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DECEMBER 12, 2002

© Copyright 2002 Hewlett-Packard Development Company, L.P
All rights reserved. Do not use without written permission from HP.

Good morning. It’s a great honor for me to be here today, and on behalf of now 140,000 HP employees in more than 160 countries around the world, I want to thank you for the opportunity to participate in this important conference.

For more than four decades, HP has been privileged to be a guest and trusted partner here in Japan. We have had the chance to work with many worthy companies over the years—companies that not only honored us with their business, but more importantly honored us with their trust.

Over the past decade, one company has taken that trust to a new level—one company in particular we have been proud to call our partner, and our friend. That company is NEC.

There is an age-old Japanese proverb that reads: ‘‘the future is greater than the past,’’ and one thing that has always struck me about NEC, is that its vision of the future is rooted in the best principles of Japan’s past—that even though we live in an age of new technology, our oldest and most fundamental values should still be our guiding light. At HP, we believe this as well. We know that who we are is defined by both our character and our capability.

The values of honor, trust, respect and tradition lie not just at the heart of Japanese families and Japanese society, but they also lie at the heart of the qualities that bring NEC to the marketplace every day, and we believe HP as well. NEC has always understood that great companies are judged not just by their imagination or by their invention—but by their integrity as well. And we at HP also believe that great companies are defined by invention and integrity.

I believe the integrity of NEC starts at the very top, and I consider it a great privilege to share this occasion today with President Koji Nishigaki—who has been a part of NEC for as long as HP has been a part of Japan. One of the things that I find fascinating about Nishigaki-san’s career is that he was not only a standout judo athlete when he was a young man, but when he was a student at Tokyo University, he was also the quarterback and first captain of Tokyo University’s American Football Club, which he helped to create.

As far as understanding the things that are near and dear to American hearts, it was surely a sign of things to come. And he has been one of the world’s outstanding quarterbacks at NEC over the past three years. So Nishigaki-san, if you ever tire of the information technology business, I’m sure there are some American football teams who would be interested in your services…

Integrity, I think, is also reflected in NEC’s customers, and I wanted to come here first and foremost to say thank you for putting your trust in HP as a partner of NEC. We at HP understand that great organizations are defined not just by the company they are, but also by the company they keep. And I want you to know that today at HP, just as in the past, everything we are about and everything we do, starts with our customers. We know that nothing happens unless you are willing to entrust your business to us, and unless you’re willing to do it again and again. We never forget who keeps us in business.

Now, you may be here at this important conference for a number of reasons. Maybe you are here today because you want to find ways to integrate new Web-based technologies and processes—technologies and processes that you spent so much time and money putting into place in the 1990s. Or, maybe you want more help in addressing the issues of manageability and interoperability. Or maybe you wonder whether it is possible to get more out of your existing technology assets. Or maybe you wonder what it would be like if you only had to pay for the computer resources you actually use. Or maybe, you’re here because you want to see how HP sees the road ahead.

Certainly, we all know that now is not the easiest time for the IT industry, or for the world economy. We all know that we are living in uncertain times, with war, recession, terror and even corporate scandal. But even though we come here with much on our minds, I actually come to this conference more hopeful about the future than I have ever been.

I believe that our world today—that this generation in which we live—is on the cusp of some of the greatest discoveries and some of the greatest advances in history—advances that have the potential to change the way we all live, work and relate to one another for the better. And I believe that information technology is central to that future. I think the market for technology for technology’s sake may be down, but the need for technology that solves real business problems, and real human problems, is stronger than it has ever been.

I come here today as a true believer that when the technology and ingenuity and invention of companies like HP and NEC is married to the vision of our customers, everything is possible. And that’s really what I’d like to talk to you about today.

It has been said that the very nature of technology is the nature of change. Many of you have been partners of NEC and HP through all four waves of change that have swept the computing landscape in its short history. From mainframes, to minis, to client-server networks, to the Internet—change has been the name of the game. At the same time, the demands placed on information technology, and on you as IT and business professionals—are as great today as they have ever been.

