risk
26	Item 4. Submission of Matters to a Vote of Security Holders
"	Item 6. Exhibits and Reports on Form 8-K
28	Signature

10-Q 1st Page of 31 TOC ↑Top Previous Next ↓Bottom Just 1st
 
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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

------------------------

FORM 10-Q 

(MARK ONE)                                                                      

                                                                [Download Table]
                                                               
/X/     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
        SECURITIES EXCHANGE ACT OF 1934.                       

FOR THE QUARTERLY PERIOD ENDED JANUARY 31, 2001 

OR

                                                                [Download Table]
                                                                
/ /     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
        SECURITIES EXCHANGE ACT OF 1934.                        

FOR THE TRANSITION PERIOD FROM ____________ TO ____________ 

COMMISSION FILE NUMBER: 1-4423

------------------------

HEWLETT-PACKARD COMPANY 
(Exact name of registrant as specified in its charter)

                                                                [Download Table]
                                                                             
                 DELAWARE                                      94-1081436    
     (State or other jurisdiction of                         (IRS Employer   
      incorporation or organization)                      Identification No.)

3000 HANOVER STREET, PALO ALTO, CALIFORNIA                       94304       
 (Address of principal executive offices)                      (Zip Code)    

(650) 857-1501
(Registrant's telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last
report) 

------------------------

Indicate by check mark whether the registrant (1) has filed all reports 
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of   
1934 during the preceding 12 months (or for such shorter period that the        
registrant was required to file such reports), and (2) has been subject to such 
filing requirements for the past 90 days. Yes /X/  No / /                       

    Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.                                

                                                                [Download Table]

            CLASS                         OUTSTANDING AT FEBRUARY 28, 2001
            -----                         --------------------------------
                                                                          
Common Stock, $0.01 par value                   1,942,829,048 shares      

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HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
INDEX 

                                                        [Enlarge/Download Table]

                                                                                PAGE NO.
                                                                                --------
                                                                                        
Part I.   Financial Information                                                         

          Item 1.  Financial Statements.                                                

                   Consolidated Condensed Statement of Earnings                         
                   Three months ended January 31, 2001 and 2000 (Unaudited)....     3   

                   Consolidated Condensed Balance Sheet                                 
                   January 31, 2001 (Unaudited) and October 31, 2000...........     4   

                   Consolidated Condensed Statement of Cash Flows                       
                   Three months ended January 31, 2001 and 2000 (Unaudited)....     5   

                   Notes to Consolidated Condensed Financial Statements                 
                   (Unaudited).................................................     6   

          Item 2.  Management's Discussion and Analysis of Financial Condition          
                   and Results of Operations...................................    15   

          Item 3.  Quantitative and Qualitative Disclosures About Market                
                   Risk........................................................    25   

Part II.  Other Information                                                             

          Item 4.  Submission of Matters to a Vote of Security Holders.........    26   

          Item 6.  Exhibits and Reports on Form 8-K............................    26   

Signature......................................................................    28   

Exhibit Index..................................................................    29   

2 

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PART I. FINANCIAL INFORMATION 

ITEM 1. FINANCIAL STATEMENTS.                                                   

HEWLETT-PACKARD COMPANY AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENT OF EARNINGS

(UNAUDITED) 

(IN MILLIONS, EXCEPT PER SHARE AMOUNTS) 

                                                                [Download Table]

                                                             THREE MONTHS ENDED 
                                                                 JANUARY 31,    
                                                             -------------------
                                                               2001       2000  
                                                             --------   --------
                                                                                
Net revenue:                                                                    
  Products.................................................. $ 9,997    $ 9,961 
  Services..................................................   1,951      1,712 
                                                             -------    ------- 
    Total net revenue.......................................  11,948     11,673 
Costs and expenses:                                                             
  Cost of products sold and services........................   8,703      8,349 
  Research and development..................................     673        607 
  Selling, general and administrative.......................   1,935      1,765 
                                                             -------    ------- 
    Total costs and expenses................................  11,311     10,721 
                                                             -------    ------- 
Earnings from operations....................................     637        952 
Interest income and other, net..............................     212        163 
Interest expense............................................      89         56 
Impairment losses on investments............................     365         -- 
                                                             -------    ------- 
Earnings before extraordinary item and taxes................     395      1,059 
Provision for taxes.........................................      90        265 
                                                             -------    ------- 
Net earnings before extraordinary item......................     305        794 
Extraordinary item--gain on early extinguishment of debt,                       
  net of taxes..............................................      23         -- 
                                                             -------    ------- 
Net earnings................................................ $   328    $   794 
                                                             =======    ======= 
Basic net earnings per share:                                                   
  Net earnings before extraordinary item.................... $  0.16    $  0.40 
  Extraordinary item--gain on early extinguishment of debt,                     
    net of taxes............................................    0.01         -- 
                                                             -------    ------- 
  Net earnings.............................................. $  0.17    $  0.40 
                                                             =======    ======= 
Diluted net earnings per share:                                                 
  Net earnings before extraordinary item.................... $  0.16    $  0.38 
  Extraordinary item--gain on early extinguishment of debt,                     
    net of taxes............................................    0.01         -- 
                                                             -------    ------- 
  Net earnings.............................................. $  0.17    $  0.38 
                                                             =======    ======= 

Cash dividends declared per share........................... $  0.16    $  0.16 

Average number of shares and share equivalents:                                 
  Basic.....................................................   1,930      1,997 
  Diluted...................................................   1,996      2,086 

The accompanying notes are an integral part of these consolidated condensed 
financial statements. 

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HEWLETT-PACKARD COMPANY AND SUBSIDIARIES

CONSOLIDATED CONDENSED BALANCE SHEET

(IN MILLIONS, EXCEPT PAR VALUE) 

                                                        [Enlarge/Download Table]

                                                              JANUARY 31,  OCTOBER 31,
                                                                 2001         2000    
                                                              -----------  -----------
                                                              (UNAUDITED)             
                                                                                      
                                        ASSETS                                        
Current assets:                                                                       
  Cash and cash equivalents.................................    $ 2,297      $ 3,415  
  Short-term investments....................................        555          592  
  Accounts receivable, net..................................      6,001        6,394  
  Financing receivables, net................................      2,192        2,174  
  Inventory.................................................      6,095        5,699  
  Other current assets......................................      5,499        4,970  
                                                                -------      -------  
    Total current assets....................................     22,639       23,244  
                                                                -------      -------  
Property, plant and equipment (net of accumulated                                     
  depreciation of $5,091 and $5,005 at January 31, 2001 and                           
  October 31, 2000, respectively)...........................      4,563        4,500  
Long-term investments and other assets......................      6,177        6,265  
                                                                -------      -------  
Total assets................................................    $33,379      $34,009  
                                                                =======      =======  

                         LIABILITIES AND STOCKHOLDERS' EQUITY                         
Current liabilities:                                                                  
  Notes payable and short-term borrowings...................    $ 2,321      $ 1,555  
  Accounts payable..........................................      4,094        5,049  
  Employee compensation and benefits........................      1,438        1,584  
  Taxes on earnings.........................................      1,762        2,046  
  Deferred revenues.........................................      1,902        1,759  
  Other accrued liabilities.................................      3,708        3,204  
                                                                -------      -------  
    Total current liabilities...............................     15,225       15,197  
                                                                -------      -------  
Long-term debt..............................................      3,037        3,402  
Other liabilities...........................................        981        1,201  
Stockholders' equity:                                                                 
  Preferred stock, $0.01 par value (300 shares authorized;                            
    none issued)............................................         --           --  
  Common stock, $0.01 par value (4,800 shares authorized;                             
    1,943 and 1,947 shares issued and outstanding at January                          
    31, 2001 and October 31, 2000, respectively)............         19           19  
  Retained earnings.........................................     14,100       14,097  
  Accumulated other comprehensive income....................         17           93  
                                                                -------      -------  
    Total stockholders' equity..............................     14,136       14,209  
                                                                -------      -------  
Total liabilities and stockholders' equity..................    $33,379      $34,009  
                                                                =======      =======  

The accompanying notes are an integral part of these consolidated condensed 
financial statements. 

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HEWLETT-PACKARD COMPANY AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS

(UNAUDITED) 

(IN MILLIONS) 

                                                                [Download Table]

                                                              THREE MONTHS ENDED 
                                                                  JANUARY 31,    
                                                              -------------------
                                                                2001       2000  
                                                              --------   --------
                                                                                 
Cash flows from operating activities:                                            
  Net earnings..............................................  $   328    $   794 
  Adjustments to reconcile net earnings to net cash provided                     
    by operating activities:                                                     
    Depreciation and amortization...........................      286        275 
    Impairment losses on investments........................      365         -- 
    Deferred taxes on earnings..............................      (52)      (413)
    Gain on early extinguishment of debt, net of taxes......      (23)        -- 
    Changes in assets and liabilities:                                           
      Accounts and financing receivables....................      415        404 
      Inventory.............................................     (396)      (237)
      Accounts payable......................................     (958)       333 
      Taxes on earnings.....................................     (318)       217 
      Other current assets and liabilities..................     (188)      (110)
      Other, net............................................       18       (128)
                                                              -------    ------- 
      Net cash (used in) provided by operating activities...     (523)     1,135 
                                                              -------    ------- 
Cash flows from investing activities:                                            
  Investment in property, plant and equipment...............     (484)      (339)
  Disposition of property, plant and equipment..............      163         76 
  Purchases of investments..................................     (173)      (462)
  Maturities and sales of investments.......................      104        472 
  Cash acquired through business acquisition................      163         -- 
                                                              -------    ------- 
      Net cash used in investing activities.................     (227)      (253)
                                                              -------    ------- 
Cash flows from financing activities:                                            
  Increase (decrease) in notes payable and short-term                            
    borrowings..............................................      845     (2,495)
  Issuance of long-term debt................................       29         30 
  Payment of long-term debt.................................     (221)      (337)
  Repurchase of zero-coupon subordinated convertible                             
    notes...................................................     (320)        -- 
  Issuance of common stock under employee stock plans.......       90        216 
  Repurchase of common stock................................     (636)      (929)
  Dividends.................................................     (155)      (161)
                                                              -------    ------- 
      Net cash used in financing activities.................     (368)    (3,676)
                                                              -------    ------- 
Net cash provided by discontinued operations................       --        368 
                                                              -------    ------- 
Decrease in cash and cash equivalents.......................   (1,118)    (2,426)
Cash and cash equivalents at beginning of period............    3,415      5,411 
                                                              -------    ------- 
Cash and cash equivalents at end of period..................  $ 2,297    $ 2,985 
                                                              =======    ======= 

The accompanying notes are an integral part of these consolidated condensed 
financial statements. 

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HEWLETT-PACKARD COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(UNAUDITED) 

NOTE 1: BASIS OF PRESENTATION                                                   

In the opinion of management, the accompanying Consolidated Condensed   
Financial Statements for Hewlett-Packard Company and its consolidated           
subsidiaries ("HP") contain all adjustments, consisting only of normal recurring
adjustments, necessary to present fairly its financial position as of           
January 31, 2001 and October 31, 2000, its results of operations for the        
three-month periods ended January 31, 2001 and 2000, and its cash flows for the 
three-month periods ended January 31, 2001 and 2000. All share and per-share    
amounts in prior periods have been adjusted to reflect the two-for-one stock    
split in the form of a stock dividend effective October 27, 2000. In addition,  
certain reclassifications have been made to prior year balances in order to     
conform to the current year presentation.                                       

   The results of operations for the three-month period ended January 31, 2001
are not necessarily indicative of the results to be expected for the full year. 
The information included in this Form 10-Q should be read in conjunction with   
"Management's Discussion and Analysis of Financial Condition and Results of     
Operations" and the Consolidated Financial Statements and notes thereto included
in Items 7 and 8, respectively, of the Hewlett-Packard Company Annual Report on 
Form 10-K for the fiscal year ended October 31, 2000.                           

