HP always renounced the "hire and fire" mentality, which meant to employ

many workers for a single big order and to dismiss them afterwards.

Instead, the company offered its employees "almost perfect job security.")

Even in 1974, when the U.S. economy was in a profound crisis and many

people were unemployed, HP avoided layoffs by a four-day workweek, which

was a unique measure in corporate America.

The two founders trusted in the "individual's own motivation to work") and

treated their employees as family members; hence the custom to call each

other by the first name - even the two chiefs were only known as Bill and

Dave.

The HP workers were participated in the company with stock options and were

even paid additional premiums when HP was successful - today known as

profit sharing. These measures served to identify the employees with their

work and to encourage them.

Moreover, the HP way included extensive employment benefits such as

scholarships for the employee's children.

At the end of the 1950s Bill and Dave decided to write down the company's

objectives, which were to serve as guidelines for "all decision-making by

HP people,") since the company had grown ever larger. With some changes,

those objectives are still valid today. They cover as follows: "Profit,

Customers, Fields of Interest, Growth, Our People, Management, and

Citizenship.") And these objectives are to be achieved through teamwork.

HP's strategies nowadays comprise mainly the "Management by Objectives",

"Management by Wandering around" meaning informal communication within the

company, and "Total Quality Control" which aims at producing highly

qualified products.)

The HP way is seen as model for corporate culture in many countries.

The roots of many subsequent companies are located in HP, e.g. Steve

Wozniak, who worked at HP and later co-founded Apple. This has led to the

establishment of a new corporate culture in Silicon Valley and many firms

have tried to imitate the HP way and ad opted measures such as stock

options, innovative work rules, teamwork, and profit sharing.

HP today.

Business Summary PALO ALTO, Calif., Nov. 13, 2000 -- Hewlett-Packard

Company (NYSE: HWP) today reported 17% revenue growth (20% excluding

currency effects) in its fourth fiscal quarter ended Oct. 31, 2000.

Excluding extraordinary other income and restructuring expenses, diluted

earnings per share (EPS) was up 14% from the year-ago quarter.

During the quarter, HP completed its previously announced 2-for-1 split of

its common stock in the form of a stock dividend. Share and per-share

amounts have been adjusted to reflect this split.

Net revenue was $13.3 billion, compared with $11.4 billion in last year's

fourth quarter. EPS for the quarter was 41 cents on a diluted basis,(1)

excluding investment and divestiture gains and losses, the effects of stock

appreciation rights and balance sheet translation, and restructuring

expenses. Including these items, diluted EPS on a reported basis was 45

cents per share on approximately 2.05 billion shares of common stock and

equivalents outstanding. This compares with diluted EPS of 36 cents in the

same period last year(2).

"We are pleased that revenue growth is accelerating, but very disappointed

that we missed our EPS growth target this quarter due to the confluence of

a number of issues that we now understand and are urgently addressing. I

accept full responsibility for the shortfall," said Carly Fiorina, HP

chairman, president and chief executive officer.

"Issues that reduced profitability included margin pressures, adverse

currency effects, higher-than-expected expenses, and business mix. The good

news is that our business is healthy, demand is strong, and we are making

good progress against our strategic objectives as we continue the hard work

of reinventing hp. We are determined to succeed and are not backing away

from our growth targets," Fiorina said.

HP also announced it has terminated discussions with PricewaterhouseCoopers

(PwC) regarding the potential acquisition of its consulting business.

Fiorina said, "We are disappointed that we have not been able to reach a

mutually acceptable agreement to acquire PwC's consulting business. This is

a high-quality operation, and we believe the strategic logic underlying

this acquisition is compelling. However, given the current market

environment, we are no longer confident that we can satisfy our value

creation and employee retention objectives -- and I am unwilling to subject

the HP organization to the continuing distraction of pursuing this

acquisition any further. We remain committed to aggressively growing our

consulting capabilities, organically and possibly by acquisition, and are

open to other business arrangements to achieve our goals."

Business Summary

Net revenue in the United States was $6.0 billion, an increase of 13% from

the year-ago quarter. Revenue from outside the U.S. rose 20% (26% in local

currency) to $7.3 billion. In Europe, revenue was $4.5 billion, an increase

of 15% (27% in local currency). In Asia Pacific, revenue was $1.9 billion,

an increase of 36% (34% in local currency). In Latin America, revenue

increased 11% to $0.6 billion.

