News release

HP Sends Letter to Shareowners on Value of Compaq Merger

PALO ALTO, Calif., Jan. 18, 2002

The following is the text of a letter being sent by eight members of the Hewlett-Packard Company (NYSE:HWP) Board of Directors to HP shareowners regarding the merger with Compaq.

Dear HP Shareowner:

Your Board of Directors and management team have completed a thorough and deliberative strategic process aimed at improving Hewlett-Packard's competitive position and delivering greater shareowner value.

As a result of this two-year process, we are convinced that merging with Compaq Computer Corporation is by far the single best way to reclaim a leadership role at the center of our industry, and the best and fastest way to increase the value of your investment in HP.

The New HP: Stronger In Every Business

In the technology industry, market leadership drives growth. By merging with Compaq, we become the market leader in servers, storage, and management software -- the essential components of business infrastructure. In one move, we dramatically improve our ability to offer the end-to-end solutions customers demand -- enhancing our prospects in existing accounts and opening doors to new ones.

We immediately double the size of our services business and become a tier-one player in this important, fast-growing segment. We double the size of our sales force, bolster our research and development budget, and extend our reach into more than 160 countries.

The merger will enable us to quickly address HP's current challenges in the personal computer business by reducing costs, improving operating margins and leveraging Compaq's successful direct distribution capability.

Improving the profitability of our other business segments will enable us to continue to increase our investment in innovation and R&D in our market-leading printing and imaging business. Investment is critical to maintaining our leadership in this business, particularly as we enter emerging high-growth markets such as digital imaging and digital publishing.

The merger will materially improve HP's earnings power through significant cost savings and operating efficiencies. In fact, we expect cost savings to reach more than $2.5 billion annually, adding $5 to $9 of present value to each HP share. Importantly, these benefits will enable us to achieve higher operating margins and profit growth than HP could achieve on its own.

This sounds like a good deal because it is.

In a single strategic move, merging with Compaq will allow HP to accelerate our strategy, strengthen all of our businesses, achieve market leadership in a dynamically changing industry, increase opportunities for our employees and create value for our customers and shareowners. At the same time, we are convinced that if we fail to quickly capitalize on the opportunities and address the challenges confronting our company and our industry, shareowner value will be jeopardized.

Walter Hewlett: He Offers No Plan To Create Value

You may have received a letter from Walter B. Hewlett opposing HP's proposed merger with Compaq. Walter Hewlett, an heir of HP co-founder Bill Hewlett, is a musician and academic who oversees the Hewlett family trust and foundation. While he serves on HP's Board of Directors, Walter has never worked at the company or been involved in its management. His motivations and investment decisions are likely to be very different from your own.

Mr. Hewlett is the ONLY member of HP's Board of Directors who believes that resting on our legacy is better than building on it.

The problem isn't just that he is saying " no " to the merger -- he's giving us nothing to say " yes " to. While opposing the merger, he has failed to propose any alternatives that your Board hasn't already analyzed, debated and rejected because they fail to create sufficient shareowner value.

While Walter Hewlett has a right to disagree, we strongly object to his flawed presentation of the merger, which misleads rather than informs shareowners. Now, he is asking you to ignore the collective vision, wisdom and experience of his eight fellow Board members and the HP management team. This team represents more than 300 years of business and management leadership, and its members have successfully overseen many large, complex transactions. If Walter Hewlett has his way, we believe this company and your investment will be damaged. Clearly, there is too much at stake for our shareowners to let him prevail.

In the coming weeks, you will be receiving proxy materials from Walter Hewlett that will argue against the proposed merger. We urge you NOT to return the proxy card that you receive from this dissident shareowner.

Instead, we invite you to read the detailed information we will be sending you in the near future about the merger and learn why an increasing number of shareowners, analysts, customers and employees believe this merger will transform our industry and provide the best value for shareowners.

