Amendments Dated November 21, 1996 To The Company's 1995 Incentive Stock Plan, - HEWLETT PACKARD CO - 1-29-1997 by HPQ-Agreements

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									Exhibit 10(t) Amendments dated November 21, 1996 to the Company's 1995 Incentive Stock Plan, 1990 Incentive Stock Plan, 1987 Director Option Plan, 1985 Incentive Compensation Plan, and 1979 Incentive Stock Option Plan, as set forth below, respectively: 1995 Incentive Stock Plan: Part I. Section II., Part 2, Section X. and Part 4, Section XXV, of the Company's 1995 Incentive Stock Plan are hereby amended to read, respectively, as follows: Section II. Administration The Board of Directors (the "Board") of the Company or any committee (the "Committee") of the Board that will satisfy Rule 16b-3 of the Exchange Act, and any regulations promulgated thereunder, as from time to time in effect, including any successor rule ("Rule 16b-3"), shall supervise and administer the Plan. The Committee shall consist solely of two or more non-employee directors of the Company, who shall be appointed by the Board. A member of the Board shall be deemed to be a "non-employee director" only if he satisfies such requirements as the Securities and Exchange Commission may establish for non-employee directors under Rule 16b-3. Members of the Board receive no additional compensation for their services in connection with the administration of the Plan. The Board or the Committee may adopt such rules or guidelines as it deems appropriate to implement the Plan. All questions of interpretation of the Plan or of any shares issued under it shall be determined by the Board or the Committee and such determination shall be final and binding upon all persons having an interest in the Plan. Any or all powers and discretion vested in the Board or the Committee under this Plan may be exercised by any subcommittee so authorized by the Board or the Committee and satisfying the requirements of Rule 16b-3 for employees subject to Section 16 of the Exchange Act. In addition, the Board or the Committee may delegate to the Executive Committee of the Board of Directors the power to approve stock options and stock awards to employees not subject to Section 16 of the Exchange Act. 1

Section X. Stock Appreciation Rights Paragraphs 7, 8 and 9 of Section X. shall be replaced in their entirety with the following: The Board or the Committee shall have the sole discretion to consent to approve or disapprove, in whole or in part, any election to receive any portion of the Appreciation in cash. B. Additional Restrictions Applicable to Section 16 Employees. No stock appreciation right or related Option may be exercised during the first six months of its term, except in the event of death or total and permanent disability of the holder occurring prior to the expiration of this six-month period. Stock appreciation rights granted to individuals subject to Section 16 of the Exchange Act must comply with any applicable provisions of Rule 16b-3. These rights shall contain such additional conditions or restrictions as may be required under this rule (or any successor rule) to qualify for the maximum exemption from Section 16 of the Exchange Act with respect to Plan transactions. Section XXV. Amendment of the Plan The Board or the Committee may suspend or discontinue the Plan or revise or amend it in any respect whatsoever; provided, however, that the Company may seek shareholder approval of an amendment if determined to be required by or advisable by any law or regulation, including without limitation, any regulations of

Section X. Stock Appreciation Rights Paragraphs 7, 8 and 9 of Section X. shall be replaced in their entirety with the following: The Board or the Committee shall have the sole discretion to consent to approve or disapprove, in whole or in part, any election to receive any portion of the Appreciation in cash. B. Additional Restrictions Applicable to Section 16 Employees. No stock appreciation right or related Option may be exercised during the first six months of its term, except in the event of death or total and permanent disability of the holder occurring prior to the expiration of this six-month period. Stock appreciation rights granted to individuals subject to Section 16 of the Exchange Act must comply with any applicable provisions of Rule 16b-3. These rights shall contain such additional conditions or restrictions as may be required under this rule (or any successor rule) to qualify for the maximum exemption from Section 16 of the Exchange Act with respect to Plan transactions. Section XXV. Amendment of the Plan The Board or the Committee may suspend or discontinue the Plan or revise or amend it in any respect whatsoever; provided, however, that the Company may seek shareholder approval of an amendment if determined to be required by or advisable by any law or regulation, including without limitation, any regulations of the Securities and Exchange Commission or the Internal Revenue Service, the rules of any stock exchange on which the Company's stock is listed or other applicable law or regulation. 1990 Incentive Stock Plan: Part I, Section II., Part 2, Section X. and Part 4, Section XXIII. of the Company's 1990 Incentive Stock Plan are hereby amended to read, respectively, as follows: Section II. Administration The Board of Directors (the "Board") of the Company or any committee (the "Committee") of the Board that will satisfy Rule 16b-3 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and any regulations promulgated thereunder, as from time to time in effect, including any successor rule ("Rule 16b-3"), 2

shall supervise and administer the Plan. The Committee shall consist solely of two or more non-employee directors of the Company, who shall be appointed by the Board. A member of the Board shall be deemed to be a "non-employee director" only if he satisfies such requirements as the Securities and Exchange Commission may establish for non-employee directors under Rule 16b-3. Members of the Board receive no additional compensation for their services in connection with the administration of the Plan. The Committee or the Board shall from time to time designate the key employees of the Participating Companies who shall be granted stock options, stock or cash awards under the Plan and the amount and nature of the award granted to each such employee. The Board or the Committee may adopt such rules or guidelines as it deems appropriate to implement the Plan. All questions of interpretation of the Plan or of any shares issued under it shall be determined by the Board or the Committee and such determination shall be final and binding upon all persons having an interest in the Plan. Any or all powers and discretion vested in the Board or the Committee under this Plan may be exercised by any subcommittee so authorized by the Board or the Committee and satisfying the requirements of Rule 16b-3 for employees subject to Section 16 of the Exchange Act. In addition, the Board or the Committee may delegate to the Executive Committee of the Board of Directors the power to approve stock options and stock awards to employees not subject to Section 16 of the Exchange Act.

shall supervise and administer the Plan. The Committee shall consist solely of two or more non-employee directors of the Company, who shall be appointed by the Board. A member of the Board shall be deemed to be a "non-employee director" only if he satisfies such requirements as the Securities and Exchange Commission may establish for non-employee directors under Rule 16b-3. Members of the Board receive no additional compensation for their services in connection with the administration of the Plan. The Committee or the Board shall from time to time designate the key employees of the Participating Companies who shall be granted stock options, stock or cash awards under the Plan and the amount and nature of the award granted to each such employee. The Board or the Committee may adopt such rules or guidelines as it deems appropriate to implement the Plan. All questions of interpretation of the Plan or of any shares issued under it shall be determined by the Board or the Committee and such determination shall be final and binding upon all persons having an interest in the Plan. Any or all powers and discretion vested in the Board or the Committee under this Plan may be exercised by any subcommittee so authorized by the Board or the Committee and satisfying the requirements of Rule 16b-3 for employees subject to Section 16 of the Exchange Act. In addition, the Board or the Committee may delegate to the Executive Committee of the Board of Directors the power to approve stock options and stock awards to employees not subject to Section 16 of the Exchange Act. Section X. Stock Appreciation Rights Paragraphs 6 and 7 of Section X. shall be replaced in their entirety with the following: No stock appreciation right or related Option may be exercised during the first six months of its term, except in the event of death or total and permanent disability of the holder occurs prior to the expiration of this six-month period. The Board or the Committee shall have the sole discretion to consent to approve or disapprove, in whole or in part, any election to receive any portion of the Appreciation in cash. Section XXIII. Amendment of the Plan The Board or the Committee may suspend or discontinue the Plan or revise or amend it in any respect whatsoever; provided, however, that the Company may 3

seek shareholder approval of an amendment if determined to be required by or advisable by any law or regulation, including without limitation, any regulations of the Securities and Exchange Commission or the Internal Revenue Service, the rules of any stock exchange on which the Company's stock is listed or other applicable law or regulation. 1987 Director Option Plan: Part 2, Section VI.A. and Part 3, Section XV. of the Company's 1987 Director Option Plan are hereby amended to read, respectively, as follows: Section VI. Terms, Conditions and Form of Options Each option granted under this plan shall be evidenced by a written agreement in such form as the Committee shall from time to time approve, which Agreements shall comply with and be subject to the following terms and conditions: A. Option Grant Dates. Options shall be granted automatically on March 1, (or, if March 1 is not a business day, on the next succeeding business day) of any year to any eligible director who, on or prior to the immediately preceding February 1, files with the Secretary an election to receive a stock option in lieu of retainer fees to be

seek shareholder approval of an amendment if determined to be required by or advisable by any law or regulation, including without limitation, any regulations of the Securities and Exchange Commission or the Internal Revenue Service, the rules of any stock exchange on which the Company's stock is listed or other applicable law or regulation. 1987 Director Option Plan: Part 2, Section VI.A. and Part 3, Section XV. of the Company's 1987 Director Option Plan are hereby amended to read, respectively, as follows: Section VI. Terms, Conditions and Form of Options Each option granted under this plan shall be evidenced by a written agreement in such form as the Committee shall from time to time approve, which Agreements shall comply with and be subject to the following terms and conditions: A. Option Grant Dates. Options shall be granted automatically on March 1, (or, if March 1 is not a business day, on the next succeeding business day) of any year to any eligible director who, on or prior to the immediately preceding February 1, files with the Secretary an election to receive a stock option in lieu of retainer fees to be earned in the following year beginning March 1 and ending February 28 (or February 29, as the case may be) ("Plan Year"). Section XV. Amendment of the Plan The Board or the Committee may suspend or discontinue the Plan or revise or amend it in any respect whatsoever; provided, however, that the option formula set forth in Section VI.B. of the Plan shall not be amended more than once every six months, except to the extent necessary to comply with changes in the Internal Revenue Code, as amended, or the Employee Retirement Income Security Act of 1974, as amended, or the rules of each thereunder. 1985 Incentive Compensation Plan: Part I, Section II., Part 2, Section X. and Part 4, Section XXII. of the Company's 1985 Incentive Compensation Plan are hereby amended to read, respectively, as follows: 4

Section II. Administration The Board of Directors (the "Board") of the Company or any committee (the "Committee") of the Board that will satisfy Rule 16b-3 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and any regulations promulgated thereunder, as from time to time in effect, including any successor rule ("Rule 16b-3"), shall supervise and administer the Plan. The Committee shall consist solely of two or more non-employee directors of the Company, who shall be appointed by the Board. A member of the Board shall be deemed to be a "non-employee director" only if he satisfies such requirements as the Securities and Exchange Commission may establish for non-employee directors under Rule 16b-3. Members of the Board receive no additional compensation for their services in connection with the administration of the Plan. The Committee or the Board shall from time to time designate the key employees of the Participating Companies who shall be granted stock options, stock or cash awards under the Plan and the amount and nature of the award granted to each such employee. The Board or the Committee may adopt such rules or guidelines as it deems appropriate to implement the Plan. All questions of interpretation of the Plan or of any shares issued under it shall be determined by the Board or the Committee and such determination shall be final and binding upon all persons having an interest in the Plan. Any

Section II. Administration The Board of Directors (the "Board") of the Company or any committee (the "Committee") of the Board that will satisfy Rule 16b-3 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and any regulations promulgated thereunder, as from time to time in effect, including any successor rule ("Rule 16b-3"), shall supervise and administer the Plan. The Committee shall consist solely of two or more non-employee directors of the Company, who shall be appointed by the Board. A member of the Board shall be deemed to be a "non-employee director" only if he satisfies such requirements as the Securities and Exchange Commission may establish for non-employee directors under Rule 16b-3. Members of the Board receive no additional compensation for their services in connection with the administration of the Plan. The Committee or the Board shall from time to time designate the key employees of the Participating Companies who shall be granted stock options, stock or cash awards under the Plan and the amount and nature of the award granted to each such employee. The Board or the Committee may adopt such rules or guidelines as it deems appropriate to implement the Plan. All questions of interpretation of the Plan or of any shares issued under it shall be determined by the Board or the Committee and such determination shall be final and binding upon all persons having an interest in the Plan. Any or all powers and discretion vested in the Board or the Committee under this Plan may be exercised by any subcommittee so authorized by the Board or the Committee and satisfying the requirements of Rule 16b-3 for employees subject to Section 16 of the Exchange Act. In addition, the Board or the Committee may delegate to the Executive Committee of the Board of Directors the power to approve stock options and stock awards to employees not subject to Section 16 of the Exchange Act. Section X. Stock Appreciation Rights Paragraphs 5 and 6 of Section X. shall be replaced in their entirety with the following: No stock appreciation right or related Option may be exercised during the first six months of its term, except in the event of death or total and permanent disability of the holder occurs prior to the expiration of this six-month period. The Committee shall have the sole discretion to consent to approve or disapprove, in whole or in part, any election to receive any portion of the Appreciation in cash. 5

Section XXII. Amendment of the Plan The Board or the Committee may suspend or discontinue the Plan or revise or amend it in any respect whatsoever; provided, however, that the Company may seek shareholder approval of an amendment if determined to be required by or advisable by any law or regulation, including without limitation, any regulations of the Securities and Exchange Commission or the Internal Revenue Service, the rules of any stock exchange on which the Company's stock is listed or other applicable law or regulation. 1979 Incentive Stock Option Plan: Sections II., XII., and XIV. of the Company's 1979 Incentive Stock Option Plan are hereby amended to read, respectively, as follows: Section II. Administration The Board of Directors (the "Board") of the Company or any committee (the "Committee") of the Board that will satisfy Rule 16b-3 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and any regulations promulgated thereunder, as from time to time in effect, including any successor rule ("Rule 16b-3"), shall supervise and administer the Plan. The Committee shall consist solely of two or more non-employee directors of the Company, who shall be appointed by the Board. A member of the Board shall be deemed to be

Section XXII. Amendment of the Plan The Board or the Committee may suspend or discontinue the Plan or revise or amend it in any respect whatsoever; provided, however, that the Company may seek shareholder approval of an amendment if determined to be required by or advisable by any law or regulation, including without limitation, any regulations of the Securities and Exchange Commission or the Internal Revenue Service, the rules of any stock exchange on which the Company's stock is listed or other applicable law or regulation. 1979 Incentive Stock Option Plan: Sections II., XII., and XIV. of the Company's 1979 Incentive Stock Option Plan are hereby amended to read, respectively, as follows: Section II. Administration The Board of Directors (the "Board") of the Company or any committee (the "Committee") of the Board that will satisfy Rule 16b-3 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and any regulations promulgated thereunder, as from time to time in effect, including any successor rule ("Rule 16b-3"), shall supervise and administer the Plan. The Committee shall consist solely of two or more non-employee directors of the Company, who shall be appointed by the Board. A member of the Board shall be deemed to be a "non-employee director" only if he satisfies such requirements as the Securities and Exchange Commission may establish for non-employee directors under Rule 16b-3. Members of the Board receive no additional compensation for their services in connection with the administration of the Plan. The Committee or the Board shall from time to time designate the key employees of the Participating Companies who shall be granted stock options under the Plan and the amount of stock to be optioned to each such employee. The Board or the Committee may adopt such rules or guidelines as it deems appropriate to implement the Plan. All questions of interpretation of the Plan or of any shares issued under it shall be determined by the Board or the Committee and such determination shall be final and binding upon all persons having an interest in the Plan. Any or all powers and discretion vested in the Board or the Committee under this Plan may be exercised by any subcommittee so authorized by the Board or the Committee and satisfying the requirements of Rule 16b-3 for employees subject to Section 16 of the Exchange Act. In addition, the Board or the 6

Committee may delegate to the Executive Committee of the Board of Directors the power to approve stock options and stock awards to employees not subject to Section 16 of the Exchange Act. Section XII. Amendment of the Plan The Board or the Committee may suspend or discontinue the Plan or revise or amend it in any respect whatsoever; provided, however, that the Company may seek shareholder approval of an amendment if determined to be required by or advisable by any law or regulation, including without limitation, any regulations of the Securities and Exchange Commission or the Internal Revenue Service, the rules of any stock exchange on which the Company's stock is listed or other applicable law or regulation. Section XIV. Stock Appreciation Rights Paragraphs 5 and 6 of Section XIV. shall be replaced in their entirety with the following: No stock appreciation right or related Option may be exercised during the first six months of its term, except in the event of death or total and permanent disability of the holder occurs prior to the expiration of this six-month period.