The preparation of financial statements in accordance with accounting   
principles generally accepted in the U.S. requires management to make estimates 
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.           

NOTE 2: RECENT ACCOUNTING PRONOUNCEMENTS                                        

In December 1999, the Securities and Exchange Commission ("SEC") issued 
Staff Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in Financial    
Statements." SAB 101 summarizes certain of the SEC's views in applying          
accounting principles generally accepted in the U.S. to revenue recognition in  
financial statements. In June 2000, the SEC issued SAB No. 101B, which delayed  
the implementation date of SAB 101. In October 2000, the SEC issued additional  
guidance to supplement SAB 101 further. HP is required to adopt SAB 101 in the  
fourth quarter of fiscal year 2001 and is continuing to evaluate the potential  
impact that adoption will have on its consolidated financial statements.        

NOTE 3: MARKETING REALIGNMENT                                                   

    In January 2001, HP's management approved a marketing realignment program to
bring marketing resources in line with HP's streamlined organizational          
structure. The purpose of the program is to eliminate redundancies and focus    
marketing investments on programs that increase market impact. This marketing   
realignment program was implemented under the existing terms of an overall      
Workforce Management Program which defined the severance benefits for which     
employees are eligible based on years of service. Accrued costs of approximately
$102 million before taxes were recorded as selling, general and administrative  
expense in the first quarter of fiscal year 2001. These costs represent         
estimated severance and other benefits related to the elimination of            
approximately 1,500 marketing positions worldwide, across all regions and job   
classes. HP expects that substantially all of the accrual will be paid out by   
the end of the second quarter of fiscal year 2001.                              

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HEWLETT-PACKARD COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED) 

NOTE 4: NET EARNINGS PER SHARE                                                  

 HP's basic earnings per share ("EPS") is calculated based on net earnings
and the weighted-average number of shares outstanding during the reporting      
period. Diluted EPS includes additional dilution from potential issuance of     
common stock, such as stock issuable pursuant to the exercise of stock options  
outstanding and the conversion of debt.                                         

The following table includes a reconciliation of the numerators and     
denominators of the basic and diluted EPS calculations. All share and per-share 
amounts reflect the two-for-one stock split in the form of a stock dividend     
effective October 27, 2000.                                                     

                                                                [Download Table]

                                                              THREE MONTHS ENDED  
                                                                  JANUARY 31,     
                                                             ---------------------
                                                               2001        2000   
                                                             ---------   ---------
                                                             (IN MILLIONS, EXCEPT 
                                                                PER SHARE DATA)   
                                                                                  
Numerator:                                                                        
  Net earnings before extraordinary item....................  $  305      $  794  
  Adjustment for interest expense, net of income tax                              
    effect..................................................       6           6  
                                                              ------      ------  
  Net earnings before extraordinary item, adjusted..........     311         800  
  Extraordinary item--gain on early extinguishment of debt,                       
    net of taxes............................................      23          --  
                                                              ------      ------  
  Net earnings, adjusted....................................  $  334      $  800  
                                                              ======      ======  

Denominator:                                                                      
  Weighted-average shares outstanding.......................   1,930       1,997  
  Effect of dilutive securities:                                                  
    Dilutive options and other stock-based awards...........      40          67  
    Zero-coupon subordinated convertible notes due 2017.....      26          22  
                                                              ------      ------  
  Dilutive potential common shares..........................      66          89  
                                                              ------      ------  
  Weighted-average shares and dilutive potential common                           
    shares..................................................   1,996       2,086  
                                                              ======      ======  

Basic net earnings per share:                                                     
  Net earnings before extraordinary item....................  $ 0.16      $ 0.40  
  Extraordinary item--gain on early extinguishment of debt,                       
    net of taxes............................................    0.01          --  
                                                              ------      ------  
  Net earnings..............................................  $ 0.17      $ 0.40  
                                                              ======      ======  

Diluted net earnings per share:                                                   
  Net earnings before extraordinary item....................  $ 0.16      $ 0.38  
  Extraordinary item--gain on early extinguishment of debt,                       
    net of taxes............................................    0.01          --  
                                                              ------      ------  
  Net earnings..............................................  $ 0.17      $ 0.38  
                                                              ======      ======  

Average number of shares and share equivalents:                                   
  Basic.....................................................   1,930       1,997  
  Diluted...................................................   1,996       2,086  

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HEWLETT-PACKARD COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED) 

NOTE 5: ACQUISITION                                                             

In January 2001, HP acquired all of the outstanding stock of Bluestone  
Software, Inc. ("Bluestone") in exchange for $528 million of HP common stock and
options. With this acquisition, HP expanded its Internet software offering by   
adding Bluestone's XML-based web application server and tools to its portfolio, 
forming the core of HP's middleware offering. The acquisition was recorded under
the purchase method of accounting, and accordingly, the purchase price was      
allocated to the net assets acquired based on their estimated fair values. HP   
recorded approximately $345 million of goodwill and identified intangibles in   
conjunction with the transaction. These intangible assets will be amortized on a
straight-line basis over three years. In addition, HP recorded a pre-tax charge 
of approximately $19 million for in-process research and development at the time
of acquisition because technological feasibility had not been established and no
future alternative uses existed. Pro forma results of operations reflecting this
acquisition have not been presented as such disclosure is not material.         

NOTE 6: DERIVATIVE FINANCIAL INSTRUMENTS                                        

   On November 1, 2000, HP adopted Statement of Financial Accounting Standards
("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging            
Activities." The standard requires that all derivatives be recorded on the      
balance sheet at fair value and establishes criteria for designation and        
effectiveness of hedging relationships. The cumulative effect of adopting       
SFAS 133 as of November 1, 2000 was not material to HP's consolidated financial 
statements.                                                                     

   HP is exposed to foreign currency exchange rate risk inherent in forecasted
sales, cost of sales, and assets and liabilities denominated in currencies other
than the U.S. dollar. HP is also exposed to interest rate risk inherent in its  
debt and investment portfolios. HP's risk management strategy uses derivative   
financial instruments, including forwards, swaps and purchased options, to hedge
certain foreign currency and interest rate exposures. HP's intent is to offset  
gains and losses that occur on the underlying exposures, with gains and losses  
on the derivative contracts hedging these exposures. HP does not enter into any 
speculative positions with regard to derivative instruments. HP enters into     
foreign exchange contracts, primarily forwards and purchased options, to hedge  
against exposure to changes in foreign currency exchange rates. Such contracts  
are designated at inception to the related foreign currency exposures being     
hedged, which include sales by subsidiaries, and assets and liabilities that are
denominated in currencies other than the U.S. dollar. HP's foreign currency     
hedges generally mature within six months. HP issues long-term debt in either   
U.S. dollars or foreign currencies based on market conditions at the time of    
financing. Interest rate and foreign currency swaps are then used to modify the 
market risk exposures in connection with the debt to achieve primarily U.S.     
dollar LIBOR-based floating interest expense and to neutralize exposure to      
changes in foreign currency exchange rates. The swap transactions generally     
involve the exchange of fixed for floating interest payment obligations and,    
when the underlying debt is denominated in a foreign currency, exchange of the  
foreign currency principal and interest obligations for U.S. dollar-denominated 
amounts.                                                                        

HP records all derivatives on the balance sheet at fair value. For      
derivative instruments that are designated and qualify as cash flow hedges, the 
effective portion of the gain or loss on the derivative instrument is recorded  
in accumulated other comprehensive income as a separate component of            
stockholders' equity and reclassified into earnings in the period during which  
the hedged transaction affects earnings. For derivative instruments that are    
designated and qualify as fair value hedges, the gain or loss on the derivative 
instrument, as well as the offsetting gain or loss on the hedged item           
attributable to the                                                             

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HEWLETT-PACKARD COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED) 

NOTE 6: DERIVATIVE FINANCIAL INSTRUMENTS (CONTINUED)                            
hedged risk, are recognized in earnings in the current period. For derivative   
instruments not designated as hedging instruments, changes in their fair values 
are recognized in earnings in the current period.                               

  For foreign currency forward contracts, hedge effectiveness is measured by
comparing the cumulative change in the hedged contract with the cumulative      
change in the hedged item, both of which are based on forward rates. For foreign
currency option contracts, only the intrinsic value of the option based on spot 
rates is used in assessing hedge effectiveness. Accordingly, the time value of  
the option is excluded in calculating effectiveness and reported in earnings    
immediately. For interest rate swaps, the critical terms of the interest rate   
swap and hedged item are designed to match up when possible, enabling the       
short-cut method of accounting as defined by SFAS 133. To the extent that the   
critical terms of the hedged item and the derivative are not identical, hedge   
ineffectiveness is reported in earnings immediately.                            

   HP reports hedge ineffectiveness from foreign currency derivatives for both
options and forward contracts in other income or expense. Ineffectiveness       
related to interest rate swaps is reported in interest income or expense. Hedge 
ineffectiveness was not material in the first quarter of fiscal 2001. The       
effective portion of all derivatives is reported in the same financial statement
line item as the changes in the hedged item.                                    

 At January 31, 2001, the net fair value of derivatives designated as fair
value hedges of debt instruments was $90 million, of which $114 million was     
recorded in long-term investments and other assets and $24 million in other     
accrued liabilities. The net fair value of foreign currency-related derivatives 
designated as cash flow hedges or fair value hedges was $51 million. Of this    
amount, $103 million was recorded in other current assets, $96 million in       
long-term investments and other assets and $148 million in other accrued        
liabilities. At January 31, 2001, HP also had $19 million in net fair value of  
derivatives which it elected not to designate as hedges, of which $93 million   
was recorded in other current assets and $74 million was recorded in other      
accrued liabilities. Derivatives that were not designated as hedges under       
SFAS 133 consisted primarily of forwards used to hedge foreign currency balance 
sheet exposures and warrants in companies acquired as part of strategic         
partnerships. Although forward contracts for balance sheet hedging are not      
specifically designated as hedges, the gains and losses on forward contracts    
used to hedge balance sheet exposures are recognized in other income and expense
in the same period as the remeasurement on the related foreign currency         
denominated assets and liabilities. Warrants which contain net settlement       
provisions or are readily convertible to cash are recorded at fair value with   
changes in fair value recognized in other income and expense in the current     
period. HP estimates the fair values on derivatives based on quoted market      
prices or pricing models using current market rates.                            

  At January 31, 2001, HP had approximately $37 million of unrealized losses
on derivative instruments, net of taxes, in accumulated other comprehensive     
income. HP expects that $44 million of net losses after taxes will be           
reclassified to earnings within one year, and approximately $7 million of net   
gains after taxes will be reclassified to earnings after one year.              

