News release

HP Board of Directors Announces Retirement Benefits for U.S. Employees

HP Retirement Programs Continued for Pre-merger HP Employees and Extended to Pre-merger Compaq Employees
Decision Recognizes Importance of Retirement Benefits in Present Economic Environment

PALO ALTO, Calif., July 23, 2002

The board of directors of HP (NYSE: HPQ) today announced that it would make pre-merger HP retirement programs available to U.S. employees, including pre-merger Compaq employees. This is the first of several important compensation and benefit decisions to take place in the coming months. The decisions regarding U.S. retirement plans, which include pension, retiree medical and 401(k) programs, have been addressed first because of their importance to employees.

"We are now one team," said Carly Fiorina, HP chairman and chief executive officer. "We recognize that our employees make extraordinary contributions to our success, and we are committed to investing in them. As a premier employer in our industry, we know the value of pension plans, especially in the current economic climate."

For pre-merger HP employees, current retirement programs continue without modification. For pre-merger Compaq employees, prior service with Compaq will count toward the two-year service requirement under the pension program. Benefits under the pension plan and eligibility for retiree medical are not retroactive for pre-merger Compaq employees. They will be determined based upon HP service earned in 2003 and beyond.

Historically, most pre-merger Compaq employees did not participate in a formal pension program. The board's decision on retiree benefits provides a new baseline for current HP employees regardless of their pre-merger company.

The company anticipates no changes to its financial goals as a result of these actions. The cost of extending these retirement programs, when offset against other integration savings, is not expected to have a material impact on the financial plans that the company has communicated publicly.

New retirement programs are being developed for future employees hired Jan. 1, 2003, and beyond. The programs for future employees will align more closely with current market practice and are expected to include account-based pension and retiree medical benefits, along with the existing pre-merger HP 401(k) program.

HP's retirement plans outside the United States will be country-specific and consistent with local practices, business needs and relevant legal considerations.

About HP

HP is a leading global provider of products, technologies, solutions and services to consumers and businesses. The company's offerings span IT infrastructure, personal computing and access devices, global services and imaging and printing. HP completed its merger transaction involving Compaq Computer Corp. on May 3, 2002. The company would have had combined revenue on a pro forma basis with the Compaq transaction of approximately $81.1 billion in fiscal 2001 and has operations in more than 160 countries. More information about HP is available at http://www.hp.com.

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 and its consolidated subsidiaries 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 financial items; any statements of the plans, strategies, and objectives of management for future operations, including with respect to benefits plans; any statements concerning proposed new plans or modifications of existing plans; any statements regarding future economic conditions or performance; statements of belief, anticipation and expectation and any statement of assumptions underlying any of the foregoing. The risks, uncertainties and assumptions referred to above include risks relating to the timing and implementation of new plans and changes to existing plans 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 quarterly report on Form 10-Q for the quarter ended April 30, 2002 and reports filed subsequent to HP's annual report on Form 10-K, as amended on January 30, 2002, for the fiscal year ended October 31, 2001. HP assumes no obligation and does not intend to update these forward-looking statements. Although HP expects to continue its U.S. retirement programs indefinitely, HP reserves the right to amend or terminate these programs at any time.