Committee may delegate to the Executive Committee of the Board of Directors the power to approve stock options and stock awards to employees not subject to Section 16 of the Exchange Act. Section XII. Amendment of the Plan The Board or the Committee may suspend or discontinue the Plan or revise or amend it in any respect whatsoever; provided, however, that the Company may seek shareholder approval of an amendment if determined to be required by or advisable by any law or regulation, including without limitation, any regulations of the Securities and Exchange Commission or the Internal Revenue Service, the rules of any stock exchange on which the Company's stock is listed or other applicable law or regulation. Section XIV. Stock Appreciation Rights Paragraphs 5 and 6 of Section XIV. shall be replaced in their entirety with the following: No stock appreciation right or related Option may be exercised during the first six months of its term, except in the event of death or total and permanent disability of the holder occurs prior to the expiration of this six-month period. The Board or the Committee shall have the sole discretion to consent to approve or disapprove, in whole or in part, any election to receive any portion of the Appreciation in cash. 7

EXHIBIT 10(u) HEWLETT-PACKARD COMPANY EXECUTIVE DEFERRED COMPENSATION PLAN (Amended and Restated as of November 21, 1996) Section 1. Establishment and Purpose of Plan The Hewlett-Packard Company Executive Deferred Compensation Plan was adopted and established effective January 1, 1994. The Plan provides deferred compensation for a select group of management or highly compensated employees as established in Title I of ERISA. As of November 21, 1996, the Plan is modified in the following principal respect: Employees with "applicable employee remuneration" in excess of the limitation set forth under Code section 162(m) may defer an amount of Base Earnings equal to the amount of such excess, even if this amount exceeds 40% of Base Earnings. The Plan is intended to be an unfunded and unsecured deferred compensation arrangement between the Participant and the Company, in which the Participant agrees to give up a portion of the Participant's current salary in exchange for the Company's unfunded and unsecured promise to make a deferred payment at a future date, as specified in Section 6. The Company retains the right, as provided in Section 14, to amend or terminate the Plan at any time. Certain capitalized items used in the text of the Plan are defined in Section 19 in alphabetical order. 1

Section 2. Participation in the Plan Employees on the U.S. payroll of the Company are eligible to defer compensation under the Plan if they have Base Earnings, at the time of election as specified in Section 3, equal to or in excess of the sum of (1) the amount defined in Code Section 401(a)(17), as adjusted by the Secretary of the Treasury under Code section 415(d), in

EXHIBIT 10(u) HEWLETT-PACKARD COMPANY EXECUTIVE DEFERRED COMPENSATION PLAN (Amended and Restated as of November 21, 1996) Section 1. Establishment and Purpose of Plan The Hewlett-Packard Company Executive Deferred Compensation Plan was adopted and established effective January 1, 1994. The Plan provides deferred compensation for a select group of management or highly compensated employees as established in Title I of ERISA. As of November 21, 1996, the Plan is modified in the following principal respect: Employees with "applicable employee remuneration" in excess of the limitation set forth under Code section 162(m) may defer an amount of Base Earnings equal to the amount of such excess, even if this amount exceeds 40% of Base Earnings. The Plan is intended to be an unfunded and unsecured deferred compensation arrangement between the Participant and the Company, in which the Participant agrees to give up a portion of the Participant's current salary in exchange for the Company's unfunded and unsecured promise to make a deferred payment at a future date, as specified in Section 6. The Company retains the right, as provided in Section 14, to amend or terminate the Plan at any time. Certain capitalized items used in the text of the Plan are defined in Section 19 in alphabetical order. 1

Section 2. Participation in the Plan Employees on the U.S. payroll of the Company are eligible to defer compensation under the Plan if they have Base Earnings, at the time of election as specified in Section 3, equal to or in excess of the sum of (1) the amount defined in Code Section 401(a)(17), as adjusted by the Secretary of the Treasury under Code section 415(d), in effect on January 1 of the calendar year for which amounts are to be deferred, plus (2) $6,000. Section 3. Amount of Deferred Compensation An Eligible Employee shall make an annual election to participate in the Plan. The election to participate must be made prior to the beginning of the calendar year for which amounts are to be deferred. Once an election by an Eligible Employee is made, an annual whole dollar amount will be deferred from Base Earnings, taken equally over twenty-four (24) pay periods. The minimum amount which may be deferred is $6,000 a year and the maximum amount which may be deferred shall be the lesser of (1) 40% of Base Earnings or (2) Base Earnings less the amount defined in the Code section 401(a)(17), as adjusted by the Secretary of the Treasury under Code section 415(d), in effect on January 1 of the calendar year for which amounts are to be deferred. Notwithstanding the maximum deferral amount set forth in the immediately preceding sentence, an Eligible Employee receiving "applicable employee remuneration" in excess of the limitation amount set forth in Code section 162(m), as amended, or as adjusted by regulation or other 2

Internal Revenue Service promulgation, pronouncement or other action ($1,000,000 for calendar year 1996), may defer an amount of Base Earnings equal to such excess. Section 4. Deferral Accounts Deferred Amounts made pursuant to Section 3 shall be credited to a Deferral Account in the name of the Participant. The Deferred Amounts shall be credited to the Deferral Account at least quarterly. The Participant's rights in the Deferral Account shall be no greater than the rights of any unsecured general creditor of the

Section 2. Participation in the Plan Employees on the U.S. payroll of the Company are eligible to defer compensation under the Plan if they have Base Earnings, at the time of election as specified in Section 3, equal to or in excess of the sum of (1) the amount defined in Code Section 401(a)(17), as adjusted by the Secretary of the Treasury under Code section 415(d), in effect on January 1 of the calendar year for which amounts are to be deferred, plus (2) $6,000. Section 3. Amount of Deferred Compensation An Eligible Employee shall make an annual election to participate in the Plan. The election to participate must be made prior to the beginning of the calendar year for which amounts are to be deferred. Once an election by an Eligible Employee is made, an annual whole dollar amount will be deferred from Base Earnings, taken equally over twenty-four (24) pay periods. The minimum amount which may be deferred is $6,000 a year and the maximum amount which may be deferred shall be the lesser of (1) 40% of Base Earnings or (2) Base Earnings less the amount defined in the Code section 401(a)(17), as adjusted by the Secretary of the Treasury under Code section 415(d), in effect on January 1 of the calendar year for which amounts are to be deferred. Notwithstanding the maximum deferral amount set forth in the immediately preceding sentence, an Eligible Employee receiving "applicable employee remuneration" in excess of the limitation amount set forth in Code section 162(m), as amended, or as adjusted by regulation or other 2

Internal Revenue Service promulgation, pronouncement or other action ($1,000,000 for calendar year 1996), may defer an amount of Base Earnings equal to such excess. Section 4. Deferral Accounts Deferred Amounts made pursuant to Section 3 shall be credited to a Deferral Account in the name of the Participant. The Deferred Amounts shall be credited to the Deferral Account at least quarterly. The Participant's rights in the Deferral Account shall be no greater than the rights of any unsecured general creditor of the Company. Deferred Amounts and Earnings thereon invested hereunder shall for all purposes be part of the general funds of the Company. Section 5. Earnings on the Deferral Account The money allocated to the Participant's Deferral Account by the Company will be credited at least quarterly with Earnings until it is paid out to the Participant under this Plan as set forth below in Section 6. All Earnings attributable to the money allocated to the Deferral Account shall be added to the liability and retained therein by the Company. Any such addition to the liability shall be appropriately reflected on the books and records of the Company and identified as an addition to the total sum owing the Participant. 3

Section 6. Payment to the Participants If the Participant terminates employment on or after his or her Retirement Date and an election as to the form and timing of the benefit is made twelve (12) months or more prior to the Retirement Date, the Participant may elect to receive either (a) a single lump sum payout by January 15 of the year following termination of employment, or (b) payouts in annual installments over a five (5) to fifteen (15) year period beginning with the January 15th following the year of termination of employment. If the Participant terminates employment on or after his or her Retirement Date and an election as to the form and timing of the benefit is made twelve (12) months or more prior to the Retirement Date, the Participant may elect to further defer commencement of payout, under either the single lump sum or the annual installment election, an additional one (1), two (2) or three (3) years beginning after the January 15 following the year of termination of employment. The payout installment election made by the Participant is based on the entire Deferral Account, and shall be determined by dividing the unpaid balance as of January 1 of the payout year by the number of annual

Internal Revenue Service promulgation, pronouncement or other action ($1,000,000 for calendar year 1996), may defer an amount of Base Earnings equal to such excess. Section 4. Deferral Accounts Deferred Amounts made pursuant to Section 3 shall be credited to a Deferral Account in the name of the Participant. The Deferred Amounts shall be credited to the Deferral Account at least quarterly. The Participant's rights in the Deferral Account shall be no greater than the rights of any unsecured general creditor of the Company. Deferred Amounts and Earnings thereon invested hereunder shall for all purposes be part of the general funds of the Company. Section 5. Earnings on the Deferral Account The money allocated to the Participant's Deferral Account by the Company will be credited at least quarterly with Earnings until it is paid out to the Participant under this Plan as set forth below in Section 6. All Earnings attributable to the money allocated to the Deferral Account shall be added to the liability and retained therein by the Company. Any such addition to the liability shall be appropriately reflected on the books and records of the Company and identified as an addition to the total sum owing the Participant. 3

Section 6. Payment to the Participants If the Participant terminates employment on or after his or her Retirement Date and an election as to the form and timing of the benefit is made twelve (12) months or more prior to the Retirement Date, the Participant may elect to receive either (a) a single lump sum payout by January 15 of the year following termination of employment, or (b) payouts in annual installments over a five (5) to fifteen (15) year period beginning with the January 15th following the year of termination of employment. If the Participant terminates employment on or after his or her Retirement Date and an election as to the form and timing of the benefit is made twelve (12) months or more prior to the Retirement Date, the Participant may elect to further defer commencement of payout, under either the single lump sum or the annual installment election, an additional one (1), two (2) or three (3) years beginning after the January 15 following the year of termination of employment. The payout installment election made by the Participant is based on the entire Deferral Account, and shall be determined by dividing the unpaid balance as of January 1 of the payout year by the number of annual payments remaining to be made. If the Participant terminates employment on or after his or her Retirement Date and an election as to the form and timing of the benefit is not made twelve (12) months or more prior to his or her Retirement Date, the Participant will receive his or her payout in annual installments over the fifteen (15) year period beginning with the January 15 following the year of termination of employment. If the Participant dies and an election was made, the Beneficiary will be paid according to the election even though the election was not made twelve (12) months or more 4

prior to the Participant's death. If the Participant dies and no election was made,then the Beneficiary will receive his or her payout in annual installments over the fifteen (15) year period beginning with the January 15 following the year of the Participant's death. If the Participant terminates employment prior to his or her Retirement Date, then the Participant will receive a single lump sum payout at termination of employment. Section 7. Hardship Provision Neither the Participant nor his or her Beneficiary is eligible to withdraw funds from the Deferral Account prior to the time specified in Section 6. However, funds in the Deferral Account may be subject to early withdrawal if an

Section 6. Payment to the Participants If the Participant terminates employment on or after his or her Retirement Date and an election as to the form and timing of the benefit is made twelve (12) months or more prior to the Retirement Date, the Participant may elect to receive either (a) a single lump sum payout by January 15 of the year following termination of employment, or (b) payouts in annual installments over a five (5) to fifteen (15) year period beginning with the January 15th following the year of termination of employment. If the Participant terminates employment on or after his or her Retirement Date and an election as to the form and timing of the benefit is made twelve (12) months or more prior to the Retirement Date, the Participant may elect to further defer commencement of payout, under either the single lump sum or the annual installment election, an additional one (1), two (2) or three (3) years beginning after the January 15 following the year of termination of employment. The payout installment election made by the Participant is based on the entire Deferral Account, and shall be determined by dividing the unpaid balance as of January 1 of the payout year by the number of annual payments remaining to be made. If the Participant terminates employment on or after his or her Retirement Date and an election as to the form and timing of the benefit is not made twelve (12) months or more prior to his or her Retirement Date, the Participant will receive his or her payout in annual installments over the fifteen (15) year period beginning with the January 15 following the year of termination of employment. If the Participant dies and an election was made, the Beneficiary will be paid according to the election even though the election was not made twelve (12) months or more 4

prior to the Participant's death. If the Participant dies and no election was made,then the Beneficiary will receive his or her payout in annual installments over the fifteen (15) year period beginning with the January 15 following the year of the Participant's death. If the Participant terminates employment prior to his or her Retirement Date, then the Participant will receive a single lump sum payout at termination of employment. Section 7. Hardship Provision Neither the Participant nor his or her Beneficiary is eligible to withdraw funds from the Deferral Account prior to the time specified in Section 6. However, funds in the Deferral Account may be subject to early withdrawal if an "Unforeseeable Emergency" occurs that is caused by an event beyond the Participant's or Beneficiary's control and would result in severe financial hardship to the individual if early withdrawal is not permitted. A significant hardship exists only when all other reasonably available financial resources have been exhausted. The Compensation Committee of the Board of Directors of the Company (the "Committee") shall have sole discretion to determine whether to approve any hardship withdrawal, which amount will be limited to the amount necessary to meet the emergency. The Committee's decision will be final and binding on all interested parties. If the Committee approves a hardship withdrawal, the Participant may not defer Base Earnings, as specified in Section 3, for (1) the remainder of the calendar year in which the hardship 5

withdrawal is received, and (2) the calendar year following the calendar year in which the hardship withdrawal is received. Section 8. Use of Funds Neither the Participant nor his or her Beneficiary is eligible to withdraw funds from the Deferral Account prior to the time specified in Section 6. However, funds in the Deferral Account may be subject to early withdrawal if an "Unanticipated Need For Funds" occurs, other than a need specified in Section 7; provided that the Participant permanently forfeits ten (10) percent of the amount to be withdrawn. Additionally, withdrawals based on an

prior to the Participant's death. If the Participant dies and no election was made,then the Beneficiary will receive his or her payout in annual installments over the fifteen (15) year period beginning with the January 15 following the year of the Participant's death. If the Participant terminates employment prior to his or her Retirement Date, then the Participant will receive a single lump sum payout at termination of employment. Section 7. Hardship Provision Neither the Participant nor his or her Beneficiary is eligible to withdraw funds from the Deferral Account prior to the time specified in Section 6. However, funds in the Deferral Account may be subject to early withdrawal if an "Unforeseeable Emergency" occurs that is caused by an event beyond the Participant's or Beneficiary's control and would result in severe financial hardship to the individual if early withdrawal is not permitted. A significant hardship exists only when all other reasonably available financial resources have been exhausted. The Compensation Committee of the Board of Directors of the Company (the "Committee") shall have sole discretion to determine whether to approve any hardship withdrawal, which amount will be limited to the amount necessary to meet the emergency. The Committee's decision will be final and binding on all interested parties. If the Committee approves a hardship withdrawal, the Participant may not defer Base Earnings, as specified in Section 3, for (1) the remainder of the calendar year in which the hardship 5

withdrawal is received, and (2) the calendar year following the calendar year in which the hardship withdrawal is received. Section 8. Use of Funds Neither the Participant nor his or her Beneficiary is eligible to withdraw funds from the Deferral Account prior to the time specified in Section 6. However, funds in the Deferral Account may be subject to early withdrawal if an "Unanticipated Need For Funds" occurs, other than a need specified in Section 7; provided that the Participant permanently forfeits ten (10) percent of the amount to be withdrawn. Additionally, withdrawals based on an "Unanticipated Need For Funds" may be made no more than once each calendar year and the amount to be withdrawn must be at least $12,000. If the Participant withdraws funds under this section, he or she may not defer Base Earnings, as specified in Section 3, for (1) the remainder of the calendar year in which the withdrawal is received, and (2) the calendar year following the calendar year in which the withdrawal is received. Section 9. Designation of Beneficiary The Participant shall, by written notice to the Company, (1) at the time of the first election designate a Beneficiary hereunder, and (2) shall have the right thereafter to change any 6

Beneficiary previously designated by the Participant. In the case of a Participant's death, payment due under this Plan shall be made to the designated Beneficiary or, in the absence of such designation, by will or the laws of descent and distribution in the state of residence of the Participant. Section 10. Change in Control In the event of a proposed change in control of the Company, as defined below, the Committee shall have complete authority and discretion, but no obligation to accelerate payments of both terminated and active Participants.

withdrawal is received, and (2) the calendar year following the calendar year in which the hardship withdrawal is received. Section 8. Use of Funds Neither the Participant nor his or her Beneficiary is eligible to withdraw funds from the Deferral Account prior to the time specified in Section 6. However, funds in the Deferral Account may be subject to early withdrawal if an "Unanticipated Need For Funds" occurs, other than a need specified in Section 7; provided that the Participant permanently forfeits ten (10) percent of the amount to be withdrawn. Additionally, withdrawals based on an "Unanticipated Need For Funds" may be made no more than once each calendar year and the amount to be withdrawn must be at least $12,000. If the Participant withdraws funds under this section, he or she may not defer Base Earnings, as specified in Section 3, for (1) the remainder of the calendar year in which the withdrawal is received, and (2) the calendar year following the calendar year in which the withdrawal is received. Section 9. Designation of Beneficiary The Participant shall, by written notice to the Company, (1) at the time of the first election designate a Beneficiary hereunder, and (2) shall have the right thereafter to change any 6