NOTE 7: INVESTMENTS IN EQUITY AND DEBT SECURITIES                               

HP's investments in marketable equity securities are classified as      
available-for-sale and investments in debt securities are classified as either  
available-for-sale or held-to-maturity. Investments classified as               
available-for-sale securities are carried at fair value, with unrealized gains  
and losses, net of taxes, included in accumulated other comprehensive income as 
a separate component of stockholders' equity. Fair values                       

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HEWLETT-PACKARD COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED) 

NOTE 7: INVESTMENTS IN EQUITY AND DEBT SECURITIES (CONTINUED)                   
for available-for-sale securities are estimated based on quoted market prices or
pricing models using current market rates. Investments classified as            
held-to-maturity securities are carried at amortized cost.                      

   In connection with the adoption of SFAS 133 on November 1, 2000, HP elected
to reclassify investments in debt securities with a net book value of $967      
million from held-to-maturity to available-for-sale. The unrealized loss on     
these securities, net of taxes, was $5 million at the time of the               
reclassification and was recorded in accumulated other comprehensive income as  
part of the cumulative effect of adopting SFAS 133. This election was made      
because HP may sell these securities in the future due to changes in related tax
laws. No sales of these investments have been made to date.                     

HP's available-for-sale securities consist of long-term corporate equity
securities and investments in debt securities which are classified as short-term
investments and long-term investments and other assets in the accompanying      
Consolidated Condensed Balance Sheet. As of January 31, 2001, these securities  
were recorded at an estimated fair value of $1,147 million, with a cost basis of
$1,056 million. As of January 31, 2001, gross unrealized gains were             
$162 million and gross unrealized losses were $71 million. As of October 31,    
2000, available-for-sale securities were recorded at an estimated fair value of 
$328 million, with a cost basis of $176 million. As of October 31, 2000, gross  
unrealized gains were $216 million and gross unrealized losses were             
$64 million. The increase in available-for-sale securities from October 31, 2000
to January 31, 2001 is due primarily to the reclassification of debt securities 
discussed above.                                                                

For the three months ended January 31, 2001, proceeds from sales of     
available-for-sale securities were $16 million and gross realized gains were    
$15 million. There were no sales of available-for-sale securities in the first  
quarter of fiscal year 2000. The specific identification method is used to      
account for gains and losses on available-for-sale securities.                  

  Investments in debt securities held-to-maturity are included in short-term
investments and long-term investments and other assets in the accompanying      
Consolidated Condensed Balance Sheet. The amortized cost basis of these         
securities was $220 million as of January 31, 2001 and $1,106 million as of     
October 31, 2000. The estimated fair value of held-to-maturity securities       
approximated their cost basis at January 31, 2001 and October 31, 2000.         

    HP's investment portfolio includes the marketable equity securities and debt
securities discussed above, as well as equity and debt investments in           
privately-held emerging market companies. Many of these private companies are   
still in the start-up or development stage. These investments are inherently    
risky because the markets for the technologies or products they have under      
development are typically in the early stages and may never develop. These      
private company investments are carried at cost, subject to adjustment for      
impairment. Due to the recent economic downturn, HP recorded an impairment loss 
of $365 million on its investments in both public and private emerging market   
companies. As of January 31, 2001, the cost basis of the portion of HP's        
remaining investment portfolio related to emerging market companies was         
approximately $310 million. Given current market conditions, HP may incur       
additional charges on this investment portfolio in the future.                  

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HEWLETT-PACKARD COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED) 

NOTE 8: INVENTORY                                                               

                                                                [Download Table]

                                                        JANUARY 31,   OCTOBER 31,
                                                           2001          2000    
                                                        -----------   -----------
                                                              (IN MILLIONS)      
                                                                                 
Finished goods.........................................    $4,452        $4,251  
Purchased parts and fabricated assemblies..............     1,643         1,448  
                                                           ------        ------  
                                                           $6,095        $5,699  
                                                           ======        ======  

NOTE 9: SUPPLEMENTAL CASH FLOW INFORMATION                                      

                                                                [Download Table]

                                                          THREE MONTHS ENDED 
                                                              JANUARY 31,    
                                                          -------------------
                                                            2001       2000  
                                                          --------   --------
                                                             (IN MILLIONS)   
                                                                             
Non-cash transactions:                                                       
  Net issuances (forfeitures) of common stock for                            
    employee benefit plans:                                                  
    Restricted stock and other..........................    $(15)      $(73) 
    Employer matching contributions for 401(k) and                           
      employee stock purchase plans.....................      22         26  
  Issuance of common stock and options for business                          
    acquisition.........................................     528         --  

NOTE 10: INCOME TAXES                                                           

  Income tax provisions for interim periods are based on estimated effective
annual income tax rates. The effective income tax rate varies from the U.S.     
federal statutory income tax rate primarily because of the mix of HP's pre-tax  
earnings in various tax jurisdictions throughout the world.                     

NOTE 11: EXTRAORDINARY ITEM                                                     

    In December 2000, the Board of Directors authorized a repurchase program for
HP's zero-coupon subordinated convertible notes. Under the repurchase program,  
HP may repurchase the notes from time to time at varying prices. In the first   
quarter of fiscal 2001, HP repurchased $600 million in face value of the notes  
with a book value of $356 million, resulting in an extraordinary gain on the    
early extinguishment of debt of $23 million (net of related taxes of            
$13 million). As of January 31, 2001, the notes had a remaining book value of   
$825 million.                                                                   

Between February 1 and March 15, 2001, HP repurchased an additional     
$227 million in face value of the notes with a book value of $135 million,      
resulting in an extraordinary gain on the early extinguishment of debt of       
$9 million (net of related taxes of $6 million). As of March 15, 2001, the notes
had a remaining book value of $692 million.                                     

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NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED) 

NOTE 12: STOCKHOLDERS' EQUITY                                                   

As of January 31, 2001, HP had 4.8 billion shares of authorized common  
stock. At the Annual Meeting of Shareowners held on February 27, 2001, HP       
stockholders approved an amendment of HP's Certificate of Incorporation to      
increase the number of authorized shares of common stock to 9.6 billion shares. 

HP repurchases shares of its common stock under a systematic program to 
manage the dilution created by shares issued under employee stock plans and     
under a separate incremental plan authorizing purchases in the open market or in
private transactions. At October 31, 2000, HP had authorization for future      
repurchases of $868 million of common stock under the two programs. In          
November 2000, HP's Board of Directors authorized an additional $2.0 billion of 
future repurchases under these two programs in the aggregate. During the first  
quarter of fiscal 2001, 18,600,000 shares were repurchased under these plans for
an aggregate price of $636 million. As of January 31, 2001, HP had authorization
for remaining future repurchases under the two programs of approximately        
$2.2 billion. In the first quarter of fiscal 2000, 17,714,200 shares were       
repurchased under these plans for $929 million. The number of shares repurchased
for the first quarter of fiscal 2000 has been adjusted to reflect the           
two-for-one stock split in the form of a stock dividend effective October 27,   
2000.                                                                           

NOTE 13: COMPREHENSIVE INCOME                                                   

 Comprehensive income includes net earnings as well as other comprehensive
income. HP's other comprehensive income consists of changes in unrealized gains 
and losses on available-for-sale securities and derivative instruments, which   
also include the cumulative effect of adopting SFAS 133. Comprehensive income,  
net of taxes, for the three months ended January 31 were as follows:            

                                                                [Download Table]

                                           THREE MONTHS ENDED   THREE MONTHS ENDED
                                            JANUARY 31, 2001     JANUARY 31, 2000 
                                           ------------------   ------------------
                                                        (IN MILLIONS)             
                                                                                  
Net earnings..............................        $328                 $794       
Change in net unrealized gain (loss) on                                           
  derivative instruments..................          53                   --       
Net gains on derivative instruments                                               
  reclassified from accumulated other                                             
  comprehensive income into revenues......         (90)                  --       
Change in net unrealized gain (loss) on                                           
  available-for-sale securities...........         (39)                 143       
                                                  ----                 ----       
Comprehensive income......................        $252                 $937       
                                                  ====                 ====       

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HEWLETT-PACKARD COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED) 

NOTE 13: COMPREHENSIVE INCOME (CONTINUED)                                       
    The components of accumulated other comprehensive income, net of taxes, were
as follows:                                                                     

                                                                [Download Table]

                                                        JANUARY 31,    OCTOBER 31, 
                                                            2001           2000    
                                                        ------------   ------------
                                                               (IN MILLIONS)       
                                                                                   
Net unrealized gain on available-for-sale securities...     $ 54           $93     
Net unrealized loss on derivative instruments..........      (37)           --     
                                                            ----           ---     
Accumulated other comprehensive income.................     $ 17           $93     
                                                            ====           ===     

NOTE 14: SEGMENT INFORMATION                                                    

HP is a leading global provider of computing and imaging solutions and  
services for business and home, and is focused on capitalizing on the           
opportunities of the Internet and the emergence of next-generation appliances,  
e-services and infrastructure. As of January 31, 2001, HP organized its         
operations into three major businesses: Imaging and Printing Systems, Computing 
Systems and IT Services.                                                        

In the second and third quarters of fiscal 2000 and the first quarter of
fiscal 2001, HP made certain strategic changes to its organizational structure. 
The changes to the organizational structure included the movement of its        
Embedded and Personal Systems and VeriFone businesses from the Computing Systems
segment to separate operating segments, and the movement of the majority of its 
services business related to imaging and printing from the Imaging and Printing 
Systems segment to its IT Services segment. The Embedded and Personal Systems   
and VeriFone operating segments are now included in "All Other" as they do not  
meet the materiality threshold for a reportable segment. Segment financial data 
for the three-month period ended January 31, 2000 has been restated to reflect  
these organizational changes.                                                   

   A significant portion of each segment's expenses arise from shared services
and infrastructure that HP has historically provided to the segments in order to
realize economies of scale and to use resources efficiently. These expenses     
include costs of centralized research and development, legal, accounting,       
employee benefits, real estate, insurance services, information technology      
services, treasury and other corporate and infrastructure costs. In the first   
quarter of fiscal year 2001, HP implemented a new management reporting system.  
This change in the reporting environment included a revised allocation          
methodology for shared services and infrastructure. HP believes these allocation
changes resulted in a better reflection of the utilization of services provided 
to or benefits received by the segments. Segment financial data for the         
three-month period ended January 31, 2000 has been restated to reflect these    
changes.                                                                        

The results of the reportable segments are derived directly from HP's   
management reporting system. These results are based on HP's method of internal 
reporting and are not necessarily in conformity with accounting principles      
generally accepted in the U.S. Management measures the performance of each      
segment based on several metrics, including earnings from operations. These     
results are used, in part, to evaluate the performance of, and allocate         
resources to, each of the segments.                                             

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HEWLETT-PACKARD COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED) 

NOTE 14: SEGMENT INFORMATION (CONTINUED)                                        
   The table below presents selected financial information for each reportable
segment:                                                                        

                                                        [Enlarge/Download Table]

                                                IMAGING AND                                          
                                                 PRINTING    COMPUTING      IT       ALL      TOTAL  
                                                  SYSTEMS     SYSTEMS    SERVICES   OTHER    SEGMENTS
                                                -----------  ---------   --------  --------  --------
                                                                    (IN MILLIONS)                    
                                                                                                     