We live in an age where it is virtually impossible for any business to consistently predict what’s coming around the corner, short- or long-term. It is not enough to be simply prepared for change—companies today have to move at the speed of change. And, as business is required to adapt to change, your metrics as IT leaders change. You’re no longer rewarded for stability; you’re rewarded for agility. You have to be able to adapt your infrastructures more rapidly and deploy systems and applications in near real time.

As IT managers, it means that you have to think about the creation of content on one hand and then the management, the distribution, the networking, the manipulation, the mining and, ultimately, the transformation of that content into whatever form your users choose.

The old conventional wisdom of ‘‘never touch a running system’’ was effective when processes remained stable over long periods of time, but in today’s environment, none of you has that luxury. The problem is, many current IT infrastructures were built to be stable, they were not built to react quickly, to adapt—which is one of the reasons why a survey of key technology decision-makers in the United States found that the business environment is changing seven times as fast as the underlying IT infrastructure and applications.

And yet, business cycles and business budgets no longer support specialized or custom-built hardware and software to meet business computing needs, which means you are pressed to do more with less. And of course, the real trick of all this is that we have not even begun to see where this latest technology revolution is going to take us, because the real transformation we see happening in technology today is that physical processes are becoming digital processes. We have gone through a phase of the Internet where we thought everything was e-business, where the ability to purchase or place orders over the Web was a big deal. But the real inflection point of this industry is what happens when we start to digitize everything.

As a simple example of this, just stop and think about the changes being wrought by digital photography—something HP knows something about. Digital photography is the embodiment of a physical process into a digital process. What do you do when you use a traditional camera? You take a picture, something physical happens on film, you physically carry the film somewhere else, that film is developed through a physical, chemical process, and then you end up with prints that you physically distribute or mail. It is a pretty static process, and it doesn’t actually allow you to do very much.

But now digital photography transforms that into a digital process. In digital photography, you create content one time. You network it. You manipulate it. You distribute it. You change it. You store it. And ultimately when you’re ready, you transform it into physical content—and you haven’t even stepped away from your desk or your home.

That same process transformation is going to happen in enterprise after enterprise after enterprise. Just think about this: into a business environment already changing at seven times the rate of underlying IT infrastructure and applications, over the next three years, there will be more data created than in the entire history of humanity. More data created in the next three years, data that needs to be mined, analyzed, understood, stored, networked, distributed, made useful and made into insight and information.

More data over the next three years than in the history of humanity…

Now, over and over again, many of our customers tell us they want partners who come to the table with the depth, with the breadth, with the product line, with the capability to address all of their needs—end to end… Partners who can help make all the pieces you already have work better together. What you need are real answers, step by step by step, not a U-turn, not a throw out and start over; step-by-step evolution of your infrastructure, not the hottest box or the latest killer application. And to us, this step-by-step approach is the essence of strategic partnerships—and it is why we completed the merger with Compaq.

I have been asked many times: why did HP make what was at the time a very controversial announcement: that we were actually going to attempt the largest merger in the history of technology. Why? Because we saw these trends, and we saw the opportunity to create one great technology company—the world’s leading technology company—a company that can be a better partner for our partners like NEC and a better partner for our customers.

We think we come today as a more complete partner for our clients and our customers—with the capability to serve any institution, any community, any customer, from a Fortune 10 to a micro-business to an individual consumer.

So let me tell you a little bit about the new HP that NEC is partnered with today.

HP is 140,000 employees strong, with over 6,000 employees here in Japan. We have employees in 160 countries around the world, working in every time zone on Earth. It makes conference calls a challenge—but for a company that does nearly 60 percent of its business outside the U.S., we think that having capabilities in 160 countries, doing business in 43 currencies, and 15 languages is an asset.

We have a stronger market position because we can offer our customers and our partners more. We think it is an advantage to our customers and our partners that we are now the market leader in the world in supercomputing, the market leader in management software, the market leader in the world in UNIX servers, and Windows servers, and Linux servers; that we are the market leader in the world in storage, in workstations, in imaging and printing, in laptops—and that we are among the leading companies in the world in professional services.

Our portfolio runs from desktop to print shop, from palmtop pocket PC devices to nonstop computing capabilities, from $49.99 USB PhotoSmart photo printers to multi-million dollar commercial systems.