Beneficiary previously designated by the Participant. In the case of a Participant's death, payment due under this Plan shall be made to the designated Beneficiary or, in the absence of such designation, by will or the laws of descent and distribution in the state of residence of the Participant. Section 10. Change in Control In the event of a proposed change in control of the Company, as defined below, the Committee shall have complete authority and discretion, but no obligation to accelerate payments of both terminated and active Participants. A "proposed change in control" shall mean (1) a tender offer by any person or entity, other than the Company or a Company subsidiary, to acquire securities representing 40 percent or more of the voting power of the Company or (2) the submission to the Company's shareholders for approval of a transaction involving the sale of all or substantially all of the assets of the Company or a merger of the Company with or into another corporation. The Committee may also ask the Board of Directors to negotiate, as part of any agreement involving the sale or merger of the Company, or a sale of substantially all of the Company's assets or a similar transaction, terms providing for protection of Participants and their interests in the Plan. 7

Section 11. Limitation on Assignments Benefits under this Plan are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment or garnishments by creditors of the Participant or the Participant's Beneficiary and any attempt to do so shall be void. Section 12. Administration The Plan shall be administered by the Committee. No member of the Committee shall become a Participant of the Plan. The Committee shall have the sole authority to interpret the Plan, to establish and revise rules and regulations relating to the Plan and to make any other determinations that it believes necessary or advisable for the administration of the Plan. Decisions and determination by the Committee shall be final and binding upon all

Beneficiary previously designated by the Participant. In the case of a Participant's death, payment due under this Plan shall be made to the designated Beneficiary or, in the absence of such designation, by will or the laws of descent and distribution in the state of residence of the Participant. Section 10. Change in Control In the event of a proposed change in control of the Company, as defined below, the Committee shall have complete authority and discretion, but no obligation to accelerate payments of both terminated and active Participants. A "proposed change in control" shall mean (1) a tender offer by any person or entity, other than the Company or a Company subsidiary, to acquire securities representing 40 percent or more of the voting power of the Company or (2) the submission to the Company's shareholders for approval of a transaction involving the sale of all or substantially all of the assets of the Company or a merger of the Company with or into another corporation. The Committee may also ask the Board of Directors to negotiate, as part of any agreement involving the sale or merger of the Company, or a sale of substantially all of the Company's assets or a similar transaction, terms providing for protection of Participants and their interests in the Plan. 7

Section 11. Limitation on Assignments Benefits under this Plan are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment or garnishments by creditors of the Participant or the Participant's Beneficiary and any attempt to do so shall be void. Section 12. Administration The Plan shall be administered by the Committee. No member of the Committee shall become a Participant of the Plan. The Committee shall have the sole authority to interpret the Plan, to establish and revise rules and regulations relating to the Plan and to make any other determinations that it believes necessary or advisable for the administration of the Plan. Decisions and determination by the Committee shall be final and binding upon all parties, including shareholders, Participants, Beneficiaries and other employees. The Committee may delegate its responsibilities as it sees fit. Books and records maintained for the purpose of the Plan shall be maintained by the officers and employees of the Company at its expense and subject to supervision and control of the Committee. 8

Section 13. No Funding Obligation The Company is under no obligation to transfer amounts credited to the Participant's Deferral Account to any trust or escrow account, and the Company is under no obligation to secure any amount credited to a Participant's Deferral Account by any specific assets of the Company or any other asset in which the Company has an interest. This Plan shall not be construed to require the Company to fund any of the benefits provided hereunder nor to establish a trust for such purpose. The Company may make such arrangements as it desires to provide for the payment of benefits, including, but not limited to, the establishment of a rabbi trust or such other equivalent arrangements as the Company may decide. No such arrangement shall cause the Plan to be a funded plan within the meaning of Title I of ERISA, nor shall any such arrangement change the nature of the obligation of the Company nor the rights of the Participants under the Plan as provided in this document. Neither the Participant nor his or her estate shall have any rights against the Company with respect to any portion of the Deferral Account except as a general unsecured creditor. No Participant has an interest in his or her Deferral Account until the Participant actually receives the deferred payment.

Section 11. Limitation on Assignments Benefits under this Plan are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment or garnishments by creditors of the Participant or the Participant's Beneficiary and any attempt to do so shall be void. Section 12. Administration The Plan shall be administered by the Committee. No member of the Committee shall become a Participant of the Plan. The Committee shall have the sole authority to interpret the Plan, to establish and revise rules and regulations relating to the Plan and to make any other determinations that it believes necessary or advisable for the administration of the Plan. Decisions and determination by the Committee shall be final and binding upon all parties, including shareholders, Participants, Beneficiaries and other employees. The Committee may delegate its responsibilities as it sees fit. Books and records maintained for the purpose of the Plan shall be maintained by the officers and employees of the Company at its expense and subject to supervision and control of the Committee. 8

Section 13. No Funding Obligation The Company is under no obligation to transfer amounts credited to the Participant's Deferral Account to any trust or escrow account, and the Company is under no obligation to secure any amount credited to a Participant's Deferral Account by any specific assets of the Company or any other asset in which the Company has an interest. This Plan shall not be construed to require the Company to fund any of the benefits provided hereunder nor to establish a trust for such purpose. The Company may make such arrangements as it desires to provide for the payment of benefits, including, but not limited to, the establishment of a rabbi trust or such other equivalent arrangements as the Company may decide. No such arrangement shall cause the Plan to be a funded plan within the meaning of Title I of ERISA, nor shall any such arrangement change the nature of the obligation of the Company nor the rights of the Participants under the Plan as provided in this document. Neither the Participant nor his or her estate shall have any rights against the Company with respect to any portion of the Deferral Account except as a general unsecured creditor. No Participant has an interest in his or her Deferral Account until the Participant actually receives the deferred payment. Section 14. Amendment and Termination of the Plan The Company, by action of the Committee, in its sole discretion may suspend or terminate the Plan or revise or amend it in any respect whatsoever, provided, however, that amounts already allocated to the Deferral Accounts will continue to be owed to the Participants or Beneficiaries 9

and will continue to accrue Earnings and continue to be a liability of the Company. Any amendment or termination of the Plan will not affect the entitlement of any Participant or the Beneficiary of a Participant who terminates employment before the amendment or termination. All benefits to which any Participant or Beneficiary may be entitled shall be determined under the Plan as in effect at the time the Participant terminates employment and shall not be affected by any subsequent change in the provisions of the Plan; provided, that the Company reserves the right to change the basis of return on investment of the Deferral Account with respect to any Participant or Beneficiary. Participants or Beneficiaries will be given notice prior to the discontinuance of the Plan or reduction of any benefits provided by the Plan. Section 15. Tax Withholding If any federal, state, or local income or employment tax withholding is required with respect to any deferral of income or payment hereunder, the Committee shall make appropriate arrangements with the Participant or his or

Section 13. No Funding Obligation The Company is under no obligation to transfer amounts credited to the Participant's Deferral Account to any trust or escrow account, and the Company is under no obligation to secure any amount credited to a Participant's Deferral Account by any specific assets of the Company or any other asset in which the Company has an interest. This Plan shall not be construed to require the Company to fund any of the benefits provided hereunder nor to establish a trust for such purpose. The Company may make such arrangements as it desires to provide for the payment of benefits, including, but not limited to, the establishment of a rabbi trust or such other equivalent arrangements as the Company may decide. No such arrangement shall cause the Plan to be a funded plan within the meaning of Title I of ERISA, nor shall any such arrangement change the nature of the obligation of the Company nor the rights of the Participants under the Plan as provided in this document. Neither the Participant nor his or her estate shall have any rights against the Company with respect to any portion of the Deferral Account except as a general unsecured creditor. No Participant has an interest in his or her Deferral Account until the Participant actually receives the deferred payment. Section 14. Amendment and Termination of the Plan The Company, by action of the Committee, in its sole discretion may suspend or terminate the Plan or revise or amend it in any respect whatsoever, provided, however, that amounts already allocated to the Deferral Accounts will continue to be owed to the Participants or Beneficiaries 9

and will continue to accrue Earnings and continue to be a liability of the Company. Any amendment or termination of the Plan will not affect the entitlement of any Participant or the Beneficiary of a Participant who terminates employment before the amendment or termination. All benefits to which any Participant or Beneficiary may be entitled shall be determined under the Plan as in effect at the time the Participant terminates employment and shall not be affected by any subsequent change in the provisions of the Plan; provided, that the Company reserves the right to change the basis of return on investment of the Deferral Account with respect to any Participant or Beneficiary. Participants or Beneficiaries will be given notice prior to the discontinuance of the Plan or reduction of any benefits provided by the Plan. Section 15. Tax Withholding If any federal, state, or local income or employment tax withholding is required with respect to any deferral of income or payment hereunder, the Committee shall make appropriate arrangements with the Participant or his or her Beneficiary for satisfaction of such obligation. Section 16. Choice of Law This Plan, and all rights under this Plan, shall be interpreted and construed in accordance with ERISA and, to the extent not preempted, the law of the State of California, unless otherwise stated in the Plan. 10

Section 17. Notice Any written notice to the Company required by any of the provisions of this Plan shall be addressed to the chief personnel officer of the Company or his or her delegate and shall become effective when it is received. Section 18. No Employment Rights Nothing in the Plan, nor any action of the Company pursuant to the Plan, shall be deemed to give any person any right to remain in the employ of the Company or affect the right of the Company to terminate a persons's employment at any time, with or without cause.

and will continue to accrue Earnings and continue to be a liability of the Company. Any amendment or termination of the Plan will not affect the entitlement of any Participant or the Beneficiary of a Participant who terminates employment before the amendment or termination. All benefits to which any Participant or Beneficiary may be entitled shall be determined under the Plan as in effect at the time the Participant terminates employment and shall not be affected by any subsequent change in the provisions of the Plan; provided, that the Company reserves the right to change the basis of return on investment of the Deferral Account with respect to any Participant or Beneficiary. Participants or Beneficiaries will be given notice prior to the discontinuance of the Plan or reduction of any benefits provided by the Plan. Section 15. Tax Withholding If any federal, state, or local income or employment tax withholding is required with respect to any deferral of income or payment hereunder, the Committee shall make appropriate arrangements with the Participant or his or her Beneficiary for satisfaction of such obligation. Section 16. Choice of Law This Plan, and all rights under this Plan, shall be interpreted and construed in accordance with ERISA and, to the extent not preempted, the law of the State of California, unless otherwise stated in the Plan. 10

Section 17. Notice Any written notice to the Company required by any of the provisions of this Plan shall be addressed to the chief personnel officer of the Company or his or her delegate and shall become effective when it is received. Section 18. No Employment Rights Nothing in the Plan, nor any action of the Company pursuant to the Plan, shall be deemed to give any person any right to remain in the employ of the Company or affect the right of the Company to terminate a persons's employment at any time, with or without cause. Section 19. Definitions (a) Base Earnings means the annual base rate of pay for employees on the U.S. payroll of the Company. It does not include bonuses, commissions, overtime pay, shift differential, payments under the Hewlett-Packard Company Employee Benefits Organization Income Protection Plan and the Hewlett-Packard Company Supplemental Income Protection Plan, or any other additional compensation. (b) Beneficiary means the person or persons designated by a Participant under Section 9 to receive any amounts payable under the Plan in the event of the Participant's death. (c) Code means the Internal Revenue Code of 1986, as amended from time to time. 11

(d) Committee means the Compensation Committee of the Board of Directors of the Company. (e) Company means Hewlett-Packard Company, a California corporation. (f) Deferral Account means the account of the Participant which includes all Deferred Amounts and the Earnings thereon prior to payout to the Participant. (g) Deferred Amount means the amount the Participant annually elects to have deferred from Base Earnings.

Section 17. Notice Any written notice to the Company required by any of the provisions of this Plan shall be addressed to the chief personnel officer of the Company or his or her delegate and shall become effective when it is received. Section 18. No Employment Rights Nothing in the Plan, nor any action of the Company pursuant to the Plan, shall be deemed to give any person any right to remain in the employ of the Company or affect the right of the Company to terminate a persons's employment at any time, with or without cause. Section 19. Definitions (a) Base Earnings means the annual base rate of pay for employees on the U.S. payroll of the Company. It does not include bonuses, commissions, overtime pay, shift differential, payments under the Hewlett-Packard Company Employee Benefits Organization Income Protection Plan and the Hewlett-Packard Company Supplemental Income Protection Plan, or any other additional compensation. (b) Beneficiary means the person or persons designated by a Participant under Section 9 to receive any amounts payable under the Plan in the event of the Participant's death. (c) Code means the Internal Revenue Code of 1986, as amended from time to time. 11

(d) Committee means the Compensation Committee of the Board of Directors of the Company. (e) Company means Hewlett-Packard Company, a California corporation. (f) Deferral Account means the account of the Participant which includes all Deferred Amounts and the Earnings thereon prior to payout to the Participant. (g) Deferred Amount means the amount the Participant annually elects to have deferred from Base Earnings. (h) Earnings means the deemed return on investment (or charge on investment loss) on money allocated to the Participant's Deferral Account, based on the return of the Fund, reduced ten (10) percent to partially offset the costs of the Plan, as described in Section 5. (i) Eligible Employee means an employee on the U.S. payroll of the Company who has Base Earnings at the time of election as specified in Section 3 equal to or in excess of the sum of (1) the amount defined in Code section 401(a)(17), as adjusted by the Secretary of the Treasury under Code section 415(d), in effect on January 1 of the calendar year for which amounts are to be deferred, plus (2) $6,000. (j) ERISA means the Employee Retirement Income Security Act of 1974, as amended from time to time. (k) Fund means an S&P 500 Index Fund, as designated by the Committee from time to time. (l) Participant means any individual who has benefits in the Deferral Account under the Plan or who is receiving or entitled to receive benefits under the Plan. 12

(m) Plan means the Hewlett-Packard Company Executive Deferred Compensation Plan amended and restated as of November 21, 1996, as amended from time to time. (n) Retirement Date means the date on which a Participant has completed at least 15 years of service, as defined

(d) Committee means the Compensation Committee of the Board of Directors of the Company. (e) Company means Hewlett-Packard Company, a California corporation. (f) Deferral Account means the account of the Participant which includes all Deferred Amounts and the Earnings thereon prior to payout to the Participant. (g) Deferred Amount means the amount the Participant annually elects to have deferred from Base Earnings. (h) Earnings means the deemed return on investment (or charge on investment loss) on money allocated to the Participant's Deferral Account, based on the return of the Fund, reduced ten (10) percent to partially offset the costs of the Plan, as described in Section 5. (i) Eligible Employee means an employee on the U.S. payroll of the Company who has Base Earnings at the time of election as specified in Section 3 equal to or in excess of the sum of (1) the amount defined in Code section 401(a)(17), as adjusted by the Secretary of the Treasury under Code section 415(d), in effect on January 1 of the calendar year for which amounts are to be deferred, plus (2) $6,000. (j) ERISA means the Employee Retirement Income Security Act of 1974, as amended from time to time. (k) Fund means an S&P 500 Index Fund, as designated by the Committee from time to time. (l) Participant means any individual who has benefits in the Deferral Account under the Plan or who is receiving or entitled to receive benefits under the Plan. 12

(m) Plan means the Hewlett-Packard Company Executive Deferred Compensation Plan amended and restated as of November 21, 1996, as amended from time to time. (n) Retirement Date means the date on which a Participant has completed at least 15 years of service, as defined in the Retirement Plan, and has attained age 55. (o) Retirement Plan means the Hewlett-Packard Company Retirement Plan in effect as of November 1, 1993, as amended from time to time. Section 20. Execution IN WITNESS WHEREOF, the Company has caused this Plan to be duly executed by the undersigned this 21 day of November, 1996. Hewlett-Packard Company
By: /s/ Susan P. Orr --------------------------SUSAN P. ORR

CHAIR, COMPENSATION COMMITTEE 13

EXHIBIT 13 SELECTED FINANCIAL DATA Unaudited

(m) Plan means the Hewlett-Packard Company Executive Deferred Compensation Plan amended and restated as of November 21, 1996, as amended from time to time. (n) Retirement Date means the date on which a Participant has completed at least 15 years of service, as defined in the Retirement Plan, and has attained age 55. (o) Retirement Plan means the Hewlett-Packard Company Retirement Plan in effect as of November 1, 1993, as amended from time to time. Section 20. Execution IN WITNESS WHEREOF, the Company has caused this Plan to be duly executed by the undersigned this 21 day of November, 1996. Hewlett-Packard Company
By: /s/ Susan P. Orr --------------------------SUSAN P. ORR

CHAIR, COMPENSATION COMMITTEE 13

EXHIBIT 13 SELECTED FINANCIAL DATA Unaudited
For the years ended October 31 In millions except per share amounts and employees 1996 -------$ 17,181 21,708 -------$ 38,889 ======== $ 38,420 $ 3,726 $ $ 2,586 2,586 1995 -------$ 14,686 17,999 -------$ 32,685 ======== $ 31,519 $ 3,568 $ $ 2,433 2,433 1994 ------$11,692 13,658 ------$25,350 ======= $24,991 $ 2,549 $ 1,599 $ 1,599 1993 ------$ 9,462 11,310 ------$20,772 ======= $20,317 $ 1,879 $ 1,177 $ 1,177 1992 ------$ 7,569 9,192 ------$16,761 ======= $16,410 $ 1,404 $ $ 881 549

U.S. orders International orders Total orders Net revenue Earnings from operations Earnings, before effect of accounting change in 1992 Net earnings Per share amounts, restated for 1996 stock split: Earnings, before effect of accounting change in 1992 Net earnings Cash dividends At year-end: Total assets Long-term debt Employees

$ $ $

2.46 2.46 .44

$ $ $

2.31 2.31 .35

$ $ $

1.54 1.54 .275

$ $ $

1.16 1.16 .225

$ $ $

.87 .55 .18

$ 27,699 $ 2,579 112,000 ========

$ 24,427 $ 663 102,300 ========

$19,567 $ 547 98,400 =======

$16,736 $ 667 96,200 =======

$13,700 $ 425 92,600 =======

1992 results include an after-tax charge of $.32 per share for the cumulative effect of a change in accounting for retiree medical benefits.