FOR THE THREE MONTHS ENDED JANUARY 31, 2001:                                                         
Net revenue from external customers............    $5,042     $4,854      $1,891     $331    $12,118 
Intersegment net revenue.......................        --         67          --       --         67 
                                                   ------     ------      ------     ----    ------- 
  Total net revenue............................    $5,042     $4,921      $1,891     $331    $12,185 
                                                   ======     ======      ======     ====    ======= 

Earnings (loss) from operations................    $  644     $  (19)     $  101     $(60)   $   666 
                                                   ======     ======      ======     ====    ======= 

FOR THE THREE MONTHS ENDED JANUARY 31, 2000:                                                         
Net revenue from external customers............    $5,032     $4,785      $1,673     $299    $11,789 
Intersegment net revenue.......................         2         52           3       19         76 
                                                   ------     ------      ------     ----    ------- 
  Total net revenue............................    $5,034     $4,837      $1,676     $318    $11,865 
                                                   ======     ======      ======     ====    ======= 

Earnings (loss) from operations................    $  683     $  190      $  125     $(28)   $   970 
                                                   ======     ======      ======     ====    ======= 

   The following is a reconciliation of segment information to HP consolidated
totals:                                                                         

                                                                [Download Table]

                                                             THREE MONTHS ENDED 
                                                                 JANUARY 31,    
                                                             -------------------
                                                               2001       2000  
                                                             --------   --------
                                                                (IN MILLIONS)   
                                                                                
NET REVENUE:                                                                    
Total segments.............................................. $12,185    $11,865 
Financing interest income reclassification..................    (103)       (82)
Elimination of intersegment net revenue and other...........    (134)      (110)
                                                             -------    ------- 
  Total HP consolidated..................................... $11,948    $11,673 
                                                             =======    ======= 

EARNINGS FROM OPERATIONS BEFORE EXTRAORDINARY ITEM AND                          
  TAXES:                                                                        
Total segment earnings from operations...................... $   666    $   970 
Net financing interest reclassification.....................     (40)       (39)
Interest income and other, net..............................     212        163 
Interest expense............................................     (89)       (56)
Impairment losses on investments............................    (365)        -- 
Corporate and unallocated costs, and eliminations...........      11         21 
                                                             -------    ------- 
  Total HP consolidated..................................... $   395    $ 1,059 
                                                             =======    ======= 

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS 
OF OPERATIONS.                                                              

HEWLETT-PACKARD COMPANY AND SUBSIDIARIES

    THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE CONSOLIDATED
CONDENSED FINANCIAL STATEMENTS AND THE RELATED NOTES THAT APPEAR ELSEWHERE IN   
THIS DOCUMENT.                                                                  

THIS DOCUMENT CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES, AS WELL AS ASSUMPTIONS THAT, IF THEY NEVER MATERIALIZE OR PROVE  
INCORRECT, COULD CAUSE THE RESULTS OF HP TO DIFFER MATERIALLY FROM THOSE        
EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. ALL STATEMENTS OTHER   
THAN STATEMENTS OF HISTORICAL FACT ARE STATEMENTS THAT COULD BE DEEMED          
FORWARD-LOOKING STATEMENTS, INCLUDING ANY PROJECTIONS OF EARNINGS, REVENUES OR  
OTHER FINANCIAL ITEMS; ANY STATEMENTS OF THE PLANS, STRATEGIES AND OBJECTIVES OF
MANAGEMENT FOR FUTURE OPERATIONS; ANY STATEMENTS CONCERNING PROPOSED NEW        
PRODUCTS, SERVICES OR DEVELOPMENTS; ANY STATEMENTS REGARDING FUTURE ECONOMIC    
CONDITIONS OR PERFORMANCE; ANY STATEMENTS OF BELIEF; AND ANY STATEMENT OF       
ASSUMPTIONS UNDERLYING ANY OF THE FOREGOING. THE RISKS, UNCERTAINTIES AND       
ASSUMPTIONS REFERRED TO ABOVE INCLUDE THE ABILITY OF HP TO RETAIN AND MOTIVATE  
KEY EMPLOYEES; THE TIMELY DEVELOPMENT, PRODUCTION AND ACCEPTANCE OF PRODUCTS AND
SERVICES AND THEIR FEATURE SETS; THE CHALLENGE OF MANAGING ASSET LEVELS,        
INCLUDING INVENTORY; THE FLOW OF PRODUCTS INTO THIRD-PARTY DISTRIBUTION         
CHANNELS; THE DIFFICULTY OF KEEPING EXPENSE GROWTH AT MODEST LEVELS WHILE       
INCREASING REVENUES; AND OTHER RISKS THAT ARE DESCRIBED FROM TIME TO TIME IN    
HP'S SECURITIES AND EXCHANGE COMMISSION REPORTS, INCLUDING BUT NOT LIMITED TO   
THE ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED OCTOBER 31, 2000 AND          
SUBSEQUENTLY FILED REPORTS. HP ASSUMES NO OBLIGATION TO UPDATE THESE            
FORWARD-LOOKING STATEMENTS.                                                     

RESULTS OF OPERATIONS                                                           

OVERVIEW                                                                        

The following is a summary of operating results at the HP consolidated  
level. This discussion is followed by a more detailed discussion of operating   
results by segment.                                                             

NET REVENUE                                                                     

   Net revenue for the first quarter ended January 31, 2001 was $11.9 billion,
an increase of 2% from the same period in fiscal 2000. This increase resulted   
primarily from growth in the IT Services and Computing Systems business         
segments. Net revenue for the IT Services segment grew 13% in the first quarter 
of 2001 compared to the same period a year ago, while the Computing Systems     
segment grew 2%. The Imaging and Printing segment revenue remained relatively   
flat compared to the first quarter of last year. Overall, product sales for the 
first quarter were relatively flat, while service revenue grew 14% over the     
corresponding period in fiscal 2000. International revenue grew 8% to           
$7.2 billion while U.S. revenue declined 6% to $4.7 billion from the same period
a year ago. International growth was fueled by strong performance in Latin      
America and the Asia Pacific region. The recent economic downturn contributed   
significantly to the decline in U.S. revenues. Fluctuations in foreign currency 
rates adversely impacted year-over-year revenue growth for the company as a     
whole by approximately 5 percentage points due mainly to the weakening of the   
Euro.                                                                           

COSTS, EXPENSES AND EARNINGS                                                    

    Costs, expenses and earnings as a percentage of net revenue were as follows:

                                                                [Download Table]

                                                          THREE MONTHS ENDED 
                                                              JANUARY 31,    
                                                          -------------------
                                                            2001       2000  
                                                          --------   --------
                                                                             
Cost of products sold and services......................    72.8%      71.5% 
Research and development................................     5.6%       5.2% 
Selling, general and administrative.....................    16.2%      15.1% 
Earnings from operations................................     5.3%       8.2% 
Net earnings before extraordinary item..................     2.6%       6.8% 

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COST OF PRODUCTS SOLD AND SERVICES                                              

   Cost of products sold and services as a percentage of net revenue was 72.8%
in the first quarter of fiscal 2001 compared to 71.5% in the same period for    
fiscal 2000. The 1.3 percentage point increase in the cost of sales ratio was   
driven by increases across all of the segments. We expect continued upward      
pressure on cost of products sold and services as a percentage of net revenue   
due primarily to continued competitive pricing pressures, particularly in       
low-end printers and the consumer and business PC markets.                      

OPERATING EXPENSES                                                              

    In January 2001, HP's management approved a marketing realignment program to
bring marketing resources in line with our streamlined organizational structure.
The purpose of the program is to eliminate redundancies and focus marketing     
investments on programs that increase market impact. This marketing realignment 
program was implemented under the existing terms of an overall Workforce        
Management Program which defined the severance benefits for which employees are 
eligible based on years of service. Accrued costs of approximately $102 million 
before taxes were recorded as selling, general and administrative expense in the
first quarter of fiscal year 2001. These costs represent estimated severance and
other benefits related to the elimination of approximately 1,500 marketing      
positions worldwide, across all regions and job classes. We expect that         
substantially all of the accrual will be paid out by the end of the second      
quarter of fiscal year 2001.                                                    

    Research and development expense increased 11% over the corresponding period
last year. After adjusting for $19 million of in-process research and           
development costs related to the Bluestone acquisition in the first quarter of  
fiscal 2001, research and development expense growth was 8%. The adjusted growth
was due primarily to an increase in spending related to development of new      
Unix-Registered Trademark-(1) and storage products in the Computing Systems     
segment.                                                                        

Selling, general and administrative expenses increased 10% in the first 
quarter of fiscal 2001 over the same period in fiscal 2000 and increased 4%     
after adjusting for the marketing realignment costs. The adjusted growth        
resulted primarily from significant hiring in our sales organization to support 
future growth and increased marketing expenses from the continued introduction  
of new products. Selling, general and administrative expense growth was         
moderated as a result of cost controls implemented in the first quarter of      
fiscal 2001.                                                                    

INTEREST INCOME AND OTHER, NET                                                  

Interest income and other, net, increased by $49 million in the first   
quarter of fiscal 2001 compared to the same period in fiscal 2000. The increase 
was mainly attributable to gains on unhedged foreign currency exposure on       
balance sheet remeasurement.                                                    

IMPAIRMENT LOSSES ON INVESTMENTS                                                

    HP's investment portfolio includes equity and debt investments in public and
privately-held emerging market companies. Many of these companies are still in  
the start-up or development stage. These investments are inherently risky       
because the markets for the technologies or products they have under development
are typically in the early stages and may never develop. Due to the recent      
economic downturn, we recorded an impairment loss of $365 million on our        
investments in both public and private emerging market companies. Given current 
market conditions, we may incur additional charges on our investment portfolio  
in the future.                                                                  

------------------------                                                        

(1)  UNIX-Registered Trademark- is a registered trademark of The Open Group.    

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TAXES                                                                           

   HP's effective tax rate before the extraordinary item was approximately 23%
in the first quarter of fiscal 2001. Excluding the impact of non-deductible     
charges for amortization of goodwill, in-process research and development and   
other acquisition-related charges, our effective tax rate was 22%, down from a  
tax rate of approximately 23% for the full year in fiscal 2000 and approximately
25% for the first quarter of fiscal 2000. This decline was primarily the result 
of changes in the mix of our pre-tax earnings in various tax jurisdictions      
throughout the world.                                                           

NET EARNINGS BEFORE EXTRAORDINARY ITEM                                          

   Net earnings before extraordinary item decreased 62% to $305 million in the
first quarter of fiscal 2001 compared to the same period in fiscal 2000. As a   
percentage of net revenue, net earnings before extraordinary item were 2.6% in  
the first quarter of 2001, compared to 6.8% in the same quarter of 2000.        