And we think the depth and breadth of our portfolio not only serves our customer’s needs and our customer base; we think it is reflected in our customers. Today, HP serves more than 1 billion customers around the world. That means if you made a country of all of our customers, it would be the third-largest country in the world.

We are actually in a lot of places that you see every day. The new HP powers more than 100 stock and commodity exchanges, including 14 of the world’s largest. We support 95 percent of the world’s securities transactions. We help process two out of every three credit card transactions worldwide and three out of every four electronic funds transfers. We handle 80 percent of the mobile billing and customer care traffic in Asia and in Europe; we help control 65 percent of the world’s energy infrastructure.

And we feel good about our ability to continue to innovate on behalf of our customers and partners, because innovation and invention is our lifeblood. We have 15,000 pre-sales and sales professionals, 65,000 service and support professionals. We have doubled, as an example, the number of employees we have here in Japan to over 6,000, and we have sales and support centers here in Japan in more than 75 locations.

I mentioned that innovation and invention is our lifeblood. We have 17,000 patents today; we produce three new patents every working day. Those patents spread from print technology to molecular computing. And as an example of the fact that high tech can mean low cost: I mentioned a $49.99 USB photo printer a few moments ago. That $49.99 printer has 100 patents associated with it. A $79.99 printer has 29 patents associated with it, proving that low cost does not mean low tech. Those 17,000 patents, generated at a rate of 3 every working day, represent $4 billion in R&D spending every year—and we believe it is vitally important to maintain that level of R&D investment.

Finally, we are the number one partner for Microsoft, Intel, Accenture, PeopleSoft, BEA, Oracle, Siebel, CGEY and BearingPoint, just to name several, and we think that partnership position helps us fulfill what we believe is one of the most important roles for HP—to galvanize all of these partners, and to bring the full power of this industry to you and to your customers.

And among all those partnerships that I just mentioned, among the very most important in the world is the relationship we have enjoyed with NEC for over a decade.

In 1995, we began an HP-UX server OEM relationship, and since then, we have expanded our partnership to include technology collaboration in hardware and software, as well as sales collaboration to deliver large-scale solutions. Together, we have developed a strong track record in providing open systems-based mission critical solutions to our customers. And I think one of the reasons our partnership works so well is because we are driven by a common vision of technology, a vision where technology is more flexible, more cost-effective, more open, more adaptive, and more scaleable for our customers.

In May of 2002, HP and NEC expanded our partnership when we announced plans to collaborate in taking open mission critical solutions to our customers in Japan and the U.S. And I’m happy to report that that program is now well under way.

Of course, part of that agreement is predicated on us providing 24 hours a day, 365 days a year operation and lightning-fast response to a changing market. And today, it is my great honor and privilege to announce that we are taking our partnership one step further.

Nishigaki-san and I, as well as other members of our teams, will be announcing at a press conference later today that HP and NEC are forming an alliance to jointly provide outsourcing services to customers. We believe that HP’s leadership in IT infrastructure services, combined with NEC’s expertise in open, mission-critical systems, as well as our history of jointly delivering comprehensive system integration offerings, will be a powerful incentive for companies to make HP and NEC their outsourcing partners.

Now, like all of our technology and services, we are focused less on what we make for ourselves and more on what we make possible for our customers. Frankly, we believe that the real storyline of this industry is being written not just in what we can develop in our labs, but in what we can make possible for consumers, for businesses, for governments, and for our customers all around the world.

Ultimately, we know that if customers cannot see a clear linkage between the return they get on their technology investment and their business priorities and productivity, they simply won’t make the investment. And likewise, we know that if consumers don’t have a good experience—what we call a simple, rewarding experience, using our products, our services, our technology—they won’t buy again.

We also know that the closer you look at what is going on, the more you see a new breed of company that is emerging: companies that are making the tough choices, that are streamlining, but that are not backing off of their core mission—and in the process, they are using technology to solve real, often seemingly impossible problems.

So, let me just give you just a few examples of how some of our customers are using HP and NEC combined services—and in some cases, HP services alone—to improve business, or enhance life, or to build our future.