"To Remain Static Is to Lose Ground"

Bill Hewlett and Dave Packard understood that in the face of change, HP could choose to lead or to follow. Always, they chose to lead. In the words of Dave Packard, "Continuous growth was essential for us to achieve our other objectives and to remain competitive. Since we participate in fields of advanced and rapidly changing technologies, to remain static is to lose ground."*

Today, our industry is again in the midst of profound transformation driven by technical advances, intensified competition and changing customer requirements. To stand still -- in these times, of all times -- is to fall behind. Now is not the time to retreat. Instead of resting on HP's legacy, let's build on it.

Sincerely,

Members of Hewlett-Packard's Board of Directors

Philip M. Condit
HP Director

Patricia C. Dunn
HP Director

Carleton S. Fiorina
HP Chairman of the Board and Chief Executive Officer

Sam Ginn
HP Director

Richard A. Hackborn
HP Director

George A. Keyworth II
HP Director

Robert E. Knowling Jr.
HP Director

Robert P. Wayman
HP Director, Executive Vice President and Chief Financial Officer

About HP

Hewlett-Packard Company -- a leading global provider of computing and imaging solutions and services -- is focused on making technology and its benefits accessible to all. HP had total revenue of $45.2 billion in its 2001 fiscal year. Information about HP and its products can be found on the World Wide Web at http://www.hp.com.

* "The HP Way," p. 141.

FORWARD-LOOKING STATEMENTS

This document contains forward-looking statements that involve risks, uncertainties and assumptions. If any of these risks or uncertainties materializes or any of these assumptions proves incorrect, the results of HP and its consolidated subsidiaries could 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 predictions regarding the outcome and certification of the vote on the merger or the closing of the merger; statements regarding future improvement of HP generally or specifically its profitability, earnings, revenues, synergies, accretion or other financial items; statements about the plans, strategies, and objectives of management for future operations, including the execution of integration and restructuring plans; any statements concerning proposed new products, services, developments or industry rankings; statements regarding future economic conditions or performance; statements of belief; and statements of assumptions underlying any of the foregoing.

The risks, uncertainties and assumptions referred to above include the actual certified results of the vote on the proposal to issue shares of HP common stock in connection with the merger; 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; the challenges of integration and restructuring associated with the merger or other planned acquisitions and the challenges of achieving anticipated synergies; the possibility that the merger or other planned acquisitions may not close or that HP, Compaq or other parties to planned acquisitions may be required to modify some aspects of the acquisition transactions in order to obtain regulatory approvals; the assumption of maintaining revenues on a combined company basis following the close of the merger or other planned acquisitions; and other risks that are described from time to time in HP's Securities and Exchange Commission reports, including but not limited to HP's annual report on Form 10-K, as amended on January 30, 2002, for the fiscal year ended October 31, 2001 and HP's registration statement on Form S-4 filed on February 5, 2002.

HP assumes no obligation and does not intend to update these forward-looking statements.

ADDITIONAL INFORMATION ABOUT THE MERGER AND WHERE TO FIND IT

On February 5, 2002, HP filed a registration statement with the SEC containing a definitive joint proxy statement/prospectus regarding the merger. Investors and security holders of HP and Compaq are urged to read the definitive joint proxy statement/prospectus filed with the SEC on February 5, 2002 and any other relevant materials filed by HP or Compaq with the SEC because they contain, or will contain, important information about HP, Compaq and the merger. The definitive joint proxy statement/prospectus and other relevant materials (when they become available), and any other documents filed by HP or Compaq with the SEC, may be obtained free of charge at the SEC's web site at www.sec.gov. In addition, investors and security holders may obtain free copies of the documents filed with the SEC by HP by contacting HP Investor Relations, 3000 Hanover Street, Palo Alto, California 94304, 650-857-1501. Investors and security holders may obtain free copies of the documents filed with the SEC by Compaq by contacting Compaq Investor Relations, P.O. Box 692000, Houston, Texas 77269-2000, 800-433-2391.