EXHIBIT 13 SELECTED FINANCIAL DATA Unaudited
For the years ended October 31 In millions except per share amounts and employees 1996 -------$ 17,181 21,708 -------$ 38,889 ======== $ 38,420 $ 3,726 $ $ 2,586 2,586 1995 -------$ 14,686 17,999 -------$ 32,685 ======== $ 31,519 $ 3,568 $ $ 2,433 2,433 1994 ------$11,692 13,658 ------$25,350 ======= $24,991 $ 2,549 $ 1,599 $ 1,599 1993 ------$ 9,462 11,310 ------$20,772 ======= $20,317 $ 1,879 $ 1,177 $ 1,177 1992 ------$ 7,569 9,192 ------$16,761 ======= $16,410 $ 1,404 $ $ 881 549

U.S. orders International orders Total orders Net revenue Earnings from operations Earnings, before effect of accounting change in 1992 Net earnings Per share amounts, restated for 1996 stock split: Earnings, before effect of accounting change in 1992 Net earnings Cash dividends At year-end: Total assets Long-term debt Employees

$ $ $

2.46 2.46 .44

$ $ $

2.31 2.31 .35

$ $ $

1.54 1.54 .275

$ $ $

1.16 1.16 .225

$ $ $

.87 .55 .18

$ 27,699 $ 2,579 112,000 ========

$ 24,427 $ 663 102,300 ========

$19,567 $ 547 98,400 =======

$16,736 $ 667 96,200 =======

$13,700 $ 425 92,600 =======

1992 results include an after-tax charge of $.32 per share for the cumulative effect of a change in accounting for retiree medical benefits.

Graphs A bar chart entitled "Total Orders (In millions)" at the bottom left of page 29 of the Annual Report shows that for the fiscal years 1992, 1993, 1994, 1995 and 1996 (shown on the x-axis) the Company had total orders (shown on the y-axis) in the respective amounts provided in the table entitled "Selected Financial Data (Unaudited)" on page 29 of the Annual Report. A bar chart entitled "Earnings from Operations (In millions)" at the bottom center of page 29 of the Annual Report shows that for the fiscal years 1992, 1993, 1994, 1995 and 1996 (shown on the x-axis) the Company had earnings from operations (shown on the y-axis) in the respective amounts provided in the table entitled "Selected Financial Data (Unaudited)" on page 29 of the Annual Report. A bar chart entitled "Employees and Net Revenue Per Employee (In thousands)" at the bottom right of page 29 of the Annual Report shows that for the fiscal years 1992, 1993, 1994, 1995 and 1996 (shown on the x-axis) the Company had employees in the respective numbers (shown on the y-axis) provided in the table entitled "Selected Financial Data (Unaudited)" on page 29 of the Annual Report. In addition, the graph shows that for the fiscal years 1992, 1993, 1994, 1995 and 1996 (shown on the x-axis) the Company had net revenue per employee (shown on the y-axis) of $180,800, $215,200, $256,900, $314,100 and $358,600, respectively.

CONSOLIDATED STATEMENT OF EARNINGS
For the years ended October 31 In millions except per share amounts

1996 -------

1995 -------

1994 -------

CONSOLIDATED STATEMENT OF EARNINGS
For the years ended October 31 In millions except per share amounts Net revenue: Products Services Total net revenue Costs and expenses: Cost of products sold Cost of services Research and development Selling, general and administrative Total costs and expenses Earnings from operations Interest income and other, net Interest expense Earnings before taxes Provision for taxes Net earnings Net earnings per share Weighted average shares and equivalents outstanding

1996 ------$33,114 5,306 ------38,420 ------22,013 3,486 2,718 6,477 ------34,694 ------3,726 295 327 ------3,694 1,108 ------$ 2,586 ======= $ 2.46 ======= 1,052 =======

1995 ------$27,125 4,394 ------31,519 ------17,069 2,945 2,302 5,635 ------27,951 ------3,568 270 206 ------3,632 1,199 ------$ 2,433 ======= $ 2.31 ======= 1,052 =======

1994 ------$21,380 3,611 ------24,991 ------13,012 2,478 2,027 4,925 ------22,442 ------2,549 29 155 ------2,423 824 ------$ 1,599 ======= $ 1.54 ======= 1,041 =======

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

FINANCIAL REVIEW Unaudited RESULTS OF OPERATIONS In 1996, HP continued its 20 percent-plus growth in revenue, adding almost $7 billion in revenue during the year. Order growth was strong as well, at 19 percent, and the company also made progress in reducing its operatingexpense ratio. However, the first half of the year was stronger than the second half, in which order and revenue growth were reduced by various factors including inventory adjustments in the reseller channel and the company's decision to exit disk-mechanism manufacturing in the third quarter. As a result, full-year operating- and net-profit margins were lower than in 1995, and net earnings growth was 6 percent, compared with 52 percent in 1995. HP's orders increased 19 percent over 1995 to $38.9 billion, compared with a 29 percent increase in 1995. Slower, but still very healthy growth rates, in the company's computer businesses, representing approximately 80 percent of HP's orders, were key factors in the order growth from 1995. Geographically, domestic and international orders grew 17 and 21 percent, respectively, compared to growth of 26 percent and 32 percent, respectively, in the prior year. Net revenue grew 22 percent both in the U.S. and internationally in 1996 to $17.0 billion and $21.4 billion, respectively, following increases of 22 percent in the U.S. and 30 percent internationally in 1995. Currency unfavorably impacted the international growth rate as the dollar strengthened in 1996. Net revenue from product sales increased 22 percent, compared with 27 percent in 1995. The sustained increase in net revenue, while lower than in 1995, primarily reflects the company's continued success in technological innovation and rapid time to market with new products.

FINANCIAL REVIEW Unaudited RESULTS OF OPERATIONS In 1996, HP continued its 20 percent-plus growth in revenue, adding almost $7 billion in revenue during the year. Order growth was strong as well, at 19 percent, and the company also made progress in reducing its operatingexpense ratio. However, the first half of the year was stronger than the second half, in which order and revenue growth were reduced by various factors including inventory adjustments in the reseller channel and the company's decision to exit disk-mechanism manufacturing in the third quarter. As a result, full-year operating- and net-profit margins were lower than in 1995, and net earnings growth was 6 percent, compared with 52 percent in 1995. HP's orders increased 19 percent over 1995 to $38.9 billion, compared with a 29 percent increase in 1995. Slower, but still very healthy growth rates, in the company's computer businesses, representing approximately 80 percent of HP's orders, were key factors in the order growth from 1995. Geographically, domestic and international orders grew 17 and 21 percent, respectively, compared to growth of 26 percent and 32 percent, respectively, in the prior year. Net revenue grew 22 percent both in the U.S. and internationally in 1996 to $17.0 billion and $21.4 billion, respectively, following increases of 22 percent in the U.S. and 30 percent internationally in 1995. Currency unfavorably impacted the international growth rate as the dollar strengthened in 1996. Net revenue from product sales increased 22 percent, compared with 27 percent in 1995. The sustained increase in net revenue, while lower than in 1995, primarily reflects the company's continued success in technological innovation and rapid time to market with new products. Shipments of the company's computer and peripheral products, such as the HP Vectra and Pavilion PCs, HP NetServer PC servers, multiuser UNIX systems, and HP's families of DeskJet and LaserJet printers, continued strong in 1996. As in 1995, strong unit volume growth was driven primarily by new product introductions. In addition, intense competition contributed to declines in the average selling price for many of these products. As a result, unit volume growth outpaced revenue growth. Sales of consumable supplies for the company's printer products increased strongly this year, reflecting increased printer usage and a larger installed base. Revenue growth in the company's non-computer businesses was slowed by various industry-specific factors during the year, including weakness in the markets for components and semiconductor-test equipment. Information on orders and net revenue by groupings of similar products and services is presented on page 53 of this report. Services such as systems integration, selective-outsourcing management, consulting, education, product financing and rentals, as well as hardware and software support and maintenance, are an integral part of the company's offerings. Net revenue from services grew 21 percent, compared with 22 percent in 1995. During 1996 and 1995, service and support Graphs A graph entitled "Net Revenue (in millions)" at the top right of page 31 of the Annual Report shows that for the fiscal years 1992, 1993, 1994, 1995 and 1996 (shown on the x-axis) the Company had total net revenue (shown on the y-axis) in the respective amounts provided in the table entitled "Selected Financial Data (Unaudited)" on page 29 of the Annual Report; and international net revenue of $9,198 million, $10,971 million, $13,522 million, $17,556 million and $21,379 million, respectively. In addition, the graph shows that for the fiscal years 1992 and 1993 (shown on the x-axis) the company had U.S. net revenue (shown on the y-axis) of $7,212 million and $9,346 million, respectively; and U.S. net revenue for the fiscal years 1994, 1995 and 1996 (shown on the x-axis) in the respective amounts (shown on the y-axis) provided in the section entitled "Geographic Area Information" under the caption "United States: Unaffiliated customer sales" in the table on page 51 of the Annual Report. A graph entitled "U.S. Dollar Relative to Major Foreign Currencies (Fiscal 1980 equals 1.00)" at the bottom

right of page 31 of the Annual Report shows that in the months running consecutively from November 1991 through October 1996 (shown on the x-axis) the U.S. Dollar was equal to (shown on the y-axis) 1.06, 1.04, 1.04, 1.07, 1.09, 1.09, 1.06, 1.04, .99, .98, .99, 1.04, 1.11, 1.12, 1.14, 1.17, 1.17, 1.13, 1.13, 1.15, 1.19, 1.20, 1.16, 1.18, 1.21, 1.21, 1.22, 1.21, 1.19, 1.19, 1.18, 1.16, 1.13, 1.13, 1.12, 1.09, 1.11, 1.13, 1.12, 1.11, 1.07, 1.06, 1.06, 1.06, 1.05, 1.07, 1.08, 1.06, 1.06, 1.07, 1.08, 1.09, 1.09, 1.10, 1.11, 1.11, 1.09, 1.09, 1.09, and 1.10, respectively, multiplied by the currencies of the following foreign countries, with varying weights assigned to each of such currencies: Austria, Belgium, Canada, Denmark, Finland, France, Germany, Italy, Japan, Netherlands, Norway, Spain, Sweden, Switzerland and United Kingdom.

revenue continued to grow with the increase in the installed base, higher leasing revenue and the continued success of the professional services businesses. Costs, expenses and earnings as a percentage of net revenue were as follows:
For the years ended October 31 - -----------------------------Cost of products sold and services Research and development Selling, general and administrative Earnings from operations Net earnings 1996 ---66.4% 7.1% 16.8% 9.7% 6.7% ==== 1995 ---63.5% 7.3% 17.9% 11.3% 7.7% ==== 1994 ---62.0% 8.1% 19.7% 10.2% 6.4% ====

During 1996, cost of products sold and services as a percentage of net revenue was 66.4 percent, an increase of 2.9 percentage points, compared with a 1.5 percentage point increase in 1995. Intense price competition affected product revenues and resulted in reduced gross profit margins. Additionally, the continued shift in the mix of products sold towards lower gross-margin, high-volume product families, as well as costs associated with the stream of new-product introductions, helped drive both the 1996 and 1995 increases in cost of sales. These factors are likely to continue to put some upward pressure on the cost of sales ratio. Pretax charges of approximately $135 million due to the exit from disk-mechanism manufacturing, and the related operating losses in that business, also contributed to the overall increase in the cost of sales ratio over the yearago period. Cost of products sold and services as a percentage of net revenue would have been 65.5 percent for 1996 without these factors. Research and development expenditures increased 18 percent in 1996 to $2.7 billion, versus 14 percent growth and expenditures of $2.3 billion in 1995. The ongoing increase in spending on research and development reflects the company's belief that success in a global marketplace requires a continuing flow of innovative, high-quality products. Selling, general and administrative expenses grew 15 percent in 1996 and 14 percent in 1995. This growth was due largely to increased selling costs related to order and revenue growth, and increased advertising and marketing costs associated with the company's growing presence in high-volume, consumer-oriented businesses. Both research and development and selling, general and administrative expenses decreased as a percentage of net revenue in 1996 and 1995, which reflects the growth of the net revenue base in both years. These decreases also reflect the company's focused management of operating-expense growth, which was most evident in the second half of 1996 when the company quickly adjusted to slowing order and revenue growth. Interest income and other, net was $295 million in 1996, compared with $270 million in 1995 and $29 million in 1994. The increased levels in 1996 and 1995 are primarily due to increased earnings on cash and other investments, increased income from equity investees, and gains on sales of real estate and other assets. Interest expense was $327 million in 1996, compared with $206 million in 1995 and $155 million in 1994, reflecting increasing levels of debt outstanding, as well as interest rate changes during the respective periods. Graphs A graph entitled "Costs and Expenses (As a percentage of net revenue)" at the top left of page 32 of the Annual Report shows that for the fiscal years 1992 and 1993 (shown on the x-axis) the Company had (shown on the yaxis) cost of products sold and services of 55.8% and 59.7%, respectively, of net revenue; selling, general and administrative expenses of 25.7% and 22.4%, respectively, of net revenue; and research and development expenses of 9.9% and 8.7%, respectively, of net revenue. In addition, the graph shows that for the fiscal years 1994, 1995 and 1996 (shown on the x-axis) the Company had, as a percentage of net revenue (shown on the y-

revenue continued to grow with the increase in the installed base, higher leasing revenue and the continued success of the professional services businesses. Costs, expenses and earnings as a percentage of net revenue were as follows:
For the years ended October 31 - -----------------------------Cost of products sold and services Research and development Selling, general and administrative Earnings from operations Net earnings 1996 ---66.4% 7.1% 16.8% 9.7% 6.7% ==== 1995 ---63.5% 7.3% 17.9% 11.3% 7.7% ==== 1994 ---62.0% 8.1% 19.7% 10.2% 6.4% ====

During 1996, cost of products sold and services as a percentage of net revenue was 66.4 percent, an increase of 2.9 percentage points, compared with a 1.5 percentage point increase in 1995. Intense price competition affected product revenues and resulted in reduced gross profit margins. Additionally, the continued shift in the mix of products sold towards lower gross-margin, high-volume product families, as well as costs associated with the stream of new-product introductions, helped drive both the 1996 and 1995 increases in cost of sales. These factors are likely to continue to put some upward pressure on the cost of sales ratio. Pretax charges of approximately $135 million due to the exit from disk-mechanism manufacturing, and the related operating losses in that business, also contributed to the overall increase in the cost of sales ratio over the yearago period. Cost of products sold and services as a percentage of net revenue would have been 65.5 percent for 1996 without these factors. Research and development expenditures increased 18 percent in 1996 to $2.7 billion, versus 14 percent growth and expenditures of $2.3 billion in 1995. The ongoing increase in spending on research and development reflects the company's belief that success in a global marketplace requires a continuing flow of innovative, high-quality products. Selling, general and administrative expenses grew 15 percent in 1996 and 14 percent in 1995. This growth was due largely to increased selling costs related to order and revenue growth, and increased advertising and marketing costs associated with the company's growing presence in high-volume, consumer-oriented businesses. Both research and development and selling, general and administrative expenses decreased as a percentage of net revenue in 1996 and 1995, which reflects the growth of the net revenue base in both years. These decreases also reflect the company's focused management of operating-expense growth, which was most evident in the second half of 1996 when the company quickly adjusted to slowing order and revenue growth. Interest income and other, net was $295 million in 1996, compared with $270 million in 1995 and $29 million in 1994. The increased levels in 1996 and 1995 are primarily due to increased earnings on cash and other investments, increased income from equity investees, and gains on sales of real estate and other assets. Interest expense was $327 million in 1996, compared with $206 million in 1995 and $155 million in 1994, reflecting increasing levels of debt outstanding, as well as interest rate changes during the respective periods. Graphs A graph entitled "Costs and Expenses (As a percentage of net revenue)" at the top left of page 32 of the Annual Report shows that for the fiscal years 1992 and 1993 (shown on the x-axis) the Company had (shown on the yaxis) cost of products sold and services of 55.8% and 59.7%, respectively, of net revenue; selling, general and administrative expenses of 25.7% and 22.4%, respectively, of net revenue; and research and development expenses of 9.9% and 8.7%, respectively, of net revenue. In addition, the graph shows that for the fiscal years 1994, 1995 and 1996 (shown on the x-axis) the Company had, as a percentage of net revenue (shown on the yaxis), cost of products sold and services, selling, general and administrative expenses and research and development expenses in the respective amounts provided in the table at the top of page 32 of the Annual Report. A bar chart entitled "Net Earnings (In millions)" at the bottom left of page 32 of the Annual Report shows that for the fiscal years 1992, 1993, 1994, 1995 and 1996 (shown on the x-axis) the Company had net earnings (shown on the y-axis) in the respective amounts provided in the table entitled "Selected Financial Data (Unaudited)" on page 29 of the Annual Report.