Here in Japan, for anyone who owns a mobile phone, if you hear the words "i-mode", you immediately think of one company: NTT DoCoMo. Last year, NTT DoCoMo announced plans to launch a next generation mission-critical i-mode system to better serve more than 40 million subscribers, and to provide an infrastructure scalable to manage millions more. But NTT DoCoMo had one problem: DoCoMo's systems provider at that time could not provide the support or the capacity to meet the enhanced needs of the next-generation i-mode system.

And so, NTT DoCoMo came to NEC and HP. Together, we delivered more than 140 large-scale servers to more than get the job done. When the new i-mode system launches in the spring of 2003, it will run on NEC's NX7000 series, which operates with an HP-UX operating system, NEC's middleware platform "OpenDiosa," and other global standard software. And by the time the new system is fully deployed, it will total more than 300 servers—it will be the largest scale open mission critical system in the world.

Now, let me, as another example, move from a company's services to a government's services.

I just came from Hong Kong. Back in 1998, the government of the Hong Kong’s special Administrative Region launched an initiative to make the city a digital hub of Asia. Dubbed the “Digital 21 IT Strategy,” the effort began by building up Hong Kong's administrative infrastructure and encouraging the growth of the city's information technology industry.

And then, the Hong Kong government set out to do what any business seeking to become a player in an e-business world would do: they built a Web portal. An in Hong Kong's case, a portal that delivered online services to its 6.8 million citizens around the clock, 24 hours a day, 356 days a year—all while saving money at the same time.

Now, to build and maintain the Electronic Service Delivery system, as it’s called, the Hong Kong government selected a partnership that included HP. Since the project began officially in 1999, HP has provided e-infrastructure products, services and solutions to the joint venture. And among our contributions, we also provide project management for the deployment of information kiosks around Hong Kong's public spaces—which not only increases convenience, but increases access for citizens who don't have access to the Internet in their home or office.

We launched the portal in December of 2000, and today, Hong Kong's millions of citizens can access more than 130 types of public services from more than 40 government departments—and those services range from applying for a business permit to booking a marriage date or signing up for volunteer work. And so today, Hong Kong is one of the first governments in the world to operate on its citizens' schedule—and not ask its citizens to operate on the government’s schedule.

And finally, as one more example of what our technology is making possible, let me give you an example that scales all borders.

In the United States, the challenge that NASA, the National Aeronautic and Space Administration, faces today, is that they send brilliant minds into space and then they have to bring them back home. And so, there isn’t a lot of room for error in that process. HP has the honor of being one of NASA's technology partners—our role is to get the astronauts home safely, so NASA can focus on its real mission: which is to explore and to discover and to inspire.

Our technology handles the communication between the Space Shuttle and mission control from the moment the shuttle lifts off, to the moment it touches down. And, of course, reliable computer systems are an absolutely critical component in this whole operation—so much so that during the famous Apollo missions, the computer was referred to as "the fourth astronaut."

So, I just gave you three examples of what three organizations—NTT DoCoMo and the Hong Kong government and NASA—are achieving with technology.

So where do we go from here? The organizations that I just mentioned are focused not simply on technology itself, but on what technology makes possible. I think as business customers, you have made your agenda clear: what you need most is straight talk, practical solutions, and partners you can trust.

You want to lower your operating costs; you want to lower your acquisition costs; you want the freedom to incorporate the best technology and services from anyone; you want infrastructure that will flex and change and adapt to your business requirements; you don’t want to have to start over, you want to make progress step by step; and you want a tight link between your business and your IT systems. And, above all, I think you want immediate information and insight so that you can take intelligent action.

And all of that requires evolving your existing infrastructure, not throwing it out and starting over—evolving your existing infrastructure that you've already built and invested in. But that existing infrastructure must evolve into a more adaptive infrastructure, a more manageable infrastructure, a better utilized infrastructure, a more cost-effective infrastructure. A truly adaptive infrastructure is one that satisfies your requirements exactly, every second of the day. That is when you know you're getting the most out of your infrastructure and the most out of your investment.

And every step of the way at HP, we are focused on redefining the value proposition for information technology—improving the value of information technology. We are focused on delivering the best, total return on information technology.

So what does that mean?

It means first lowering your cost of acquiring technology, which is why you'll see HP continue to invest in high-tech, low-cost. You will see us continue to invest heavily to ensure that our product line is the most modular, the most standards-based in the industry, because standards and modular design give you choice, give you flexibility and improve your overall cost of ownership.