Imaging and Printing Systems

The imaging and printing systems segment -- laser and inkjet printing, and

imaging devices and associated supplies -- grew 6% in revenue year over

year (9% in local currency) against a very strong quarter last year.

Internet printing and a migration to color are driving strategy and growth.

Strong sales of supplies, scanners, all-in-one (AiO) products, and consumer

imaging devices, as well as overall strength in Europe and Asia, partially

offset softness in the U.S. business printing market and continuing price

erosion in inkjet printers.

Nearly 12 million printing and scanning devices were shipped during the

quarter. HP's color LaserJet market share continues to grow and new

products began shipping in October. Imaging revenues grew 31% over the year-

ago period, driven by strong performances in all product lines: AiOs up

31%, scanners up 12% and digital cameras and printers up 137%. AiO units

were up 53% and PhotoSmart printer units were up 208%. Supplies revenues

grew 15% against a strong quarter last year.

Operating margin was 13.4%, up from 13.2% last year.

Computing Systems

The computing systems segment -- a broad range of Internet infrastructure

systems and solutions for businesses and consumers, including workstations,

desktops, notebooks, mobile devices, UNIX(R) and PC servers, storage and

software solutions -- grew 29% in revenue year over year (32% in local

currency) with strong performances across all product categories.

UNIX server revenues rose 23% year over year, with orders up 43%, driven by

excellent performance in low- and mid-range servers. Superdome, HP's new

high-end server introduced this quarter, is achieving stronger-than-

expected market acceptance, and volume shipments remain on schedule for

January. NetServer revenues were up 20%. Enterprise storage revenues were

up 40% with the HP Surestore E Disk Array XP512, HP's flagship enterprise

storage product, up 90% in revenues with strong backlog. Software revenues

(excluding VeriFone) were up 18%, but down sequentially with strong order

backlog at the end of the quarter. OpenView revenues were up 29% with

orders up 60%. PC revenues were up 40%, with home PC revenues up 62%,

notebooks up 164%, workstations up 11%, and commercial desktops up 8%.

Operating margin was 3.7%, up from 3.2% last year, but down sequentially

from 7.3% in the third quarter primarily due to margin pressures, higher

expenses and mix changes.

IT Services

The IT services segment -- hardware and software services, along with

mission-critical, outsourcing, consulting and customer financing services --

grew 15% in revenue year over year (18% in local currency). HP's

consulting business achieved in 46% revenue growth, with substantial new

hires broadening and deepening the organization's capabilities.

Operating margin was 7.4%, essentially flat with 7.5% last year.

Costs and Expenses

Cost of goods sold this quarter was 72.5% of net revenue, up from 71.3% in

the year-ago period. Expenses grew 15%. After adjusting for currency,

expense growth was 17%. Operating expenses, as reported, were 20.3% of net

revenue. This compares with 20.7% in the comparable period last year.

Asset Management

Return on assets for the quarter was 10.5% compared with 9.8% in the

comparable quarter last year. Inventory was 11.7% of revenue compared with

11.5% in last year's fourth fiscal quarter. Trade receivables were 13.1% of

revenue compared with 14.1% in the prior year period. Net property, plant

and equipment was 9.2% of revenue compared with 10.2% in the year-ago

quarter.

Full-year Review

Net revenue increased 15% to $48.8 billion. Net revenue in the United

States rose 14% to $21.6 billion, while revenue from outside the United

States increased 16% to $27.2 billion.

Net earnings from continuing operations were $3.6 billion, an increase of

15%, compared with $3.1 billion in fiscal 1999. Net earnings per share were

$1.73 on a diluted basis, up 16% from $1.49 last year.

Outlook for FY 2001

For the 2001 fiscal year ending Oct. 31, 2001, HP expects to achieve

revenue growth in the range of 15 to 17%, compared to 15% in FY 2000. Gross

margin percentage in FY 2001 is expected to be in the range of 27.5 to

28.5%, compared to 28.5% in FY 2000, with improvements beginning in the 2nd

quarter. Total operating expenses in FY 2001 are expected to be

approximately 10 to 12% above FY 2000. Tax rate is expected to remain

constant at approximately 23%.