The company's effective tax rate was 30 percent in 1996, compared with 33 percent in 1995 and 34 percent in 1994. A combination of factors led to the decreases, including continued shifts in the geographical composition of earnings and resolution of certain issues related to tax returns filed in previous years. Net earnings increased 6 percent to $2.6 billion in 1996. This compares with a 52 percent increase in 1995 and a 36 percent increase in 1994. As a percentage of net revenue, net earnings were 6.7 percent in 1996, compared with 7.7 percent in 1995 and 6.4 percent in 1994. Net earnings growth for 1996 would have been higher without the effects of the company's exit from disk-mechanism manufacturing. FINANCIAL CONDITION AND LIQUIDITY HP's financial position remains strong, with cash and cash equivalents and short-term investments of $3.3 billion at October 31, 1996, and $2.6 billion at October 31, 1995. In addition, other long-term investments, relatively low levels of debt compared to assets, and a large equity base continue to demonstrate the company's financial flexibility. Operating activities generated $3.5 billion in cash in 1996, compared with $1.6 billion and $2.2 billion in 1995 and 1994, respectively. The increase in cash generated from operations in 1996 compared with 1995 is primarily due to substantially reduced receivables and inventory growth. Receivables as a percentage of net revenue decreased to 18.5 percent at October 31, 1996, from 21.4 percent a year ago, while inventories as a percentage of net revenue decreased to 16.7 percent from 19.1 percent. Slowing revenue growth in the second half of the year contributed to these declines. The company's efforts to enhance processes, with a focus on improving asset utilization and supply-chain management in order to accommodate shorter product life cycles and rapid product ramps, were also a factor in the improvements of these ratios. Capital expenditures in 1996 were $2.2 billion, compared with $1.6 billion and $1.3 billion in 1995 and 1994, respectively. The increases in capital expenditures relate primarily to expansion of production capacity to accommodate higher volumes and the introduction of new products, but also reflect increasing expenditures to support growth in the company's leasing business. The company invests excess cash in short- and long-term investments, depending on its projected cash needs for operations, capital expenditures and other business purposes. Additionally, the company from time to time supplements its internally generated cash flow with a combination of short- and long-term borrowings. Recent changes in tax laws in Puerto Rico have resulted in the company liquidating a substantial portion of its short-term investments there and using the cash to pay down notes payable and short-term borrowings. Long-term debt has increased, however, as it is utilized to support increased investments in the company's lease portfolio and to finance interest-bearing assets. Cash flow from net changes in debt structure resulted in net borrowings of $811 million in 1996 compared Graphs A bar chart entitled "Selected Cash Flows (In millions)" at the top right of page 33 of the Annual Report shows that for the fiscal years 1992 and 1993 (shown on the x-axis) the Company had cash flows from operating activities (shown on the y-axis) of $1,288 and $1,142 million, respectively; capital expenditures of $1,032 million and $1,405 million, respectively; and dividends paid of $183 million and $228 million, respectively. In addition, the bar chart shows that for the fiscal years 1994, 1995 and 1996 (shown on the x-axis) the Company had cash flows from operating activities and dividends paid (shown on the y-axis) in the respective amounts provided in the table entitled "Consolidated Statement of Cash Flows" on page 38 of the Annual Report. Finally, the bar chart shows that for the fiscal years 1994, 1995 and 1996 (shown on the x-axis) the Company had capital expenditures (shown on the y-axis) in the respective amounts shown as "Investment in property, plant and equipment" provided in the table entitled "Consolidated Statement of Cash Flows" on page 38 of the Annual Report. A graph entitled "Asset Management (As a percentage of net revenue)" at the bottom right of page 33 of the Annual Report shows that for the fiscal years 1992, 1993, 1994, 1995 and 1996 (shown on the x-axis) the Company had (shown on the y-axis) net property, plant and equipment of 22.2%, 20.6%, 17.3%, 14.9% and 14.4%, respectively, of net revenue; accounts and notes receivable of 21.3%, 20.7%, 20.1%, 21.4% and 18.5%, respectively, of net revenue; and inventories of 15.9%, 18.2%, 17.1%, 19.1% and 16.7%, respectively, of net revenue.

The company's effective tax rate was 30 percent in 1996, compared with 33 percent in 1995 and 34 percent in 1994. A combination of factors led to the decreases, including continued shifts in the geographical composition of earnings and resolution of certain issues related to tax returns filed in previous years. Net earnings increased 6 percent to $2.6 billion in 1996. This compares with a 52 percent increase in 1995 and a 36 percent increase in 1994. As a percentage of net revenue, net earnings were 6.7 percent in 1996, compared with 7.7 percent in 1995 and 6.4 percent in 1994. Net earnings growth for 1996 would have been higher without the effects of the company's exit from disk-mechanism manufacturing. FINANCIAL CONDITION AND LIQUIDITY HP's financial position remains strong, with cash and cash equivalents and short-term investments of $3.3 billion at October 31, 1996, and $2.6 billion at October 31, 1995. In addition, other long-term investments, relatively low levels of debt compared to assets, and a large equity base continue to demonstrate the company's financial flexibility. Operating activities generated $3.5 billion in cash in 1996, compared with $1.6 billion and $2.2 billion in 1995 and 1994, respectively. The increase in cash generated from operations in 1996 compared with 1995 is primarily due to substantially reduced receivables and inventory growth. Receivables as a percentage of net revenue decreased to 18.5 percent at October 31, 1996, from 21.4 percent a year ago, while inventories as a percentage of net revenue decreased to 16.7 percent from 19.1 percent. Slowing revenue growth in the second half of the year contributed to these declines. The company's efforts to enhance processes, with a focus on improving asset utilization and supply-chain management in order to accommodate shorter product life cycles and rapid product ramps, were also a factor in the improvements of these ratios. Capital expenditures in 1996 were $2.2 billion, compared with $1.6 billion and $1.3 billion in 1995 and 1994, respectively. The increases in capital expenditures relate primarily to expansion of production capacity to accommodate higher volumes and the introduction of new products, but also reflect increasing expenditures to support growth in the company's leasing business. The company invests excess cash in short- and long-term investments, depending on its projected cash needs for operations, capital expenditures and other business purposes. Additionally, the company from time to time supplements its internally generated cash flow with a combination of short- and long-term borrowings. Recent changes in tax laws in Puerto Rico have resulted in the company liquidating a substantial portion of its short-term investments there and using the cash to pay down notes payable and short-term borrowings. Long-term debt has increased, however, as it is utilized to support increased investments in the company's lease portfolio and to finance interest-bearing assets. Cash flow from net changes in debt structure resulted in net borrowings of $811 million in 1996 compared Graphs A bar chart entitled "Selected Cash Flows (In millions)" at the top right of page 33 of the Annual Report shows that for the fiscal years 1992 and 1993 (shown on the x-axis) the Company had cash flows from operating activities (shown on the y-axis) of $1,288 and $1,142 million, respectively; capital expenditures of $1,032 million and $1,405 million, respectively; and dividends paid of $183 million and $228 million, respectively. In addition, the bar chart shows that for the fiscal years 1994, 1995 and 1996 (shown on the x-axis) the Company had cash flows from operating activities and dividends paid (shown on the y-axis) in the respective amounts provided in the table entitled "Consolidated Statement of Cash Flows" on page 38 of the Annual Report. Finally, the bar chart shows that for the fiscal years 1994, 1995 and 1996 (shown on the x-axis) the Company had capital expenditures (shown on the y-axis) in the respective amounts shown as "Investment in property, plant and equipment" provided in the table entitled "Consolidated Statement of Cash Flows" on page 38 of the Annual Report. A graph entitled "Asset Management (As a percentage of net revenue)" at the bottom right of page 33 of the Annual Report shows that for the fiscal years 1992, 1993, 1994, 1995 and 1996 (shown on the x-axis) the Company had (shown on the y-axis) net property, plant and equipment of 22.2%, 20.6%, 17.3%, 14.9% and 14.4%, respectively, of net revenue; accounts and notes receivable of 21.3%, 20.7%, 20.1%, 21.4% and 18.5%, respectively, of net revenue; and inventories of 15.9%, 18.2%, 17.1%, 19.1% and 16.7%, respectively, of net revenue.

CONSOLIDATED BALANCE SHEET
October 31 In millions except par value and number of shares 1996 1995 - -------------------------------------------------------------------------------------------------ASSETS Current assets: Cash and cash equivalents $ 2,885 $ 1,973 Short-term investments 442 643 Accounts and notes receivable 7,126 6,735 Inventories: Finished goods 3,956 3,368 Purchased parts and fabricated assemblies 2,445 2,645 Other current assets 1,137 875 - -------------------------------------------------------------------------------------------------Total current assets 17,991 16,239 - -------------------------------------------------------------------------------------------------Property, plant and equipment: Land 475 485 Buildings and leasehold improvements 4,257 3,810 Machinery and equipment 5,466 4,452 - -------------------------------------------------------------------------------------------------10,198 8,747 Accumulated depreciation (4,662) (4,036) - -------------------------------------------------------------------------------------------------5,536 4,711 Long-term investments and other assets 4,172 3,477 - -------------------------------------------------------------------------------------------------Total assets $27,699 $24,427 ================================================================================================== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Notes payable and short-term borrowings $ 2,125 $ 3,214 Accounts payable 2,375 2,422 Employee compensation and benefits 1,675 1,568 Taxes on earnings 1,514 1,494 Deferred revenues 951 782 Other accrued liabilities 1,983 1,464 - -------------------------------------------------------------------------------------------------Total current liabilities 10,623 10,944 - -------------------------------------------------------------------------------------------------Long-term debt 2,579 663 Other liabilities 1,059 981 Commitments and contingencies Shareholders' equity: Preferred stock, $1 par value (authorized: 300,000,000 shares; issued: none) --Common stock and capital in excess of $1 par value (authorized: 2,400,000,000 shares; issued and outstanding: 1,014,123,000 in 1996 and 1,019,910,000 in 1995) 1,014 1,381 Retained earnings 12,424 10,458 - -------------------------------------------------------------------------------------------------Total shareholders' equity 13,438 11,839 - -------------------------------------------------------------------------------------------------Total liabilities and shareholders' equity $27,699 $24,427 ==================================================================================================

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

with $857 million and $155 million in 1995 and 1994, respectively. At October 31, 1996, the company had various uncommitted borrowing arrangements in place with borrowing capacity totaling $4.6 billion. The company split its stock on a 2-for-1 basis effective June 21, 1996, following a similar split in March of last year. All share and per share amounts have been restated to reflect the retroactive effect of this split. Shares are

CONSOLIDATED BALANCE SHEET
October 31 In millions except par value and number of shares 1996 1995 - -------------------------------------------------------------------------------------------------ASSETS Current assets: Cash and cash equivalents $ 2,885 $ 1,973 Short-term investments 442 643 Accounts and notes receivable 7,126 6,735 Inventories: Finished goods 3,956 3,368 Purchased parts and fabricated assemblies 2,445 2,645 Other current assets 1,137 875 - -------------------------------------------------------------------------------------------------Total current assets 17,991 16,239 - -------------------------------------------------------------------------------------------------Property, plant and equipment: Land 475 485 Buildings and leasehold improvements 4,257 3,810 Machinery and equipment 5,466 4,452 - -------------------------------------------------------------------------------------------------10,198 8,747 Accumulated depreciation (4,662) (4,036) - -------------------------------------------------------------------------------------------------5,536 4,711 Long-term investments and other assets 4,172 3,477 - -------------------------------------------------------------------------------------------------Total assets $27,699 $24,427 ================================================================================================== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Notes payable and short-term borrowings $ 2,125 $ 3,214 Accounts payable 2,375 2,422 Employee compensation and benefits 1,675 1,568 Taxes on earnings 1,514 1,494 Deferred revenues 951 782 Other accrued liabilities 1,983 1,464 - -------------------------------------------------------------------------------------------------Total current liabilities 10,623 10,944 - -------------------------------------------------------------------------------------------------Long-term debt 2,579 663 Other liabilities 1,059 981 Commitments and contingencies Shareholders' equity: Preferred stock, $1 par value (authorized: 300,000,000 shares; issued: none) --Common stock and capital in excess of $1 par value (authorized: 2,400,000,000 shares; issued and outstanding: 1,014,123,000 in 1996 and 1,019,910,000 in 1995) 1,014 1,381 Retained earnings 12,424 10,458 - -------------------------------------------------------------------------------------------------Total shareholders' equity 13,438 11,839 - -------------------------------------------------------------------------------------------------Total liabilities and shareholders' equity $27,699 $24,427 ==================================================================================================

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

with $857 million and $155 million in 1995 and 1994, respectively. At October 31, 1996, the company had various uncommitted borrowing arrangements in place with borrowing capacity totaling $4.6 billion. The company split its stock on a 2-for-1 basis effective June 21, 1996, following a similar split in March of last year. All share and per share amounts have been restated to reflect the retroactive effect of this split. Shares are

with $857 million and $155 million in 1995 and 1994, respectively. At October 31, 1996, the company had various uncommitted borrowing arrangements in place with borrowing capacity totaling $4.6 billion. The company split its stock on a 2-for-1 basis effective June 21, 1996, following a similar split in March of last year. All share and per share amounts have been restated to reflect the retroactive effect of this split. Shares are repurchased periodically to manage the dilution created by shares issued under various employee stock plans. In 1996, 24.6 million shares were repurchased at an aggregate price of $1,089 million. In 1995, 20.8 million shares were repurchased for $686 million and in 1994, 16.1 million shares were repurchased for $325 million. Additional stock repurchases, based on certain price and volume criteria, are periodically authorized by the Board of Directors. FACTORS THAT MAY AFFECT FUTURE RESULTS HP's future operating results may be adversely affected if the company is unable to continue to rapidly develop, manufacture and market innovative products and services that meet customer requirements. The process of developing new high technology products and solutions is inherently complex and uncertain. It requires accurate anticipation of customers' changing needs and emerging technological trends. The company then must make longterm investments and commit significant resources before knowing whether its predictions will eventually result in products that achieve market acceptance. After a product is developed, the company must quickly ramp manufacturing in sufficient volumes at acceptable costs. This is a process that requires accurate forecasting of volumes, mix of products and configurations. Moreover, the supply and timing of a new product or service must match the customers' demand and timing for those particular products or services. Given the wide variety of systems, products and services the company offers, the process of planning production and managing inventory levels becomes increasingly difficult. Inventory management has also become increasingly complex as the company continues to sell a greater mix of products, especially printers and personal computers, through third-party distribution channels. Resellers constantly adjust their ordering patterns in response to the company's, and its competitors', supply into the channel and the timing of their new product introductions and relative feature sets, as well as seasonal fluctuations in end-user demand such as the back-to-school and holiday selling periods. Resellers may increase orders during times of shortages, cancel orders if the channel is filled with currently available products, or delay orders in anticipation of new products. Any excess supply could result in price reductions and inventory writedowns, which in turn could adversely affect the company's gross margins. The short life cycles of many of the company's products pose a challenge for the effective management of the transition from existing products to new products and could adversely affect the company's future operating results. Product development or manufacturing

delays, variations in product costs, and delays in customer purchases of existing products in anticipation of new product introductions are among the factors that make a smooth transition from current products to new products difficult. In addition, the timing of competitors' introductions of new products and services may negatively affect the future operating results of the company, especially when these introductions coincide with periods leading up to the company's own introduction of new or enhanced products. Furthermore, some of the company's own new products replace or compete with others of the company's current products. Portions of the company's manufacturing operations are dependent on the ability of suppliers to deliver components, subassemblies and completed products in time to meet critical manufacturing and distribution schedules. The company periodically experiences constrained supply of certain component parts in some product lines as a result of strong demand in the industry for those parts. Such constraints, if persistent, may adversely affect the company's operating results until alternate sourcing could be developed. In order to secure components for production and introduction of new products, the company frequently makes advance payments to certain suppliers, and often enters into noncancelable purchase commitments with vendors for such components. Volatility in the prices of these component parts, the possible inability of the company to secure enough components at reasonable prices to build new products in a timely manner in the quantities and configurations demanded or, conversely, a temporary oversupply of these parts, could adversely affect the company's future