You'll see us adhere to an engineering paradigm that is firmly rooted in our belief that a diverse, a heterogeneous technology landscape can work—and work better, because heterogeneity serves your needs.

It's why you'll see us extend our lead in Windows, in UNIX, in Linux platforms, and extend our lead in modular architectures like blades and cell boards, as well. It's why we will lead the advancement and the management of both .Net and J2EE in the emerging web services world, because our customers tell us that is what they want and need to create an infrastructure that can adapt in real time.

But it’s not only about lowering your technology acquisition costs; it’s also about lowering your technology operating costs. In other words, to make it easier for you to manage the assets you already have, and the assets you will invest in—which is why you'll see us continue to invest in virtualization, so that you can achieve better capacity utilization in servers, better utilization in storage, better utilization across the entire data center. It's why you'll see that our approach to the best return on information technology includes PCs, handhelds, wireless devices and printing infrastructure, as well as servers and storage and software and data centers—because your entire infrastructure must be adaptive, and your entire infrastructure must be digital, from desktop to print shop, from desktop to data center.

It’s not only about lowering your acquisition costs, or lowering your management costs, it’s also about managing the infrastructure truly end-to-end. And that is our third important goal in delivering the best return on information technology. That is why we have put more investment in OpenView, which is the console that lets you see in one view all of the resources in your IT environment from end-to-end, inside and outside, so you know how to shift resources to best handle the demands of business. It's the foundation and the key to building an adaptive infrastructure that truly flexes with changes in your business activity. And, just as an example of OpenView’s leading position in the market place, today 100 percent of the Fortune 50 use OpenView.

Fourth, it's about providing the services that fundamentally improve your return on investment, your return on information technology. It’s about lowering the cost of acquiring technology, lowering the cost of managing technology, enabling you to manage your infrastructure truly on an end-to-end basis, and fourth, providing the services that improve your return on investment. So we focus all of our 65,000 services professionals on being the industry's experts on adaptive infrastructure. And we're pioneering new methodologies and new services in IT consolidation, in optimizing heterogenous environments, in mission-critical services, in enterprise Microsoft, in on-demand infrastructure solutions. And again, we’re focused on optimizing the infrastructure all the way out to the mobile solutions and the handheld devices.

Ultimately, we think for you it is also about freedom of choice. One of the key reasons we have built this company called HP was to combine enough of the key elements of an enterprise infrastructure under one roof—so that we could, quite literally, speed implementation for our customers. So we now have within our scope, the leadership products and technologies required to truly redefine the IT value proposition for business, to actually deliver the best return on information technology.

But importantly, we do not wish to control you. We do not wish to lock you in. We do not wish to limit your choices. In fact, the essential difference between HP and our competition is that perhaps because of our engineering orientation, perhaps because of our DNA as a company, we believe partnership, as much as innovation, is our lifeblood: our partnership with our customers, and our partnership with others in the industry who serve you, like NEC.

We believe it's our job to make sure that you always have access to the best talent and the best innovation. In some cases, that will be our talent and our innovation, specifically in the places where we think we can make a valued contribution, areas like management, interoperability, utilization, software and services. Areas like computing as a utility, imaging technologies, mobility, secure and trusted systems, and consumer connectivity. And in other cases, the best talent and innovation will come from our valued partners who also will bring their talent and capability to our customers.

I started today by saying that I have every reason to be hopeful about the prospects for our industry, and I gave you a few examples of how customers are using technology today to do things that were not possible previously, and would not be possible without the application of technology. And so I think if we can get beyond the doom and gloom of the current headlines, headlines that we've grown accustomed to in some ways in the past few years—we’ll see a world where technology is more ubiquitous, more accepted, more purposeful, more promising and more woven into the fabric of our businesses and our lives and driving more change than technology ever has before.

At HP, the idea that we can make more things more possible for more people in more places represents our highest aspiration. It represents, as well, our most practical goals and our highest aspirations as a company and as a partner. We believe it is at the intersection of practice and promise that you will find the new HP.

Thank you very much for your attention, and please enjoy the rest of the conference.

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