EXTRAORDINARY ITEM                                                              

    In December 2000, the Board of Directors authorized a repurchase program for
HP's zero-coupon subordinated convertible notes. Under the repurchase program,  
we may repurchase the notes from time to time at varying prices. In the first   
quarter of fiscal 2001, we repurchased $600 million in face value of the notes  
with a book value of $356 million, resulting in an extraordinary gain on the    
early extinguishment of debt of $23 million (net of related taxes of            
$13 million).                                                                   

SEGMENT INFORMATION                                                             

    The following is a discussion of operating results for each of HP's business
segments. A description of the products and services for each segment can be    
found in Note 16 to the Consolidated Financial Statements in the Hewlett-Packard
Company Annual Report on Form 10-K for the fiscal year ended October 31, 2000.  
Quarterly financial data for each segment can be found in Note 14 to these      
Consolidated Condensed Financial Statements. Segment financial data for the     
three months ended January 31, 2000 has been restated to reflect changes in HP's
organizational structure and management reporting system that occurred in the   
second and third quarters of fiscal 2000 and the first quarter of fiscal 2001.  
These changes are more fully described in Note 14 to the Consolidated Condensed 
Financial Statements. The reportable segments disclosed in this Form 10-Q are   
based on HP's management organizational structure as of January 31, 2001. Future
changes to this organizational structure may result in changes to the reportable
segments disclosed.                                                             

IMAGING AND PRINTING SYSTEMS                                                    

                                                                [Download Table]

                                                          THREE MONTHS ENDED 
                                                              JANUARY 31,    
                                                          -------------------
                                                            2001       2000  
                                                          --------   --------
                                                             (IN MILLIONS)   
                                                                             
Net revenue.............................................   $5,042     $5,034 
Earnings from operations................................   $  644     $  683 

 Imaging and Printing Systems' net revenue grew 0.2% for the quarter ended
January 31, 2001 compared to the same period in 2000. While overall net revenue 
growth was relatively flat, Imaging and Printing Systems experienced strong     
growth in printer supplies and imaging devices, offset by declines in both      
LaserJet and InkJet printer hardware sales. Unfavorable foreign currency        
effects, particularly in Europe, as well as slowing markets in all regions, also
moderated the segment's revenue growth during the first quarter of fiscal 2001. 

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   Net revenue growth in printer supplies reflected continued expansion in the
installed base and a positive mix shift to color LaserJet supplies. Revenue     
growth in imaging devices was fueled by strong unit growth in all-in-one        
products, scanners, and PhotoSmart printers and cameras. The increase in imaging
revenues was partially offset by declines in average selling prices as demand   
continues to grow for lower-priced products. LaserJet and InkJet printer        
hardware sales decreased year-over-year as a result of softening demand. Revenue
for LaserJet printers was particularly affected by the market slowdown and      
European foreign currency effects. While there was continued strong growth in   
color laser printer sales, it did not fully offset an expected decline in       
monochrome laser printer sales. Net revenue for InkJet printers declined as a   
result of flat unit growth and a shift to lower-priced products.                

 Earnings from operations as a percentage of net revenue was 12.8% for the
quarter ended January 31, 2001 compared to 13.6% for the same period in 2000.   
This decline was driven by a slight decrease in gross margins, which was mainly 
attributable to a shift toward lower-priced InkJet and imaging devices, as well 
as higher component costs related to the strong Japanese yen. This negative     
impact was offset in part by favorable gross margins in printer supplies due to 
economies of scale from increased production levels. In addition, operating     
expenses grew only slightly from the same period a year ago due to effective    
expense management.                                                             

COMPUTING SYSTEMS                                                               

                                                                [Download Table]

                                                          THREE MONTHS ENDED 
                                                              JANUARY 31,    
                                                          -------------------
                                                            2001       2000  
                                                          --------   --------
                                                             (IN MILLIONS)   
                                                                             
Net revenue.............................................   $4,921     $4,837 
Earnings from operations................................   $  (19)    $  190 

Computing Systems' net revenue grew 2% for the quarter ended January 31,
2001 compared to the same period in 2000. Net revenue growth was driven by solid
performance in notebook PCs, enterprise storage, Unix-Registered Trademark-     
servers and software. This growth was partially offset by revenue declines in   
commercial desktop PCs and PC servers due in part to an overall market slowdown.

Within the PC business, a strong increase in notebook PC revenues was   
substantially offset by a decline in commercial desktop PC revenues. Notebook PC
revenue growth was driven by a very strong increase in units, partially offset  
by declines in average selling prices. The decrease in commercial desktop PC    
revenue reflected both the effects of the PC market slowdown and the continued  
shift toward mobile computing. A decline in PC server revenues also negatively  
impacted revenue growth in the Computing Systems segment. This decrease resulted
largely from softened demand, competitive pricing pressures and issues in the   
commercial channel. Enterprise storage revenues increased compared to the first 
quarter of 2000 due to continued strength in sales of the XP512 product, our    
core storage offering, and Storage Area Network solutions. Net revenue growth in
Unix-Registered Trademark- servers was fueled by increased sales in the low-end 
and mid-range categories. This growth reflects higher selling prices due to the 
continued shift to more richly configured systems as well as increased volume in
the low-end category. High-end Unix-Registered Trademark- server revenue        
declined from the same period a year ago because our new high-end server did not
begin shipping in volume until January 2001. In addition, overall               
Unix-Registered Trademark- server revenue was moderated by issues in the        
commercial channel. Net revenue growth in software was driven primarily by      
OpenView, our services management offering.                                     

   Earnings from operations as a percentage of net revenues was (0.4)% for the
quarter ended January 31, 2001, compared to 3.9% for the same period in 2000.   
The decline in the earnings from operations ratio was mainly attributable to an 
increase in operating expenses. These increases were the result of significant  
hiring in the sales organization during the quarter to support future growth, as
well as investments in research and development for new                         
Unix-Registered Trademark- server and storage products. The earnings from       

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operations ratio was also negatively impacted by gross margin declines,         
reflecting the overall market slowdown and competitive pricing pressures,       
primarily in PC servers and home PCs. These declines were partially offset by a 
shift to higher-margin Unix-Registered Trademark- server and enterprise storage 
products.                                                                       

IT SERVICES                                                                     

                                                                [Download Table]

                                                          THREE MONTHS ENDED 
                                                              JANUARY 31,    
                                                          -------------------
                                                            2001       2000  
                                                          --------   --------
                                                             (IN MILLIONS)   
                                                                             
Net revenue.............................................   $1,891     $1,676 
Earnings from operations................................   $  101     $  125 

IT Services' net revenue increased 13% for the quarter ended January 31,
2001 compared to the same period in 2000. Net revenue growth was driven         
primarily by strong performance in consulting services as well as solid sales in
our customer support and financing businesses.                                  

The net revenue growth in consulting was fueled by the investment in    
headcount during fiscal 2000, which has enabled HP to pursue larger and more    
profitable engagements in fiscal 2001. Consulting revenues reflected strong     
demand for communications solutions and implementation of Customer Relationship 
Management ("CRM") applications. Customer support revenues have been positively 
impacted by growth in mission critical support services and emerging businesses 
such as networking services. Revenue growth in our financing business has       
resulted from a shift in mix toward operating leases.                           

Earnings from operations as a percentage of net revenue was 5.3% for the
quarter ended January 31, 2001 compared to 7.5% for the same period in 2000. The
decrease was driven largely by declines in gross margins in our customer support
and financing businesses. The declines were mainly the result of mix shifts to  
higher-cost services. These gross margin declines were partially offset by an   
increase in gross margin for consulting services due to improved labor          
utilization and overall engagement cost management. Increased operating expenses
also negatively impacted the earnings from operations ratio during the first    
quarter of 2001. These increases resulted primarily from aggressive hiring in   
sales and consulting in order to drive future revenue growth as well as an      
increase in bad debt write-offs in our financing portfolio.                     

LIQUIDITY AND CAPITAL RESOURCES                                                 

   Our financial position remained strong in the first quarter of fiscal 2001.
Cash and cash equivalents and short-term investments were $2.9 billion at       
January 31, 2001 compared to $4.0 billion at October 31, 2000. During the first 
quarter of fiscal 2001, net earnings and short-term borrowings were used to fund
payments on accounts payable, repurchases of our common stock, purchases of     
property, plant and equipment, repurchases of our zero-coupon subordinated      
convertible notes and payments on maturing long-term debt.                      

  Operating activities used $0.5 billion of cash during the first quarter of
2001, whereas operating activities generated cash of $1.1 billion for the       
corresponding period of fiscal 2000. The decrease in cash from operating        
activities in the first quarter of 2001 resulted primarily from timing of       
payments on accounts payable and taxes.                                         

 Inventory as a percentage of net revenue was 12.4% as of January 31, 2001
compared to 11.6% at the end of the first quarter of fiscal 2000 and 11.7% as of
October 31, 2000. The increase in the ratio was attributable to a rise in       
inventories due to the current economic slowdown. Trade and financing           
receivables as a percentage of net revenue were 16.7% at January 31, 2001       
compared to 16.6% in the corresponding period of fiscal 2000 and 17.6% as of    
October 31, 2000. The ratio at year-end reflected a relatively high level of    
receivables due to seasonal fluctuations.                                       

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  Capital expenditures were $484 million in the first three months of fiscal
2001 compared to $339 million for the corresponding period in fiscal 2000. Net  
property, plant and equipment as a percentage of net revenue was 9.3% as of     
January 31, 2001 compared to 9.9% at the end of the first quarter of fiscal 2000
and 9.2% at October 31, 2000. The decline from January 31, 2000 reflects our    
continuing efforts to streamline operations through outsourcing and             
consolidating activities, improving space utilization and reducing asset        
intensity to build flexibility into our balance sheet.                          

   We invest excess cash in short- and long-term investments, depending on our
projected cash needs for operations, capital expenditures and other business    
purposes. We also supplement our internally generated cash flow with a          
combination of short- and long-term borrowings. Short- and long-term borrowings 
in the first quarter of fiscal 2001 increased by $401 million as short-term debt
borrowings were partially offset by repurchases of our zero-coupon subordinated 
convertible notes and payments on other long-term debt. During the first quarter
of fiscal 2001, we issued short-term debt for general corporate purposes and    
working capital needs. Long-term debt totaling $221 million matured as scheduled
in the first quarter of fiscal 2001. At January 31, 2001, we had an unused      
committed borrowing facility in place totaling $1.0 billion.                    

    In December 2000, the Board of Directors authorized a repurchase program for
our zero-coupon subordinated convertible notes. Under the repurchase program, we
may repurchase the notes from time to time at varying prices. In the first      
quarter of 2001, we repurchased $600 million in face value of the notes with a  
book value of $356 million, resulting in an extraordinary gain on the early     
extinguishment of debt of $23 million (net of related taxes of $13 million).    
Between February 1 and March 15, 2001, we repurchased an additional             
$227 million in face value of the notes with a book value of $135 million,      
resulting in an extraordinary gain on the early extinguishment of debt of       
$9 million (net of related taxes of $6 million).                                

 In February 2000, we filed a shelf registration statement with the SEC to
register $3.0 billion of debt securities, common stock, preferred stock,        
depositary shares and warrants. This registration statement was declared        
effective on March 17, 2000. On June 6, 2000, we offered under the registration 
statement $1.5 billion of unsecured 7.15% Global Notes which mature on June 15, 
2005, unless previously redeemed. This offering closed on June 9, 2000. The net 
proceeds from the sale of the notes were used for general corporate purposes,   
which included repayment of existing indebtedness, capital expenditures and     
working capital needs. We have the capacity to issue an additional $1.5 billion 
of securities under the shelf registration statement.                           

We repurchase shares of our common stock under a systematic program to  
manage the dilution created by shares issued under employee stock plans and     
under a separate incremental plan authorizing purchases in the open market or in
private transactions. At October 31, 2000, we had authorization for future      
repurchases of $868 million of common stock under the two programs. In          
November 2000, the Board of Directors authorized an additional $2.0 billion of  
future repurchases under these two programs in the aggregate. During the first  
quarter of fiscal 2001, we repurchased 18,600,000 shares under these plans for  
an aggregate price of $636 million. As of January 31, 2001, we had authorization
for remaining future repurchases under the two programs of approximately        
$2.2 billion. In the first quarter of fiscal 2000, we repurchased 17,714,200    
shares under these plans for $929 million. The number of shares repurchased for 
the first quarter of fiscal 2000 has been adjusted to reflect the two-for-one   
stock split in the form of a stock dividend effective October 27, 2000.         