delays, variations in product costs, and delays in customer purchases of existing products in anticipation of new product introductions are among the factors that make a smooth transition from current products to new products difficult. In addition, the timing of competitors' introductions of new products and services may negatively affect the future operating results of the company, especially when these introductions coincide with periods leading up to the company's own introduction of new or enhanced products. Furthermore, some of the company's own new products replace or compete with others of the company's current products. Portions of the company's manufacturing operations are dependent on the ability of suppliers to deliver components, subassemblies and completed products in time to meet critical manufacturing and distribution schedules. The company periodically experiences constrained supply of certain component parts in some product lines as a result of strong demand in the industry for those parts. Such constraints, if persistent, may adversely affect the company's operating results until alternate sourcing could be developed. In order to secure components for production and introduction of new products, the company frequently makes advance payments to certain suppliers, and often enters into noncancelable purchase commitments with vendors for such components. Volatility in the prices of these component parts, the possible inability of the company to secure enough components at reasonable prices to build new products in a timely manner in the quantities and configurations demanded or, conversely, a temporary oversupply of these parts, could adversely affect the company's future operating results. The company continues to expand into third-party distribution channels to accommodate changing customer preferences. As a result, the financial health of these resellers, and the company's continuing relationships with them, become more important to the company's success. Some of these companies are thinly capitalized and may be unable to withstand changes in business conditions. The company's financial results could be adversely affected if the financial condition of these resellers substantially weakens or the company's relationship with such resellers deteriorates. Sales outside the United States make up more than half of the company's revenues. In addition, a portion of the company's product and component manufacturing, along with key suppliers, are located outside the United States. Accordingly, the company's future results could be adversely affected by a variety of factors, including changes in foreign currency exchange rates, changes in a specific 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 and natural disasters. As a matter of course, the company frequently engages in discussions with a variety of parties relating to possible acquisitions, strategic alliances, joint ventures and divestitures. Although the consummation of any transaction is unlikely to have a material effect on the

company's results as a whole, the implementation or integration of the transaction may contribute to the company's results differing from the investment community's expectation in a given quarter. Divestitures may result in the cancellation of orders and charges to earnings. Acquisitions and strategic alliances may require, among other things, integration or coordination with a different company culture, management team organization, and business infrastructure. They may also require the development, manufacture and marketing of product offerings with the company's products in a way that enhances the performance of the combined business or product line. Depending on the size and complexity of the transaction, successful integration or implementation depends on a variety of factors, including the hiring and retention of key employees, management of geographically separate facilities, 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 temporarily adversely impact other business operations. A portion of the company's research and development activities, its corporate headquarters, other critical business operations and certain of its suppliers are located near major earthquake faults. The ultimate impact on the company, its significant suppliers and the general infrastructure is unknown, but operating results could be materially affected in the event of a major earthquake. The company is predominantly self-insured for losses and interruptions caused by earthquakes. Operations of the company involve the use of substances regulated under various federal, state and international

company's results as a whole, the implementation or integration of the transaction may contribute to the company's results differing from the investment community's expectation in a given quarter. Divestitures may result in the cancellation of orders and charges to earnings. Acquisitions and strategic alliances may require, among other things, integration or coordination with a different company culture, management team organization, and business infrastructure. They may also require the development, manufacture and marketing of product offerings with the company's products in a way that enhances the performance of the combined business or product line. Depending on the size and complexity of the transaction, successful integration or implementation depends on a variety of factors, including the hiring and retention of key employees, management of geographically separate facilities, 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 temporarily adversely impact other business operations. A portion of the company's research and development activities, its corporate headquarters, other critical business operations and certain of its suppliers are located near major earthquake faults. The ultimate impact on the company, its significant suppliers and the general infrastructure is unknown, but operating results could be materially affected in the event of a major earthquake. The company is predominantly self-insured for losses and interruptions caused by earthquakes. Operations of the company involve the use of substances regulated under various federal, state and international laws governing the environment. It is the company's policy to apply strict standards for environmental protection to sites inside and outside the U.S., even if not subject to regulations imposed by local governments. The liability for environmental remediation and related costs is accrued when it is considered probable and the costs can be estimated. Environmental costs are presently not material to the company's operations or financial position. Although the company believes that it has the product offerings and resources needed for continuing success, future revenue and margin trends cannot be reliably predicted and may cause the company to adjust its operations. The company's stock price, like that of other technology companies, is subject to significant volatility. The announcement of new products, services or technological innovations by the company or its competitors, quarterly variations in the company's results of operations, changes in revenue or earnings estimates by the investment community and speculation in the press or investment community are among the factors affecting the company's stock price. In addition, the stock price may be affected by general market conditions and domestic and international macroeconomic factors unrelated to the company's performance. Because of the foregoing reasons, recent trends should not be considered reliable indicators of future stock prices or financial results.

CONSOLIDATED STATEMENT OF CASH FLOWS
For the years ended October 31 In millions Cash flows from operating activities: Net earnings Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization Deferred taxes on earnings Changes in current assets and liabilities: Accounts and notes receivable Inventories Accounts payable Taxes on earnings Other current assets and liabilities Other, net Net cash provided by operating activities Cash flows from investing activities: Investment in property, plant and equipment Disposition of property, plant and equipment Purchase of short-term investments Maturities of short-term investments Purchase of long-term investments

1996 ------$ 2,586

1995 ------$ 2,433

1994 ------$ 1,599

1,297 (284) (293) (356) (55) 102 553 (94) ------3,456 ------(2,201) 316 (6,652) 7,074 (734)

1,139 (102) (1,696) (1,740) 956 180 663 (220) ------1,613 ------(1,601) 294 (3,191) 3,669 (308)

1,006 (156) (848) (582) 243 320 585 57 ------2,224 ------(1,257) 291 (2,758) 2,392 (332)

CONSOLIDATED STATEMENT OF CASH FLOWS
For the years ended October 31 In millions Cash flows from operating activities: Net earnings Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization Deferred taxes on earnings Changes in current assets and liabilities: Accounts and notes receivable Inventories Accounts payable Taxes on earnings Other current assets and liabilities Other, net Net cash provided by operating activities Cash flows from investing activities: Investment in property, plant and equipment Disposition of property, plant and equipment Purchase of short-term investments Maturities of short-term investments Purchase of long-term investments Maturities of long-term investments Acquisitions, net of cash acquired Other, net Net cash used in investing activities Cash flows from financing activities: Change in notes payable and short-term borrowings Issuance of long-term debt Payment of current maturities of long-term debt Issuance of common stock under employee stock plans Repurchase of common stock Dividends Other, net Net cash (used in) provided by financing activities Increase in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year Supplemental cash flow disclosures: Income taxes paid, net Interest paid

1996 ------$ 2,586

1995 ------$ 2,433

1994 ------$ 1,599

1,297 (284) (293) (356) (55) 102 553 (94) ------3,456 ------(2,201) 316 (6,652) 7,074 (734) --22 ------(2,175) ------(1,137) 1,989 (41) 363 (1,089) (450) (4) ------(369) ------912 1,973 ------$ 2,885 ======= $ 1,159 $ 267 =======

1,139 (102) (1,696) (1,740) 956 180 663 (220) ------1,613 ------(1,601) 294 (3,191) 3,669 (308) --(38) ------(1,175) ------755 434 (332) 361 (686) (358) 4 ------178 ------616 1,357 ------$ 1,973 ======= $ 1,058 $ 187 =======

1,006 (156) (848) (582) 243 320 585 57 ------2,224 ------(1,257) 291 (2,758) 2,392 (332) 47 (62) 69 ------(1,610) ------250 64 (159) 300 (325) (280) 4 ------(146) ------468 889 ------$ 1,357 ======= $ 626 $ 143 =======

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

CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
Common stock ---------------------------Par value Number of and capital in shares excess of par ---------------------1,010,852 $ 1,447 24,568 (16,112) 421 (325)

In millions except number of shares in thousands Balance October 31, 1993 Employee stock plans: Shares issued Shares repurchased

Retained earnings -------$ 7,064 ---

To ---$ 8

CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
Common stock ---------------------------Par value Number of and capital in shares excess of par ---------------------1,010,852 $ 1,447 24,568 (16,112) ----------1,019,308 21,392 (20,790) ----------1,019,910 3,056 15,737 (24,580) ----------1,014,123 ========= 421 (325) --------1,543 524 (686) --------1,381 137 577 (1,081) --------$ 1,014 =======

In millions except number of shares in thousands Balance October 31, 1993 Employee stock plans: Shares issued Shares repurchased Dividends Net earnings Balance October 31, 1994 Employee stock plans: Shares issued Shares repurchased Dividends Net earnings Balance October 31, 1995 Acquisition via immaterial pooling Employee stock plans: Shares issued Shares repurchased Dividends Net earnings BALANCE OCTOBER 31, 1996

Retained earnings -------$ 7,064 --(280) 1,599 -------8,383 --(358) 2,433 -------10,458 (162) -(8) (450) 2,586 -------$ 12,424 ========

To ---$ 8

1 ---9

2 ---11

(1 2 ---$ 13 ====

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of HewlettPackard Company and its subsidiaries. All significant intercompany accounts and transactions have been eliminated. USE OF ESTIMATES The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, as well as revenues and expenses reported for the periods presented. The company regularly assesses these estimates and, while actual results may differ, management believes that the estimates are reasonable. REVENUE RECOGNITION Revenue from product sales is generally recognized at the time the product is shipped, with provisions established for price protection programs and for estimated product returns. Upon shipment, the company also provides for the estimated cost that may be incurred for product warranties and post-sales support. Service revenue is recognized over the contractual period or as services are rendered and accepted by the customer. ADVERTISING Advertising costs are expensed as incurred and amounted to $999 million in 1996, $830 million in 1995, and $686 million in 1994. TAXES ON EARNINGS Income tax expense is based on pretax financial accounting income. Deferred tax assets and liabilities are recognized for the expected tax consequences of temporary differences between the tax bases of assets and liabilities and their reported amounts. NET EARNINGS PER SHARE Net earnings per share is computed using the weighted-average number of

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of HewlettPackard Company and its subsidiaries. All significant intercompany accounts and transactions have been eliminated. USE OF ESTIMATES The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, as well as revenues and expenses reported for the periods presented. The company regularly assesses these estimates and, while actual results may differ, management believes that the estimates are reasonable. REVENUE RECOGNITION Revenue from product sales is generally recognized at the time the product is shipped, with provisions established for price protection programs and for estimated product returns. Upon shipment, the company also provides for the estimated cost that may be incurred for product warranties and post-sales support. Service revenue is recognized over the contractual period or as services are rendered and accepted by the customer. ADVERTISING Advertising costs are expensed as incurred and amounted to $999 million in 1996, $830 million in 1995, and $686 million in 1994. TAXES ON EARNINGS Income tax expense is based on pretax financial accounting income. Deferred tax assets and liabilities are recognized for the expected tax consequences of temporary differences between the tax bases of assets and liabilities and their reported amounts. NET EARNINGS PER SHARE Net earnings per share is computed using the weighted-average number of common shares and common share equivalents outstanding during each period. Common share equivalents represent the dilutive effect of outstanding stock options. CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS The company has classified investments as cash equivalents if the original maturity of such investments is three months or less. Short-term investments are principally comprised of certificates of deposit, temporary money-market instruments and repurchase agreements and are stated at cost, which approximates market. INVENTORIES Inventories are valued at standard costs that approximate actual costs computed on a first-in, first-out basis, not in excess of market values. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are stated at cost. Additions, improvements and major renewals are capitalized. Maintenance, repairs and minor renewals are expensed as incurred. Depreciation is provided using accelerated methods, principally over the following useful lives: buildings and improvements, 15 to 40 years; machinery and equipment, 3 to 10 years. Depreciation of leasehold improvements is provided using the straight-line method over the life of the lease or the asset, whichever is shorter. LONG-TERM INVESTMENTS The company's investments are primarily comprised of debt securities which are held-to-maturity.

EMPLOYEE STOCK COMPENSATION The company accounts for its employee stock compensation plans using the intrinsic value method prescribed by Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees." In October 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 123 (SFAS 123), "Accounting for Stock-Based Compensation," which is effective for fiscal year 1997. Under SFAS 123 companies may elect, but are not required, to use a fair value methodology to recognize compensation expense for all stock-based awards. In fiscal 1997, the company will implement the disclosure-only provisions of SFAS 123.

EMPLOYEE STOCK COMPENSATION The company accounts for its employee stock compensation plans using the intrinsic value method prescribed by Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees." In October 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 123 (SFAS 123), "Accounting for Stock-Based Compensation," which is effective for fiscal year 1997. Under SFAS 123 companies may elect, but are not required, to use a fair value methodology to recognize compensation expense for all stock-based awards. In fiscal 1997, the company will implement the disclosure-only provisions of SFAS 123. FOREIGN CURRENCY TRANSLATION The company uses the U.S. dollar as its functional currency. Foreign currency assets and liabilities are translated into U.S. dollars at end-of-period exchange rates except for inventories, property, plant and equipment, other assets and deferred revenue, which are translated at historical exchange rates. Revenues and expenses are translated at average exchange rates in effect during each period, except for those expenses related to balance sheet amounts which are translated at historical exchange rates. Gains or losses from foreign currency translation are included in net earnings. The effect of foreign currency exchange rate fluctuations on cash and cash equivalents denominated in foreign currencies was not material. ACQUISITIONS The company acquired several companies during the last three years, which were not significant to its financial position or results of operations. During 1996, one acquisition was accounted for as a pooling of interests; however, prior period consolidated financial statements were not restated because the retroactive effect was not material. All other acquisitions were accounted for using the purchase method. Under the purchase method, the results of operations of acquired companies are included prospectively from the date of acquisition, and the acquisition cost is allocated to the acquirees' assets and liabilities based upon their fair market values at the date of the acquisition. At October 31, 1996, the net book value of goodwill associated with acquisitions was $288 million and is being amortized on a straight-line basis over 3 to 10 years. FINANCIAL INSTRUMENTS OFF-BALANCE-SHEET RISK The company enters into foreign exchange contracts to hedge against possible exposure from changes in foreign currency exchange rates. Such exposure arises from assets and liabilities that are denominated in currencies other than the U.S. dollar as well as firm foreign currency commitments. When foreign exchange contracts hedge balance sheet exposure, such effects are recognized when the exchange rate changes. When the company's foreign exchange contracts hedge operational exposure, the effects of movements in exchange rates on these instruments are recognized when the related revenues and expenses are recognized. Because the impact of movements in exchange rates on foreign exchange contracts offsets the related impact on the underlying items being hedged, these instruments do not subject the company to risk that would otherwise result from such changes. Foreign exchange contracts require the company to exchange foreign currencies for U.S. dollars and generally mature within six months. The company had foreign exchange contracts of $7.1 billion and $5.4 billion at October 31, 1996 and 1995, respectively. At October 31, 1996 and 1995, deferred gains and deferred losses on these contracts amounted to $66 million and $78 million, and $126 million and $82 million, respectively.