The forward-looking statements in this Outlook are based on current

expectations and are subject to risks, uncertainties and assumptions

described under the sub-heading "Forward-Looking Statements." Actual

results may differ materially from the expectations expressed above. These

statements do not include the potential impact of any mergers, acquisitions

or other business combinations that may be completed after Oct. 31, 2000.

HP will be discussing its fourth quarter results and its 2001 outlook on a

conference call today, beginning at 6 a.m. (PST). A live Webcast of the

conference call will be available at

http://www.hp.com/hpinfo/investor/quarters/2000/q4webcast.html. A replay of

the Webcast will be available at the same Web site shortly after the call

and will remain available through 4:30 p.m. PST on Nov. 22, 2000.

The rise of Silicon Valley

Hewlett-Packard was Silicon Valley's first large firm and due to its

success one of the area's most admired electronics firms.

While HP was important for the initial growth of the area and at first was

based on electronic devices, the actual Silicon Valley fever was launched

in the mid-1950s with Shockley and Fairchild, and other semiconductor

firms, and went on to the microelectronics revolution and the development

of the first PCs in the mid-1970s, continuing till today.

Invention of the transistor

One major event was crucial for this whole development. It was the

invention of the transistor that revolutionized the world of electronics.

By the 1940s, the switching units in computers were mechanical relays,

which were then replaced by vacuum tubes. But these vacuum tubes soon

turned out to have some critical disadvantages, which impeded the further

progress in computing technology. In contrast, transistors were much

better. They could perform everything the vacuum tubes did, but "required

much less current, did not generate as much heat, and were much smaller")

than vacuum tubes.

The use of vacuum tubes, which could not be made as small as transistors,

had meant that the computers were very large and drew a lot of power. For

example the famous American ENIAC, built in 1946 and consisting of more

than 18,000 vacuum tubes, had a total weight of 30 tons, filled a whole

room of 500 square meters and consumed 150 KW per hour. The breathtaking

development in computers can be seen, when comparing the ENIAC with today's

laptops which are portable with about 5 kg, are battery driven and run some

100,000 times faster.)

This development was launched by the transistor (short for "transfer

resistance") invention in 1947 by William Shockley and his colleagues John

Bardeen and Walter Brattain. This "major invention of the century") was

made at the Bell Labs in Murray Hill, New Jersey, which are the "R&D arm of

the American Telephone and Telegraph Company (AT&T).") And in 1956, the

three scientists received the Nobel Prize in Physics for their invention

that had "more significance than the mere obsolescence of another bit of

technology.")

The transistor is a "switch - or, more precisely, an electronic "gate,"

opening and closing to allow the passage of current.") Transistors are

solid-state and are based on semiconductors such as silicon. The crystals

of these elements show properties, which are between those of conductors

and insulators, so they are called semiconductors. The peculiarity of

semiconductor crystals is that they can be made "to act as a conductor for

electrical current passing through it in one direction") only, by adding

impurities or "doping" them - for instance, "adding small amounts of boron

of phosphorus.")

Shockley Semiconductor

In 1955, William Shockley, co-inventor of the transistor, decided to start

his own company, Shockley Semiconductor, to build transistors, after

leaving the Bell Labs. The new firm was seated in Palo Alto in Santa Clara

County, California, where he had grown up. Shockley man aged to hire eight

of the best scientists from the East Coast, who were attracted by his

scientific reputation. These talented young men - "the cream of electronics

research" - represented the "greatest collection of electronics genius ever

assembled". Their names were: Julius Blank, Victor Grinich, Eugene Kleiner,

Jean Hoerni, Jay Last, Gordon Moore, Robert Noyce and Sheldon Roberts.)

But however brilliant Shockley was, who was called a "marvelous intuitive

problem solver" and a "tremendous generator of ideas" by Robert Noyce, it

soon turned out that he was "hard as hell to work with", as his style was

"oppressive" and he "didn't have trust and faith in other individuals.")

When Shockley refused the suggestions of his eight engineers who wanted to

concentrate on silicon transistors, while their boss pursued research on

four-layer diodes, they decided to quit and start their own firm in 1957.

Within several months Shockley had to shut down his firm, since he had lost

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