 In January 2001, we acquired all of the outstanding stock of Bluestone in
exchange for $528 million of HP common stock and options. With this acquisition,
we expanded our Internet software offering by adding Bluestone's XML-based web  
application server and tools to our portfolio, forming the core of HP's         
middleware offering. The acquisition was recorded under the purchase method of  
accounting, and accordingly, the purchase price was allocated to the net assets 
acquired based on their estimated fair values. We recorded approximately        
$345 million of goodwill and identified intangibles in conjunction with the     
transaction. These intangible assets will be amortized on a straight-line basis 
over three years. In                                                            

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addition, we recorded a pre-tax charge of approximately $19 million for         
in-process research and development at the time of acquisition because          
technological feasibility had not been established and no further alternative   
uses existed.                                                                   

FACTORS THAT COULD AFFECT FUTURE RESULTS                                        

COMPETITION                                                                     

 We encounter aggressive competition in all areas of our business. We have
numerous competitors, ranging from some of the world's largest corporations to  
many relatively small and highly specialized firms. We compete primarily on the 
basis of technology, performance, price, quality, reliability, distribution,    
customer service and support. Product life cycles are short. To remain          
competitive, we must be able to develop new products, services and support, as  
well as periodically enhance our existing products, services and support. In    
particular, we anticipate that we will have to continue to lower the prices of  
many of our products, services and support to stay competitive and effectively  
manage financial returns with resulting reduced gross margins. In some of our   
markets, we may not be able to compete successfully against current and future  
competitors, and the competitive pressures we face could harm our business and  
prospects.                                                                      

NEW PRODUCT AND SERVICE INTRODUCTIONS                                           

   If we cannot continue to rapidly develop, manufacture and market innovative
products and services that meet customer requirements for performance and       
reliability, we may lose market share and our future revenue and earnings may   
suffer. The process of developing new high technology products and services is  
complex and uncertain. We must accurately anticipate customers' changing needs  
and emerging technological trends. We consequently must make long-term          
investments and commit significant resources before knowing whether our         
predictions will eventually result in products that the market will accept.     
After a product is developed, we must be able to manufacture sufficient volumes 
quickly at low enough costs. To do this we must accurately forecast volumes, mix
of products and configurations. Additionally, the supply and timing of a new    
product or service must match customers' demand and timing for the particular   
product or service. Given the wide variety of systems, products and services    
that HP offers, the process of planning production and managing inventory levels
becomes increasingly difficult.                                                 

RELIANCE ON THIRD PARTY DISTRIBUTION CHANNELS AND INVENTORY MANAGEMENT          

 We use third-party distributors to sell our products, especially printers
and personal computers, in order to accommodate changing customer preferences.  
As a result, the financial soundness of our wholesale and retail distributors,  
and our continuing relationships with these distributors, are important to HP's 
success. Some of these distributors may have insufficient financial resources   
and may not be able to withstand changes in business conditions. Our revenue and
earnings could suffer if our distributors' financial condition or operations    
weaken or if our relationships with them deteriorate.                           

Additionally, inventory management becomes increasingly complex as we   
continue to sell a significant mix of products through distributors. Third party
distributors constantly adjust their product orders from us in response to:     

   - The supply of our products and our competitors' products available to the
distributor,                                                        

- The timing of new product introductions and relative features of the  
products, and                                                       

- Seasonal fluctuations in end-user demand, such as back-to-school and  
holiday buying.                                                     

  Distributors may increase orders during times of product shortages, cancel
orders if their inventory is too high, or delay orders in anticipation of new   
products. If we have excess inventory, we may have to reduce our prices and     
write down inventory, which in turn could result in lower gross margins.        

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SHORT PRODUCT LIFE CYCLES                                                       

The short life cycles of many of our products pose a challenge for us to
manage effectively the transition from existing products to new products. If we 
do not manage the transition effectively, our revenue and earnings could suffer.
Among the factors that make a smooth transition from current products to new    
products difficult are delays in product development or manufacturing,          
variations in product costs and delays in customer purchases of existing        
products in anticipation of new product introductions. Our revenue and earnings 
could also suffer due to the timing of product or service introductions by our  
suppliers and competitors. This is especially true when a competitor introduces 
a new product just before our own product introduction. Furthermore, our new    
products may replace or compete with a certain number of our own current        
products.                                                                       

INTELLECTUAL PROPERTY                                                           

    We generally rely upon patent, copyright, trademark and trade secret laws in
the U.S. and in certain other countries, and agreements with our employees,     
customers and partners, to establish and maintain our proprietary rights in our 
technology and products. However, any of our intellectual proprietary rights    
could be challenged, invalidated or circumvented. Our intellectual property may 
not necessarily provide significant competitive advantages. Also, because of the
rapid pace of technological change in the information technology industry, many 
of our products rely on key technologies developed by third parties, and we may 
not be able to continue to obtain licenses from these third parties. Third      
parties may claim that we are infringing their intellectual property. Even if we
do not believe that our products are infringing third parties' intellectual     
property rights, the claims can be time-consuming and costly to defend and      
divert management's attention and resources away from our business. Claims of   
intellectual property infringement might also require us to enter into costly   
royalty or license agreements. If we cannot or do not license the infringed     
technology or substitute similar technology from another source, our business   
could suffer.                                                                   

RELIANCE ON SUPPLIERS                                                           

Our manufacturing operations depend on our suppliers' ability to deliver
quality components and products in time for us to meet critical manufacturing   
and distribution schedules. We sometimes experience a short supply of certain   
component parts as a result of strong demand in the industry for those parts. If
shortages or delays persist, our operating results could suffer until other     
sources can be developed. In order to secure components for the production of   
new products, at times we make advance payments to suppliers, or we may enter   
into non-cancelable purchase commitments with vendors. If the prices of these   
component parts then decrease after we have entered into binding price          
agreements, our earnings could suffer. Furthermore, we may not be able to secure
enough components at reasonable prices to build new products in a timely manner 
in the quantities and configurations needed. Conversely, a temporary oversupply 
of these parts also could adversely affect our operating results.               

INTERNATIONAL                                                                   

   Sales outside the U.S. make up more than half of our revenues. A portion of
our product and component manufacturing, along with key suppliers, are also     
located outside of the U.S. Our future earnings or financial position could be  
adversely affected by a variety of international factors, including:            

- Changes in a country's or region's political or economic conditions,  

- Trade protection measures,                                            

- Import or export licensing requirements,                              

- The overlap of different tax structures,                              

- Unexpected changes in regulatory requirements,                        

- Differing technology standards,                                       

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 - Problems caused by the conversion of various European currencies to the
Euro (see "Adoption of the Euro" section below), and                

- Natural disasters.                                                    

MARKET RISK                                                                     

   We are exposed to foreign currency exchange rate risk inherent in our sales
commitments, anticipated sales and assets and liabilities denominated in        
currencies other than the U.S. dollar. We are also exposed to interest rate risk
inherent in our debt and investment portfolios. Our risk management strategy    
uses derivative financial instruments, including forwards, swaps and purchased  
options, to hedge certain foreign currency and interest rate exposures. Our     
intent is to offset gains and losses that occur on the underlying exposures,    
with gains and losses on the derivative contracts hedging these exposures. We do
not enter into derivatives for trading purposes. We are also exposed to equity  
securities price risk on our portfolio of marketable equity securities. We      
typically do not attempt to reduce or eliminate our market exposure on these    
securities. See also Notes 6 and 7 to the Consolidated Condensed Financial      
Statements in Item 1 above for more detailed information.                       

    We have performed a sensitivity analysis assuming a hypothetical 10% adverse
movement in foreign exchange rates applied to the hedging contracts and         
underlying exposures described above, and a hypothetical 10% adverse movement in
interest rates applied to our debt and investment portfolios. As of January 31, 
2001 and 2000, the analysis indicated that these hypothetical market movements  
would not have a material effect on our consolidated financial position, results
of operations or cash flows. Actual gains and losses in the future may differ   
materially from that analysis, however, based on changes in the timing and      
amount of interest rate and foreign currency exchange rate movements and our    
actual exposures and hedges.                                                    

IMPAIRMENT OF INVESTMENT AND FINANCING PORTFOLIOS                               

We have an investment portfolio which includes minority equity and debt 
investments in numerous emerging market companies. In particular, we have       
invested in various privately held companies, many of which are still in the    
start-up or development stage. These investments are inherently risky because   
the markets for the technologies or products they have under development are    
typically in the early stages and may never develop. Furthermore, the values of 
our investments in publicly-traded companies are subject to significant market  
price volatility. We may incur losses related to our investments in these       
companies. Our investments in technology companies are often coupled with a     
strategic commercial relationship. Our commercial agreements with these         
companies may not be sufficient to allow us to obtain and integrate such        
products or technology into our technology or product lines, and these companies
may be subsequently acquired by third parties, including competitors of ours.   

 Moreover, we often provide financing for the purchase of our products and
services to technology companies. Due to the recent economic downturn,          
particularly in the U.S., and difficulties that may be faced by some of these   
companies, our financing portfolio could be further impaired.                   

ACQUISITIONS, STRATEGIC ALLIANCES, JOINT VENTURES AND DIVESTITURES              

  In the normal course of business, we frequently engage in discussions with
third parties relating to possible acquisitions, strategic alliances, joint     
ventures and divestitures. Although completion of any one transaction may not   
have a material effect on our financial position, results of operations or cash 
flows taken as a whole, it may contribute to our financial results differing    
from the investment community's expectations in a given quarter. Divestiture of 
a part of our business may result in the cancellation of orders and charges to  
earnings. Acquisitions and strategic alliances may require us to integrate with 
a different company culture, management team and business infrastructure. We may
also have to develop, manufacture and market products with our products in a way
that enhances the performance of the                                            

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combined business or product line. Depending on the size and complexity of an   
acquisition, our successful integration of the entity into HP depends on a      
variety of factors, including:                                                  

- The hiring and retention of key employees,                            

  - Management of facilities and employees in separate geographic areas, and

   - The integration or coordination of different research and development and
product manufacturing facilities.                                   

  All of these efforts require varying levels of management resources, which
may divert our attention from other business operations.                        

EARTHQUAKES AND POWER OUTAGES                                                   

Our corporate headquarters, a portion of our research and development   
activities, other critical business operations and a certain number of our      
suppliers are located in California. The ultimate impact on HP, our significant 
suppliers and our general infrastructure of being located near major earthquake 
faults is unknown, but operating results could be materially adversely affected 
in the event of a major earthquake. In addition, California has recently        
experienced ongoing power shortages, which have resulted in "rolling blackouts."
These blackouts could cause disruptions to our operations and the operations of 
our suppliers, distributors and resellers, and customers. We are predominantly  
uninsured for losses and interruptions caused by earthquakes and power outages. 