The company enters into interest rate swap agreements to manage its exposure to interest rate changes. The transactions generally involve the exchange of fixed and floating interest payment obligations without the exchange of the underlying principal amounts. Interest rate differentials under interest rate swap agreements are recognized over the life of the contracts as interest expense. The notional amounts and maturities of interest rate swap agreements match those of the underlying debt. At October 31, 1996 and 1995, off-balance-sheet exposures under interest rate swap agreements were not material. CONCENTRATIONS OF CREDIT RISK Financial instruments that potentially subject the company to significant concentrations of credit risk consist principally of cash, investments, trade accounts receivable and certain other off-balance-sheet financial instruments. The company maintains cash and cash equivalents, short- and long-term investments and certain other offbalance-sheet financial instruments with various financial institutions. These financial institutions are located in

The company enters into interest rate swap agreements to manage its exposure to interest rate changes. The transactions generally involve the exchange of fixed and floating interest payment obligations without the exchange of the underlying principal amounts. Interest rate differentials under interest rate swap agreements are recognized over the life of the contracts as interest expense. The notional amounts and maturities of interest rate swap agreements match those of the underlying debt. At October 31, 1996 and 1995, off-balance-sheet exposures under interest rate swap agreements were not material. CONCENTRATIONS OF CREDIT RISK Financial instruments that potentially subject the company to significant concentrations of credit risk consist principally of cash, investments, trade accounts receivable and certain other off-balance-sheet financial instruments. The company maintains cash and cash equivalents, short- and long-term investments and certain other offbalance-sheet financial instruments with various financial institutions. These financial institutions are located in many different geographies, and company policy is designed to limit exposure with any one institution. As part of its cash and risk management processes, the company performs periodic evaluations of the relative credit standing of the financial institutions. The company has not sustained material credit losses from these instruments. The company sells a significant portion of its products through third-party resellers and, as a result, maintains individually significant receivable balances with major distributors. If the financial condition and operations of these distributors deteriorate substantially, the company's operating results could be adversely affected. The ten largest distributor receivable balances collectively represent 13 percent of total accounts and notes receivable at both October 31, 1996 and 1995. Credit risk with respect to other trade accounts receivable is generally diversified due to the large number of entities comprising the company's customer base and their dispersion across many different industries and geographies. The company performs ongoing credit evaluations of its thirdparty resellers' and other customers' financial condition, utilizes flooring arrangements with third-party financing companies and requires collateral, such as letters of credit and bank guarantees, in certain circumstances. FAIR VALUE OF FINANCIAL INSTRUMENTS For certain of the company's financial instruments, including cash and cash equivalents, short-term investments, accounts and notes receivable, notes payable and short-term borrowings, accounts payable, and other accrued liabilities, the carrying amounts approximate fair value due to their short maturities. Long-term floating rate notes, long-term stock investments and certificates of deposit are carried at amounts that approximate fair value. The estimated fair value of long-term debt is primarily based on quoted market prices, as well as borrowing rates currently available to the company for bank loans with similar terms and maturities. This fair value, when adjusted for unrealized gains and losses on related interest rate swap agreements, approximates the carrying amount of long-term debt. The estimated fair value for foreign exchange contracts is primarily based on quoted market prices for the same or similar instruments, adjusted where necessary for maturity differences. At October 31, 1996 and 1995, the estimated fair value of foreign exchange contracts with carrying values of $(7) million and $(15) million, respectively, amounted to $(19) million and $44 million, respectively.

The estimated fair values may not be representative of actual values of the financial instruments that could have been realized as of year-end or that will be realized in the future. FINANCE RECEIVABLES AND EQUIPMENT ON OPERATING LEASES Finance receivables represent sales-type and direct-financing leases and installment sales resulting from the marketing of the company's and complementary third-party products. These receivables have terms from two to five years and are typically collateralized by a security interest in the underlying assets. The components of finance receivables, net, which are included in accounts and notes receivable and long-term investments and other assets at October 31, are:
In millions Gross finance receivables Unearned income 1996 ------$ 2,004 (224) ------1995 ------$ 1,723 (181) -------

The estimated fair values may not be representative of actual values of the financial instruments that could have been realized as of year-end or that will be realized in the future. FINANCE RECEIVABLES AND EQUIPMENT ON OPERATING LEASES Finance receivables represent sales-type and direct-financing leases and installment sales resulting from the marketing of the company's and complementary third-party products. These receivables have terms from two to five years and are typically collateralized by a security interest in the underlying assets. The components of finance receivables, net, which are included in accounts and notes receivable and long-term investments and other assets at October 31, are:
In millions Gross finance receivables Unearned income Finance receivables, net Less current portion Amounts due after one year, net 1996 ------$ 2,004 (224) ------1,780 (897) ------$ 883 ======= 1995 ------$ 1,723 (181) ------1,542 (791) ------$ 751 =======

Contractual maturities of the company's gross finance receivables at October 31, 1996 are $1,022 million in 1997, $527 million in 1998, $291 million in 1999, $116 million in 2000 and $48 million thereafter. Actual cash collections may differ, however, primarily due to customer early buy-outs and refinancings. The company also leases its products to customers under operating leases. Equipment on operating leases was $849 million and $573 million at October 31, 1996 and 1995, respectively, and is included in machinery and equipment. Accumulated depreciation on equipment on operating leases was $378 million and $286 million at October 31, 1996 and 1995, respectively. Minimum future rentals on noncancelable operating leases with original terms of one year or longer are $466 million in 1997, $259 million in 1998, $92 million in 1999, $17 million in 2000 and $14 million thereafter. TAXES ON EARNINGS The provision for income taxes is comprised of:
In millions U.S. federal taxes: Current Deferred Non-U.S. taxes: Current Deferred State taxes 1996 ------$ 614 (115) 1995 ------$ 642 (87) 1994 ----$ 511 (156) 441 -28 ----$ 824 =====

716 (169) 62 ------$ 1,108 =======

609 (15) 50 ------$ 1,199 =======

The significant components of deferred tax assets, which required no valuation allowance, and deferred tax liabilities included on the balance sheet at October 31 are:
1996 --------------------------Deferred Deferred tax tax assets liabilities ---------------$ 497 $ 13 1995 ------------------Deferred De tax assets liabi ---------$ 381

In millions Inventory

The significant components of deferred tax assets, which required no valuation allowance, and deferred tax liabilities included on the balance sheet at October 31 are:
1996 --------------------------Deferred Deferred tax tax assets liabilities ---------------$ 497 $ 13 142 8 251 --111 178 -272 -----$1,340 ====== 34 84 133 -----$ 383 ====== 1995 ------------------Deferred De tax assets liabi ---------$ 381 110 248 -130 -325 -----$1,194 ======

In millions Inventory Fixed assets Retiree medical benefits Other retirement benefits Employee benefits, other than retirement Leasing activities Other

Tax benefits of $123 million, $91 million and $41 million associated with the exercise of employee stock options were allocated to equity in 1996, 1995 and 1994, respectively. The differences between the U.S. federal statutory income tax rate and the company's effective rate are:
1996 ---35.0% 1.1 (6.9) 0.8 ---30.0% ==== 1995 ---35.0% 0.9 (5.0) 2.1 ---33.0% ====

U.S. federal statutory income tax rate State income taxes, net of federal tax benefit Lower rates in other jurisdictions, net Other, net

After allocating eliminations and corporate items, earnings before taxes are:
In millions U.S. operations including Puerto Rico Non-U.S 1996 -----$1,535 2,159 -----$3,694 ====== 1995 -----$1,548 2,084 -----$3,632 ====== 1994 -----$ 915 1,508 -----$2,423 ======

The company has not provided for U.S. federal income and foreign withholding taxes on $3.8 billion of non-U.S. subsidiaries' undistributed earnings as of October 31, 1996, because such earnings are intended to be reinvested indefinitely. If these earnings were distributed, foreign tax credits should become available under current law to reduce or eliminate the resulting U.S. income tax liability. Where excess cash has accumulated in the company's non-U.S. subsidiaries and it is advantageous for tax or foreign exchange reasons, subsidiary earnings are remitted.

As a result of certain employment and capital investment actions undertaken by the company, income from manufacturing activities in certain countries is subject to reduced tax rates, and in some cases is wholly exempt from taxes, for years through 2010. The income tax benefits attributable to the tax status of these subsidiaries are estimated to be $212 million, $168 million and $163 million for 1996, 1995 and 1994, respectively. The Internal Revenue Service (IRS) has completed its examination of the company's federal income tax returns filed through 1983. The IRS has not commenced its examination of returns for years subsequent to 1992. The

As a result of certain employment and capital investment actions undertaken by the company, income from manufacturing activities in certain countries is subject to reduced tax rates, and in some cases is wholly exempt from taxes, for years through 2010. The income tax benefits attributable to the tax status of these subsidiaries are estimated to be $212 million, $168 million and $163 million for 1996, 1995 and 1994, respectively. The Internal Revenue Service (IRS) has completed its examination of the company's federal income tax returns filed through 1983. The IRS has not commenced its examination of returns for years subsequent to 1992. The company believes that adequate accruals have been provided for all years. BORROWINGS Notes payable and short-term borrowings and the related average interest rates at October 31 are:
1996 ----------------------------Average interest rate ----------------------------$1,848 5.3% 200 7.5% 77 6.2% -------$2,125 ====== 1995 ----------------------------Average interest rate ----------------------------$2,785 5.8 315 6.6 114 3.5 -------$3,214 ======

In millions Commercial paper Notes payable to banks Other short-term borrowings

At October 31, 1996, the company had various borrowing arrangements in place with unused borrowing capacity totaling $4.6 billion. These credit arrangements are generally uncommitted and generally do not require commitment fees. Long-term debt and related maturities and interest rates at October 31 are:
In millions U.S. dollar notes due 1997-2017 at 5.25%-7.98% Deutschemark notes, due 2000-2002 at 4.75%-5.63% Yen notes, due 1999-2002 at 1.80%-5.00% British pound issue, due 1999 at 7.13% Other Less current portion Long-term debt 1996 ------$ 1,348 513 567 149 87 (85) ------$ 2,579 ======= 1995 ----$ 488 --149 65 (39) ----$ 663 =====

The company utilizes interest rate swaps to modify the interest expense on its long-term debt to achieve primarily U.S. LIBOR-based floating rates. The company also hedges currency exposure on its foreign-currency denominated long-term debt. The aggregate future repayments of long-term debt outstanding at October 31, 1996 are $85 million in 1997, $256 million in 1998, $1,245 million in 1999, $417 million in 2000, $246 million in 2001 and $415 million thereafter.

SHAREHOLDERS' EQUITY STOCK SPLIT The company made a 2-for-1 split of its $1 par value common stock in the form of a 100 percent distribution to shareholders of record as of June 21, 1996. As a result of the stock split, authorized, outstanding, and reserved common shares doubled and retained earnings was reduced by the par value of the additional common shares issued. The rights of the holders of these securities were not otherwise modified. All share and per share data and stockholders' equity balances have been restated for the effect of the stock split. EMPLOYEE STOCK PURCHASE PLAN Eligible company employees may generally contribute up to 10

SHAREHOLDERS' EQUITY STOCK SPLIT The company made a 2-for-1 split of its $1 par value common stock in the form of a 100 percent distribution to shareholders of record as of June 21, 1996. As a result of the stock split, authorized, outstanding, and reserved common shares doubled and retained earnings was reduced by the par value of the additional common shares issued. The rights of the holders of these securities were not otherwise modified. All share and per share data and stockholders' equity balances have been restated for the effect of the stock split. EMPLOYEE STOCK PURCHASE PLAN Eligible company employees may generally contribute up to 10 percent of their base compensation to the quarterly purchase of company stock under the Employee Stock Purchase Plan. Under this plan, employee contributions to purchase HP stock are partially matched with shares contributed by the company. At October 31, 1996, approximately 89,000 employees were eligible to participate and approximately 52,000 employees were participants in the plan. INCENTIVE COMPENSATION PLANS The company has four principal stock option plans, adopted in 1979, 1985, 1990 and 1995. All plans permit options granted to qualify as "Incentive Stock Options" under the Internal Revenue Code. The exercise price of a stock option is generally equal to the fair market value of the company's common stock on the date the option is granted. Under the 1990 and 1995 Incentive Stock Plans, however, the Compensation Committee, in certain cases, may choose to establish a discounted exercise price at no less than 75 percent of fair market value on the grant date. In 1996 and 1995, discounted options totaling 1,165,000 shares and 1,536,000 shares, respectively, were granted. Stock compensation expense related to the discounted options was not material. Options generally vest at a rate of 25 percent per year over a period of four years from the date of grant except for discounted options, which generally may not be exercised before the fifth anniversary of the option grant date, at which time such options become 100 percent vested. The plans also provide for the granting of stock appreciation rights with respect to options granted to officers. The company has not included stock appreciation rights with options granted to officers since October 31, 1991. The following table summarizes option activity during 1996:
Price per share --------$ 7-48 29-53 7-49 7-53 -----$ 7-53 ======

In thousands except price per share amounts

Options ------49,616 7,876 (7,214) (934) -----49,344 ======

Outstanding at October 31, 1995 Granted Exercised Cancelled Outstanding at October 31, 1996

At October 31, 1996, options to purchase 25,649,000 shares were exercisable at prices ranging from $7 to $47 per share. Shares available for option grants at October 31, 1996 and 1995 were 65,531,000 and 74,488,000, respectively. Approximately 49,000 employees were considered eligible to receive stock options in fiscal 1996. There were approximately 29,000 employees holding options under one or more of the option plans as of October 31, 1996. Under the 1985 Incentive Compensation Plan and the 1990 and 1995 Incentive Stock Plans, certain key employees may be granted cash or restricted stock awards. Cash and restricted stock awards are independent of option grants and are subject to restrictions considered appropriate by the company's Compensation Committee. The majority of the shares of restricted stock outstanding at October 31, 1996 are subject to forfeiture if employment terminates prior to five years from the date of grant. During that period, ownership of the shares cannot be transferred. Restricted stock has the same dividend and voting rights as other common stock and is considered to be currently issued and outstanding. The cost of the awards, determined to be the fair market value of the shares at the date of grant, is expensed ratably over the period the restrictions lapse. Such expense was not material in 1996, 1995 or 1994. At October 31, 1996 and 1995, the company had 3,926,000 and 3,062,000 shares, respectively, of restricted stock outstanding.

At October 31, 1996, options to purchase 25,649,000 shares were exercisable at prices ranging from $7 to $47 per share. Shares available for option grants at October 31, 1996 and 1995 were 65,531,000 and 74,488,000, respectively. Approximately 49,000 employees were considered eligible to receive stock options in fiscal 1996. There were approximately 29,000 employees holding options under one or more of the option plans as of October 31, 1996. Under the 1985 Incentive Compensation Plan and the 1990 and 1995 Incentive Stock Plans, certain key employees may be granted cash or restricted stock awards. Cash and restricted stock awards are independent of option grants and are subject to restrictions considered appropriate by the company's Compensation Committee. The majority of the shares of restricted stock outstanding at October 31, 1996 are subject to forfeiture if employment terminates prior to five years from the date of grant. During that period, ownership of the shares cannot be transferred. Restricted stock has the same dividend and voting rights as other common stock and is considered to be currently issued and outstanding. The cost of the awards, determined to be the fair market value of the shares at the date of grant, is expensed ratably over the period the restrictions lapse. Such expense was not material in 1996, 1995 or 1994. At October 31, 1996 and 1995, the company had 3,926,000 and 3,062,000 shares, respectively, of restricted stock outstanding. SHARES RESERVED The company has reserved shares for future issuance under the employee stock plans. At October 31, 1996 and 1995, 145,622,000 and 160,468,000 shares, respectively, were reserved. STOCK REPURCHASE PROGRAM Under the company's stock repurchase program, shares of HP common stock are purchased primarily to manage the dilution created by shares issued under the employee stock plans. In 1996, 1995 and 1994, 24,580,000, 20,790,000 and 16,112,000 shares were repurchased for an aggregate purchase price of $1,089 million, $686 million and $325 million, respectively. At October 31, 1996, HP had authorization for an aggregate of $230 million in future repurchases under this program based on certain price and volume criteria. During November 1996, the Board of Directors authorized an additional $1 billion in stock repurchases. RETIREMENT PLANS AND RETIREE MEDICAL BENEFITS PENSION AND DEFERRED PROFIT-SHARING PLANS Substantially all of the company's employees are covered under various pension and deferred profit-sharing retirement plans. Worldwide pension and deferred profit-sharing costs were $281 million in 1996, $233 million in 1995, and $196 million in 1994. U.S. employees who meet certain minimum eligibility criteria are provided retirement benefits under the HewlettPackard Company Retirement Plan (Retirement Plan). Defined benefits are based upon an employee's highest average pay rate and length of service. For eligible service through October 31, 1993, the benefit payable under the Retirement Plan is reduced by any amounts due to the employee under the company's frozen defined contribution Deferred Profit-Sharing Plan (DPS), which has since been closed to new participants.