ENVIRONMENTAL                                                                   

    Some of our operations use substances regulated under various federal, state
and international laws governing the environment. It is our policy to apply     
strict standards for environmental protection to sites inside and outside the   
U.S., even when not subject to local government regulations. We record a        
liability for environmental remediation and related costs when we consider the  
costs to be probable and the amount of the costs can be reasonably estimated.   
Environmental costs are presently not material to our results of operations or  
financial position.                                                             

PROFIT MARGIN                                                                   

Our profit margins vary somewhat among our products, customer groups and
geographic markets. Consequently, our overall profitability in any given period 
is partially dependent on the product, customer and geographic mix reflected in 
that period's net revenue.                                                      

STOCK PRICE                                                                     

   HP's stock price, like that of other technology companies, can be volatile.
Some of the factors that can affect our stock price are:                        

- Our, or a competitor's, announcement of new products, services or     
technological innovations,                                          

- Quarterly increases or decreases in our earnings,                     

   - Changes in revenue or earnings estimates by the investment community, and

- Speculation in the press or investment community about our financial  
condition or results of operations.                                 

General market conditions and domestic or international macroeconomic   
factors unrelated to our performance may also affect our stock price. For these 
reasons, investors should not rely on recent trends to predict future stock     
prices or financial results. In addition, following periods of volatility in a  
company's securities, securities class action litigation against a company is   
sometimes instituted. This type of litigation could result in substantial costs 
and the diversion of management time and resources.                             

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ECONOMIC UNCERTAINTY                                                            

  The revenue growth and profitability of our business depends significantly
on the overall demand for computing and imaging products and services,          
particularly in the product and service segments in which we compete. Softening 
demand for these products and services caused by ongoing economic uncertainty   
may result in decreased revenues or earnings levels or growth rates. The U.S.   
economy has weakened and market conditions continue to be challenging. This has 
resulted in individuals and companies delaying or reducing expenditures, such as
for information technology. Further delays or reductions in information         
technology spending could have a material adverse effect on demand for our      
products and services, and consequently on our business, operating results,     
financial condition, prospects and stock price.                                 

EARNINGS FLUCTUATIONS                                                           

Although we believe that we have the products and resources needed for  
continuing success, we cannot reliably predict future revenue and margin trends.
Actual trends may cause us to adjust our operations, which could cause          
period-to-period fluctuations in our earnings.                                  

SPIN-OFF OF AGILENT TECHNOLOGIES                                                

On June 2, 2000, we distributed to our stockholders of record as of the 
close of business on May 2, 2000, substantially all of the common stock of      
Agilent Technologies owned by HP. We may not obtain the benefits we expect as a 
result of this distribution, such as greater strategic focus on our core        
computing and imaging and printing businesses.                                  

 In conjunction with the spin-off of Agilent Technologies, we entered into
transitional service agreements with Agilent Technologies to support ongoing    
operations of Agilent Technologies relating to certain administrative processes.
These transitional service agreements generally have terms of two years or less 
following the spin-off. As each of these service agreements expires, the fees   
and cost reimbursements currently being paid to us by Agilent Technologies for  
the associated services will also cease.                                        

ADOPTION OF THE EURO                                                            

 We had established a dedicated task force to address the issues raised by
the introduction of a European single currency, the Euro. The Euro's initial    
implementation was effective as of January 1, 1999, and the transition period   
will continue through January 1, 2002. On January 1, 1999, we began converting  
our product prices from local currencies to Euros as required. We implemented   
system changes to give multi-currency capability to internal applications and to
ensure that external partners' systems processing Euro conversions are compliant
with the European Council regulations. In addition, we have implemented design  
changes to support display and printing of the Euro character by impacted HP    
products.                                                                       

 The introduction and use of the Euro has not had a material effect on our
foreign exchange and hedging activities or our use of derivative instruments,   
and we do not presently expect that it will. All costs associated with the      
conversion to the Euro are expensed to operations as incurred. While we will    
continue to evaluate the impact of the Euro over time, based on currently       
available information, we do not believe that the introduction of the Euro      
currency will have a material adverse impact on our consolidated financial      
condition, cash flows or results of operations.                                 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.             

    For quantitative and qualitative disclosures about market risk affecting HP,
see "Management's Discussion and Analysis of Financial Condition and Results of 
Operations--Factors That Could Affect Future Results--Market Risk" in Item 2    
above, which is incorporated herein by reference.                               

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PART II. OTHER INFORMATION

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.                    

(a) HP's Annual Meeting of Shareowners was held on February 27, 2001 in 
Cupertino, California.                                            

   (b) At the 2001 Annual Meeting of Shareowners, an election of directors was
held with the following individuals being elected to the Board of 
Directors:                                                        

                                                                [Download Table]

                      NAME                          VOTED FOR    VOTES WITHHELD
                      ----                          ---------    --------------
                                                                               
Philip M. Condit................................. 1,630,911,451    20,126,117  
Patricia C. Dunn................................. 1,636,955,535    14,042,033  
Carleton S. Fiorina.............................. 1,514,217,441   136,820,127  
Sam Ginn......................................... 1,635,395,141    15,642,428  
Richard A. Hackborn.............................. 1,608,557,243    42,480,325  
Walter B. Hewlett................................ 1,637,802,712    13,234,857  
George A. Keyworth II............................ 1,637,655,095    13,382,473  
Robert E. Knowling, Jr........................... 1,637,165,077    13,872,491  
Robert P. Wayman................................. 1,636,213,257    14,824,311  

   (c) At the 2001 Annual Meeting of Shareowners, the following proposals were
voted upon by the stockholders as indicated below:                

   The stockholders approved an amendment of HP's Certificate of Incorporation
to increase the number of authorized shares of common stock from 4.8 billion    
shares to 9.6 billion shares. There were 1,497,756,018 votes cast for the       
amendment, 144,174,492 votes cast against the amendment and 9,107,058           
abstentions.                                                                    

   The stockholders approved an amendment of HP's Certificate of Incorporation
to decrease the number of directors from not less than eleven nor more than     
twenty-one to not less than eight nor more than seventeen. There were           
1,346,852,625 votes cast for the amendment, 18,782,750 votes cast against the   
amendment, 9,239,573 abstentions and 276,162,620 broker non-votes.              

  The stockholders voted against a shareowner proposal to request HP's Board
of Directors to make all possible lawful efforts to implement and/or increase   
activity on each of the proposal's named principles in the People's Republic of 
China. There were 103,792,606 votes cast for the proposal, 1,181,922,073 votes  
cast against the proposal, 88,591,685 abstentions and 276,731,204 broker        
non-votes.                                                                      

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.                                       

(a) Exhibits:                                                           

A list of exhibits is set forth in the Exhibit Index found on page 29 of
this report.                                                            

(b) Reports on Form 8-K:                                                

 On November 13, 2000, HP filed a report on Form 8-K, which reported under
Item 5 that it had terminated discussions with PricewaterhouseCoopers LLP       
("PwC") regarding the potential acquisition of PwC's global management and      
information technology consulting practice. The report also provided earnings   
information for the fourth quarter of fiscal year 2000 and the full fiscal year.

On December 6, 2000, HP filed a report on Form 8-K, which reported under
Item 9 that on December 6, 2000, HP held a simultaneous analyst presentation and
audio webcast to discuss fiscal year 2000 results and fiscal year 2001 outlook  
and other business information.                                                 

On January 11, 2001, HP filed a report on Form 8-K, which reported under
Item 5 the issuance of a press release relating to HP's fiscal year 2001 first  
quarter and full year guidance.                                                 

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On February 8, 2001, HP filed a report on Form 8-K, which reported under
Item 5 that on February 2, 2001, HP's Audit Committee of the Board of Directors 
selected and appointed Ernst & Young LLP as HP's independent public accountants 
with respect to HP's audit for the fiscal year ending October 31, 2001.         

 On February 15, 2001, HP filed a report on Form 8-K, which reported under
Item 5 the issuance of a press release containing financial information for the 
first quarter of fiscal 2001 and forward-looking statements relating to fiscal  
year 2001.                                                                      

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SIGNATURE 

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the        
undersigned thereunto duly authorized.                                          

                                                                [Download Table]
                                                       
                HEWLETT-PACKARD COMPANY                

                  /S/ ROBERT P. WAYMAN                 
-------------------------------------------------------
                    Robert P. Wayman                   
               EXECUTIVE VICE PRESIDENT,               
FINANCE AND ADMINISTRATION, CHIEF FINANCIAL OFFICER AND
                        DIRECTOR                       
             (PRINCIPAL FINANCIAL OFFICER)             

Date: March 16, 2001                                                            

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HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
EXHIBIT INDEX 

                                                                [Download Table]

       EXHIBIT                                                                     
       NUMBER                                  DESCRIPTION                         
---------------------  ------------------------------------------------------------
                                                                                   
1                      Not applicable.                                             

2                      Master Separation and Distribution Agreement between        
                       Hewlett-Packard Company and Agilent Technologies, Inc.      
                       effective as of August 12, 1999, which appears as Exhibit 2 
                       to Registrant's Annual Report on Form 10-K for the fiscal   
                       year ended October 31, 1999, which exhibit is incorporated  
                       herein by reference.                                        

3(a)                   Registrant's Certificate of Incorporation, which appears as 
                       Exhibit 3(a) to Registrant's Quarterly Report on Form 10-Q  
                       for the fiscal quarter ended April 30, 1998, which exhibit  
                       is incorporated herein by reference.                        

3(b)                   Registrant's Amendment to the Certificate of Incorporation. 

3(c)                   Registrant's Amended By-Laws, which appears as Exhibit      
                       3(b) to Registrant's Annual Report on Form 10-K for the     
                       fiscal year ended October 31, 1999, which exhibit is        
                       incorporated herein by reference.                           

4(a)                   Indenture dated as of October 14, 1997 among Registrant and 
                       Chase Trust Company of California regarding Liquid Yield    
                       Option Notes due 2017 which appears as Exhibit 4.2 to       
                       Registrant's Registration Statement on Form S-3             
                       (Registration No. 333-44113), which exhibit is incorporated 
                       herein by reference.                                        

4(b)                   Supplemental Indenture dated as of March 16, 2000 among     
                       Registrant and Chase Trust Company of California regarding  
                       Liquid Yield Option Notes due 2017, which appears as Exhibit
                       4(b) to Registrant's Quarterly Report on Form 10-Q for the  
                       fiscal quarter ended July 31, 2000, which exhibit is        
                       incorporated herein by reference.                           

4(c)                   Form of Registrant's 7.15% Global notes due June 15, 2005   
                       and related Officers' Certificate, which appear as Exhibits 
                       4.1 and 4.3 to Registrant's Form 8-K filed on June 15, 2000,
                       which exhibits are incorporated herein by reference.        

4(d)                   Senior Indenture, which appears as Exhibit 4.1 to           
                       Registrant's Registration Statement on Form S-3 dated       
                       February 18, 2000, as amended by Amendment No. 1 thereto    
                       dated March 17, 2000 (Registration No. 333-30786), which    
                       exhibit is incorporated herein by reference.                

5-8                    Not applicable.                                             

9                      None.                                                       

10(a)                  Registrant's 1985 Incentive Compensation Plan, as amended,  
                       which appears as Exhibit 10(a) to Registrant's Annual       
                       Report on Form 10-K for the fiscal year ended October 31,   
                       1999, which exhibit is incorporated herein by reference.*   

10(b)                  Registrant's 1985 Incentive Compensation Plan, as amended,  
                       stock option agreement, which appears as Exhibit 10(b) to   
                       Registrant's Annual Report on Form 10-K for the fiscal year 
                       ended October 31, 1999, which exhibit is incorporated herein
                       by reference.*                                              

10(c)                  Registrant's Excess Benefit Retirement Plan, amended and    
                       restated as of November 1, 1999, which appears as Exhibit   
                       10(c) to Registrant's Quarterly Report on Form 10-Q for the 
                       fiscal quarter ended July 31, 2000, which exhibit is        
                       incorporated herein by reference.*                          

10(d)                  Registrant's 1990 Incentive Stock Option Plan, as amended,  
                       which appears as Exhibit 10(d) to Registrant's Annual       
                       Report on Form 10-K for the fiscal year ended October 31,   
                       1999, which exhibit is incorporated herein by reference.*   

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       EXHIBIT                                                                     
       NUMBER                                  DESCRIPTION                         
---------------------  ------------------------------------------------------------
                                                                                   
10(e)                  Registrant's 1990 Incentive Stock Option Plan, as amended,  
                       stock option agreement, which appears as Exhibit 10(e) to   
                       Registrant's Annual Report on Form 10-K for the fiscal year 
                       ended October 31, 1999, which exhibit is incorporated herein
                       by reference.*                                              

10(f)                  Registrant's 1995 Incentive Stock Plan, as amended, which   
                       appears as Exhibit 10(f) to Registrant's Annual Report on   
                       Form 10-K for the fiscal year ended October 31, 1999, which 
                       exhibit is incorporated herein by reference.*               

10(g)                  Registrant's 1995 Incentive Stock Plan, as amended, stock   
                       option and restricted stock agreements, which appears as    
                       Exhibit 10(g) to Registrant's Annual Report on Form 10-K for
                       the fiscal year ended October 31, 1999, which exhibit is    
                       incorporated herein by reference.*                          

10(h)                  Registrant's 1997 Director Stock Plan which appears as      
                       Exhibit 99 to Registrant's Form S-8 filed on March 7, 1997, 
                       which exhibit is incorporated herein by reference.*         

10(i)                  Registrant's Executive Deferred Compensation Plan, Amended  
                       and Restated effective November 1, 2000, which appears as   
                       Exhibit 10(i) to Registrant's Annual Report on Form 10-K    
                       for the fiscal year ended October 31, 2000, which exhibit is
                       incorporated herein by reference.*                          

10(j)                  VeriFone, Inc. Amended and Restated 1992 Non-Employee       
                       Directors' Stock Option Plan which appears as Exhibit 99.1  
                       to Registrant's Form S-8 filed on July 1, 1997, which       
                       exhibit is incorporated herein by reference.*               

10(k)                  VeriFone, Inc. Amended and Restated Incentive Stock Option  
                       Plan and form of agreement which appears as Exhibit 99.2 to 
                       Registrant's Form S-8 filed on July 1, 1997, which exhibit  
                       is incorporated herein by reference.*                       

10(l)                  VeriFone, Inc. Amended and Restated 1987 Supplemental Stock 
                       Option Plan and form of agreement which appears as Exhibit  
                       99.3 to Registrant's Form S-8 filed on July 1, 1997, which  
                       exhibit is incorporated herein by reference.*               

10(m)                  Enterprise Integration Technologies Corporation 1991 Stock  
                       Plan and form of agreement which appears as Exhibit 99.4 to 
                       Registrant's Form S-8 filed on July 1, 1997, which exhibit  
                       is incorporated herein by reference.*                       

10(n)                  VeriFone, Inc. Amended and Restated Employee Stock Purchase 
                       Plan which appears as Exhibit 99.1 to Registrant's Form S-8 
                       filed on July 1, 1997, which exhibit is incorporated herein 
                       by reference.*                                              

10(o)                  Registrant's 1998 Subsidiary Employee Stock Purchase Plan   
                       and the Subscription Agreement which appear as Appendices E 
                       and E-1 to Registrant's Proxy Statement dated January 12,   
                       1998, respectively, which appendices are incorporated herein
                       by reference.*                                              

10(p)                  Transition Agreement, dated May 20, 1999, between Registrant
                       and Lewis E. Platt which appears as Exhibit 10(ee) to       
                       Registrant's Quarterly Report on Form 10-Q for the fiscal   
                       quarter ended July 31, 1999, which exhibit is incorporated  
                       herein by reference.*                                       

10(q)                  Employment Agreement, dated May 20, 1999, between Registrant
                       and Robert P. Wayman which appears as Exhibit 10(ff) to     
                       Registrant's Quarterly Report on Form 10-Q for the fiscal   
                       quarter ended July 31, 1999, which exhibit is incorporated  
                       herein by reference.*                                       

10(r)                  Employment Agreement, dated July 17, 1999, between          
                       Registrant and Carleton S. Fiorina which appears as Exhibit 
                       10(gg) to Registrant's Quarterly Report on Form 10-Q for the
                       fiscal quarter ended July 31, 1999, which exhibit is        
                       incorporated herein by reference.*                          

10(s)                  Executive Transition Program which appears as Exhibit 10(hh)
                       to Registrant's Quarterly Report on Form 10-Q for the fiscal
                       quarter ended July 31, 1999, which exhibit is incorporated  
                       herein by reference.*                                       

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       EXHIBIT                                                                     
       NUMBER                                  DESCRIPTION                         
---------------------  ------------------------------------------------------------
                                                                                   
10(t)                  Incentive Stock Plan Stock Option Agreement (Non-Qualified),
                       dated July 17, 1999, between Registrant and Carleton S.     
                       Fiorina which appears as Exhibit 10(ii) to Registrant's     
                       Quarterly Report on Form 10-Q for the fiscal quarter ended  
                       July 31, 1999, which exhibit is incorporated herein by      
                       reference.*                                                 

10(u)                  Restricted Stock Agreement, dated July 17, 1999, between    
                       Registrant and Carleton S. Fiorina which appears as Exhibit 
                       10(jj) to Registrant's Quarterly Report on Form 10-Q for the
                       fiscal quarter ended July 31, 1999, which exhibit is        
                       incorporated herein by reference.*                          

10(v)                  Restricted Stock Unit Agreement, dated July 17, 1999,       
                       between Registrant and Carleton S. Fiorina which appears as 
                       Exhibit 10(kk) to Registrant's Quarterly Report on Form 10-Q
                       for the fiscal quarter ended July 31, 1999, which exhibit is
                       incorporated herein by reference.*                          

10(w)                  Registrant's 2000 Stock Plan which appears as Exhibit 4.1 to
                       Registrant's Form S-8 filed on April 28, 2000, which exhibit
                       is incorporated herein by reference.*                       

10(x)                  Registrant's 2000 Employee Stock Purchase Plan which appears
                       as Exhibit 4.2 to Registrant's Form S-8 filed on April 28,  
                       2000, which exhibit is incorporated herein by reference.*   

10(y)                  Registrant's Executive Pay-For-Results Plan (Amended and    
                       Restated as of November 1, 2000), which appears as          
                       Exhibit 10(y) to Registrant's Annual Report on Form 10-K for
                       the fiscal year ended October 31, 2000, which exhibit is    
                       incorporated herein by reference.*                          

10(z)                  Registrant's Pay-For-Results Short-Term Bonus Plan          
                       (Effective November 1, 2000), which appears as              
                       Exhibit 10(z) to Registrant's Annual Report on Form 10-K for
                       the fiscal year ended October 31, 2000, which exhibit is    
                       incorporated herein by reference.*                          

10(aa)                 Executive Transition Program General Waiver, Release and    
                       Agreement, dated February 13, 2001, between Registrant and  
                       Carolyn Ticknor.*                                           

11                     Not applicable.                                             

12                     Statement of Computation of Ratio of Earnings to Fixed      
                       Charges.                                                    

13-17                  Not applicable.                                             

18                     None.                                                       

19-21                  Not applicable.                                             

22                     None.                                                       

23-27                  Not applicable.                                             

28                     None.                                                       

99                     Not applicable.                                             

------------------------                                                        

*   Indicates management contract or compensatory plan, contract or arrangement.

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Dates Referenced Herein and Documents Incorporated by Reference

		Referenced-On Page
This ‘10-Q’ Filing	Date	First	Last	Other Filings

	6/15/05	20	29	3, 8-K, SC 13G
	1/1/02	25
	10/31/01	27		10-K, 10-K/A
Filed on:	3/16/01	28
	3/15/01	11	20
	2/28/01	1
	2/27/01	12	26	DEF 14A, PRE 14A
	2/15/01	27		8-K
	2/13/01	31
	2/8/01	27		8-K
	2/2/01	27		8-K
For Period End:	1/31/01	1	23
	1/11/01	26		8-K
	12/6/00	26		8-K
	11/13/00	26		425, 8-K
	11/1/00	8	31	13F-HR
	10/31/00	2	31	10-K, 425
	10/27/00	6	20	SC 13D
	7/31/00	29		10-Q, 10-Q/A
	6/15/00	29		8-K
	6/9/00	20		8-K
	6/6/00	20
	6/2/00	25		8-K
	5/2/00	25
	4/28/00	31		S-8
	3/17/00	20	29	S-3/A
	3/16/00	29		S-3/A
	2/18/00	29		13F-HR, S-3
	1/31/00	2	23	10-Q
	11/1/99	29
	10/31/99	29	30	10-K, 5/A
	8/12/99	29
	7/31/99	30	31	10-Q, NT 10-Q
	7/17/99	30	31
	5/20/99	30
	1/1/99	25
	4/30/98	29		10-Q
	1/12/98	30		DEF 14A, S-3
	10/14/97	29
	7/1/97	30		S-8
	3/7/97	30		S-8
				List all Filings

24 Subsequent Filings that Reference this Filing

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12/06/22  HP Inc.                           S-3                    6:763K                                   Broadridge Fin’l So… Inc
12/06/22  HP Inc.                           10-K       10/31/22  156:22M
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12/09/21  HP Inc.                           S-4                    6:13M                                    Broadridge Fin’l So… Inc
12/09/21  HP Inc.                           10-K       10/31/21  153:22M
 9/03/21  HP Inc.                           10-Q        7/31/21   95:13M
 6/04/21  HP Inc.                           10-Q        4/30/21   89:12M
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12/10/20  HP Inc.                           POS AM                 2:361K                                   Broadridge Fin’l So… Inc
12/10/20  HP Inc.                           S-8        12/10/20    3:86K                                    Broadridge Fin’l So… Inc
12/10/20  HP Inc.                           S-8        12/10/20    4:200K                                   Broadridge Fin’l So… Inc
12/10/20  HP Inc.                           10-K       10/31/20  154:22M
12/09/20  HP Inc.                           POSASR     12/09/20    2:361K                                   Broadridge Fin’l So… Inc
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Filing Submission 0000912057-01-007696 – Alternative Formats (Word / Rich Text, HTML, Plain Text, et al.)

Hewlett Packard Co – ‘10-Q’ for 1/31/01

On: Friday, 3/16/01, at 5:09pm ET · For: 1/31/01 · Accession #: 912057-1-7696 · File #: 1-04423

Quarterly Report — Form 10-QFiling Table of Contents

10-Q — Quarterly ReportDocument Table of Contents

Dates Referenced Herein and Documents Incorporated by Reference

24 Subsequent Filings that Reference this Filing

Quarterly Report — Form 10-Q
Filing Table of Contents

10-Q — Quarterly Report
Document Table of Contents