The combined status of the Retirement Plan and DPS follows:
In millions Fair value of plan assets Retirement benefit obligation 1996 -----$2,744 $2,799 -----1995 -----$2,400 $2,413 ------

Employees outside the U.S. generally receive retirement benefits under various defined benefit and defined contribution plans based upon factors such as years of service and employee compensation levels. Eligibility is generally determined in accordance with local statutory requirements. RETIREE MEDICAL PLAN In addition to providing pension benefits, the company also sponsors a medical plan that provides defined benefits to U.S. retired employees. Substantially all of the company's current U.S. employees could become eligible for these benefits and the existing benefit obligation relates primarily to those employees. Once participating in the plan, retirees may choose from managed-care and indemnity options, with

The combined status of the Retirement Plan and DPS follows:
In millions Fair value of plan assets Retirement benefit obligation 1996 -----$2,744 $2,799 -----1995 -----$2,400 $2,413 ------

Employees outside the U.S. generally receive retirement benefits under various defined benefit and defined contribution plans based upon factors such as years of service and employee compensation levels. Eligibility is generally determined in accordance with local statutory requirements. RETIREE MEDICAL PLAN In addition to providing pension benefits, the company also sponsors a medical plan that provides defined benefits to U.S. retired employees. Substantially all of the company's current U.S. employees could become eligible for these benefits and the existing benefit obligation relates primarily to those employees. Once participating in the plan, retirees may choose from managed-care and indemnity options, with their contributions dependent on options chosen and length of service. 401(K) PLAN U.S. employees of the company may participate in the Tax Saving Capital Accumulation Plan (TAXCAP), which was established as a supplemental retirement program. Under the TAXCAP program, the company matches contributions by employees up to a maximum of 4 percent of an employee's annual compensation. The maximum combined contribution to the Employee Stock Purchase Plan and TAXCAP is 17 percent of an employee's annual base compensation subject to certain regulatory and plan limitations. At October 31, 1996, 52,000 employees were participating in TAXCAP out of 58,000 who were eligible. FUNDED STATUS The funded status of the defined benefit and retiree medical plans is:
U.S. defined benefit plan ------------------------1996 1995 --------$ 485 $ 358 (540) (371) --------(55) (19) 48 (31) ----$ (57) ===== $(232) $(232) ----(13) (8) 52 (39) ----$ (8) ===== $(157) $(157) ----Non-U.S. defined benefit plans -----------------------------1996 1995 ------------$ 1,223 $ 1,116 (1,246) (1,182) ------------(23) 50 27 -------$ 54 ======= $ (893) $ (944) ------(66) 95 32 -------$ 61 ======= $ (812) $ (859) ------U.S --$ -

In millions Fair value of plan assets Benefit obligation Benefit obligation in excess of plan assets Unrecognized net experience (gain) loss Unrecognized prior service cost (benefit) related to plan changes Unrecognized net transition asset* Prepaid (accrued) costs Vested benefit obligation Accumulated benefit obligation

$ =

*Amortized over 15 years for the U.S. plan and over periods ranging from 12 to 20 years for non-U.S. plans.

Plan assets consist primarily of listed stocks and bonds for the U.S. plans and listed stocks, bonds and cash surrender value of life insurance policies for the non-U.S. plans. It is the company's practice to fund these costs to the extent they are tax-deductible. NET PERIODIC COST The company's net pension and retiree medical costs are comprised of:
Pension ----------------------------------------------------U.S. plans Non-U.S. plans ----------------------------------------------1996 1995 1994 1996 1995 1994

In millions

U.S. retiree m -------------1996 1995

Plan assets consist primarily of listed stocks and bonds for the U.S. plans and listed stocks, bonds and cash surrender value of life insurance policies for the non-U.S. plans. It is the company's practice to fund these costs to the extent they are tax-deductible. NET PERIODIC COST The company's net pension and retiree medical costs are comprised of:
Pension ----------------------------------------------------U.S. plans Non-U.S. plans ----------------------------------------------1996 1995 1994 1996 1995 1994 ----------------------$ 137 27 (61) 25 ----$ 128 ===== $ 108 15 (59) 25 ----$ 89 ===== $ 112 6 (7) (29) ----$ 82 ===== $ 86 $ 88 72 (26) (52) ---$ 82 ==== $ 73 58 (44) (16) ---$ 71 ====

In millions Service cost --benefits earned during the period Interest cost on benefit obligation Actual return on plan assets Net amortization and deferral Net plan cost

U.S. retiree m -------------1996 1995 ------$ 23 32 (55) 8 ---$ 8 ==== $ 21 28 (52 18 ---$ 15 ====

74 (120) 36 ----$ 76 =====

ASSUMPTIONS The assumptions used to measure the benefit obligations and to compute the expected longterm return on assets for the company's defined benefit and retiree medical plans are:
1996 ------U.S. defined benefit plan: Discount rate Average increase in compensation levels Expected long-term return on assets Non-U.S. defined benefit plans: Discount rate Average increase in compensation levels Expected long-term return on assets U.S. retiree medical plan: Discount rate Expected long-term return on assets Current medical cost trend rate Ultimate medical cost trend rate Medical cost trend rate decreases to ultimate rate in year Effect of a 1% increase in the medical cost trend rate (millions): Increase in benefit obligation Increase in the annual retiree medical cost 7.5% 5.5% 9.0% 4.0 to 8.5% 3.5 to 6.5% 5.8 to 10.0% 7.5% 9.0% 10.0% 6.0% 2007 1995 ------7.5% 5.5% 9.0% 4.0 to 8.5% 3.5 to 6.5% 5.8 to 10.0% 7.5% 9.0% 10.4% 6.0% 2007 1994 ------8.0% 5.5% 9.0% 5.0 to 8.8% 4.1 to 7.0% 7.0 to 9.5% 8.0% 9.0% 10.8% 6.0% 2007

$ 90 $ 13 -------

$ 87 $ 12 -------

$ 66 $ 13 -------

COMMITMENTS The company leases certain real and personal property under non-cancelable operating leases. Future minimum lease payments at October 31, 1996 are $182 million for 1997, $151 million for 1998, $111 million for 1999, $87 million for 2000, $78 million for 2001 and $287 million thereafter. Certain leases require the company to pay property taxes, insurance and routine maintenance and include escalation clauses. Rent expense was $353 million in 1996, $302 million in 1995 and $274 million in 1994. CONTINGENCIES AND FACTORS THAT COULD AFFECT FUTURE RESULTS CONTINGENCIES The company is involved in lawsuits, claims, investigations and proceedings, including patent, commercial, and environmental matters, which arise in the ordinary course of business. There are no such matters pending that the company expects to be material in relation to its business, financial condition, or results of operations.

COMMITMENTS The company leases certain real and personal property under non-cancelable operating leases. Future minimum lease payments at October 31, 1996 are $182 million for 1997, $151 million for 1998, $111 million for 1999, $87 million for 2000, $78 million for 2001 and $287 million thereafter. Certain leases require the company to pay property taxes, insurance and routine maintenance and include escalation clauses. Rent expense was $353 million in 1996, $302 million in 1995 and $274 million in 1994. CONTINGENCIES AND FACTORS THAT COULD AFFECT FUTURE RESULTS CONTINGENCIES The company is involved in lawsuits, claims, investigations and proceedings, including patent, commercial, and environmental matters, which arise in the ordinary course of business. There are no such matters pending that the company expects to be material in relation to its business, financial condition, or results of operations. FACTORS THAT COULD AFFECT FUTURE RESULTS A substantial portion of the company's revenues each year are generated from the development, manufacture and rapid release to market of high technology products newly introduced during the year. In the extremely competitive industry environment in which the company operates, such product generation, manufacturing and marketing processes are uncertain and complex, requiring accurate prediction of market trends and demand as well as successful management of various manufacturing risks inherent in such products. Additionally, the company's production strategy relies on certain key suppliers' ability to deliver completed products, subassemblies, and component parts in time to meet critical manufacturing and distribution schedules, and its sales strategy on the ability of certain third-party resellers to support sales channels to the mass market effectively. In light of these dependencies, it is reasonably possible that failure to successfully manage a significant product introduction, failure of certain key suppliers to deliver as needed, or failure of certain resellers to remain customers and channel partners could have a severe near-term impact on the company's order growth, revenue growth, or results of operations.

GEOGRAPHIC AREA INFORMATION The company, operating in a single industry segment, designs, manufactures and services products and systems for measurement, computation and communications. Net revenue, earnings from operations and identifiable assets, classified by the major geographic areas in which the company operates, are:
In millions NET REVENUE United States: Unaffiliated customer sales Interarea transfers 1996 -------1995 -------1994 --------

$ 17,041 7,263 -------24,304 -------13,252 1,643 -------14,895 -------8,127 5,470 -------13,597 -------(14,376) -------$ 38,420 ========

$ 13,963 5,728 -------19,691 -------11,142 1,432 -------12,574 -------6,414 3,783 -------10,197 -------(10,943) -------$ 31,519 ========

$ 11,469 4,653 -------16,122 -------8,423 1,058 -------9,481 -------5,099 2,765 -------7,864 -------(8,476) -------$ 24,991 ========

Europe: Unaffiliated customer sales Interarea transfers

Japan, Other Asia Pacific,Canada, Latin America: Unaffiliated customer sales Interarea transfers

Eliminations

GEOGRAPHIC AREA INFORMATION The company, operating in a single industry segment, designs, manufactures and services products and systems for measurement, computation and communications. Net revenue, earnings from operations and identifiable assets, classified by the major geographic areas in which the company operates, are:
In millions NET REVENUE United States: Unaffiliated customer sales Interarea transfers 1996 -------1995 -------1994 --------

$ 17,041 7,263 -------24,304 -------13,252 1,643 -------14,895 -------8,127 5,470 -------13,597 -------(14,376) -------$ 38,420 ======== 2,470 769 1,173 (686) -------$ 3,726 ======== $ 14,321 7,991 7,200 (1,813) -------$ 27,699 ======== $

$ 13,963 5,728 -------19,691 -------11,142 1,432 -------12,574 -------6,414 3,783 -------10,197 -------(10,943) -------$ 31,519 ======== $ 2,259 930 1,240 (861) -------$ 3,568 ======== $ 12,347 7,168 5,854 (942) -------$ 24,427 ========

$ 11,469 4,653 -------16,122 -------8,423 1,058 -------9,481 -------5,099 2,765 -------7,864 -------(8,476) -------$ 24,991 ======== 1,472 660 824 (407) -------$ 2,549 ======== 9,848 4,991 4,052 676 -------$ 19,567 ======== $ $

Europe: Unaffiliated customer sales Interarea transfers

Japan, Other Asia Pacific,Canada, Latin America: Unaffiliated customer sales Interarea transfers

Eliminations

EARNINGS FROM OPERATIONS United States Europe Japan, Other Asia Pacific, Canada, Latin America Eliminations and corporate

IDENTIFIABLE ASSETS United States Europe Japan, Other Asia Pacific, Canada, Latin America Eliminations and corporate

Net revenue from sales to unaffiliated customers is based on the location of the customer. Interarea transfers are sales among HP affiliates principally made at market price, less an allowance primarily for subsequent manufacturing and/or marketing costs. Earnings from operations and identifiable assets are classified based on the location of the company's facilities. Identifiable corporate assets, which are net of eliminations, comprise primarily cash and cash equivalents, property, plant and equipment, and other assets, and aggregate $4,810 million in 1996, $4,343 million in 1995 and $4,594 million in 1994.

STATEMENT OF MANAGEMENT RESPONSIBILITY The company's management is responsible for the preparation, integrity and objectivity of the consolidated financial statements and other financial information presented in this report. The accompanying consolidated financial statements have been prepared in conformity with generally accepted accounting principles and reflect the effects of certain estimates and judgments made by management.

STATEMENT OF MANAGEMENT RESPONSIBILITY The company's management is responsible for the preparation, integrity and objectivity of the consolidated financial statements and other financial information presented in this report. The accompanying consolidated financial statements have been prepared in conformity with generally accepted accounting principles and reflect the effects of certain estimates and judgments made by management. The company's management maintains an effective system of internal control that is designed to provide reasonable assurance that assets are safeguarded and transactions are properly recorded and executed in accordance with management's authorization. The system is continuously monitored by direct management review and by internal auditors who conduct an extensive program of audits throughout the company. The company selects and trains qualified people who are provided with and expected to adhere to the company's standards of business conduct. These standards, which set forth the highest principles of business ethics and conduct, are a key element of the company's control system. The company's consolidated financial statements have been audited by Price Waterhouse LLP, independent accountants. Their audits were conducted in accordance with generally accepted auditing standards, and included a review of financial controls and tests of accounting records and procedures as they considered necessary in the circumstances. The Audit Committee of the Board of Directors, which consists of outside directors, meets regularly with management, the internal auditors and the independent accountants to review accounting, reporting, auditing and internal control matters. The committee has direct and private access to both internal and external auditors.
/s/ Lew Platt - ----------------------------Lew Platt Chairman of the Board, President and Chief Executive Officer /s/ Robert Wayman --------------------------Robert Wayman Executive Vice President, Finance and Administration Chief Financial Officer

REPORT OF INDEPENDENT ACCOUNTANTS TO THE SHAREHOLDERS AND BOARD OF DIRECTORS OF HEWLETT-PACKARD COMPANY In our opinion, the accompanying consolidated balance sheet and the related consolidated statements of earnings, cash flows and shareholders' equity present fairly, in all material respects, the financial position of HewlettPackard Company and its subsidiaries at October 31, 1996 and 1995, and the results of their operations and their cash flows for each of the three years in the period ended October 31, 1996, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above.
/s/ Price Waterhouse LLP

San Jose, California November 18, 1996

ORDERS AND NET REVENUE BY GROUPINGS OF SIMILAR PRODUCTS AND SERVICES Unaudited
For the years ended October 31 In millions ORDERS Computer products, service and support Electronic test and measurement instrumentation, systems and service Medical electronic equipment and service Chemical analysis and service Electronic components

1996 ------$31,828 3,912 1,423 895 831 ------$38,889 ======= $31,430 3,798 1,416 858 918 ------$38,420 =======

1995 ------$25,980 3,499 1,385 855 966 ------$32,685 ======= $25,269 3,288 1,300 806 856 ------$31,519 =======

1994 ------$19,882 2,759 1,170 777 762 ------$25,350 ======= $19,632 2,722 1,141 754 742 ------$24,991 =======

NET REVENUE Computer products, service and support Electronic test and measurement instrumentation, systems and service Medical electronic equipment and service Chemical analysis and service Electronic components

The table above provides supplemental information showing orders and net revenue by groupings of similar products and services. In fiscal 1996, the company changed its order-reporting policies for its support businesses to report orders when received instead of as services are provided. Fiscal 1995 orders have been restated to reflect this change, which did not have a material impact on order growth rates. The groupings are as follows: COMPUTER PRODUCTS, SERVICE AND SUPPORT Computer equipment and systems (hardware and software), networking products, desktop and large-format printers and scanners; extended-storage products; terminals and handheld calculators; consulting and integration services; support and maintenance services; and parts and supplies. ELECTRONIC TEST AND MEASUREMENT INSTRUMENTATION, SYSTEMS AND SERVICE Instruments and systems used to design, synchronize and produce electronics; instruments and systems that test, synchronize and extract data from communications networks; digital communications products; and consulting services. MEDICAL ELECTRONIC EQUIPMENT AND SERVICE Clinical measurement instrumentation and information systems used for patient monitoring, diagnostic cardiology and ultrasound imaging; support, systemsintegration and equipment-maintenance services; and medical supplies. CHEMICAL ANALYSIS AND SERVICE Gas and liquid chromatographs, mass spectrometers and spectrophotometers used to analyze chemical compounds; laboratory data and information management systems; support and maintenance services; and consumables and supplies. ELECTRONIC COMPONENTS Microwave semiconductor and optoelectronic devices.

QUARTERLY SUMMARY Unaudited
For the three months ended In millions except per share amounts 1996 U.S. orders International orders January 31 ---------$ 3,923 6,179 April 30 -------$ 4,672 5,438 July 31 ------$3,888 4,784

QUARTERLY SUMMARY Unaudited
For the three months ended In millions except per share amounts 1996 U.S. orders International orders Total orders Net revenue Cost of products sold and services Earnings from operations Net earnings Per share amounts, restated for 1996 stock split: Net earnings Cash dividends Range of stock prices January 31 ---------$ 3,923 6,179 ------$10,102 ------$ 9,288 $ 5,988 $ 1,195 $ 790 April 30 -------$ 4,672 5,438 ------$10,110 ------$ 9,880 $ 6,498 $ 1,041 $ 723 July 31 ------$3,888 4,784 -----$8,672 -----$9,105 $6,194 $ 611 $ 425

$ .75 $ .10 $37 7/8-47 1/2 ============

.69 .10 $43 1/8-55 =========

$ $

$ .40 $ .12 $38 5/8-56 7/8 ============

1995 U.S. orders International orders Total orders Net revenue Cost of products sold and services Earnings from operations Net earnings Per share amounts, restated for 1996 stock split: Net earnings Cash dividends Range of stock prices

$ 3,167 4,668 ------$ 7,835 ------$ 7,304 $ 4,547 $ 932 $ 602

$ 3,523 4,609 ------$ 8,132 ------$ 7,428 $ 4,654 $ 875 $ 577

$3,733 4,317 -----$8,050 -----$7,739 $4,907 $ 824 $ 576

$ .57 $ .075 $23-26 5/8 ============

.55 .075 $25 1/4-33 =========

$ $

$ .55 $ .10 $32 1/8-41 3/4 ============

Graphs A bar chart entitled "Net Earnings Per Share (In dollars)" at the top right of page 54 of the Annual Report shows that for the fiscal quarters in the years 1995 and 1996 (shown on the x-axis) the Company had net earnings per share (shown on the y-axis) in the respective amounts provided in the table entitled "Quarterly Summary (Unaudited)" on page 54 of the Annual Report. In addition, a note to the bar chart states that these amounts have been restated for the effect of a 2-for-1 stock split in 1996. A bar chart entitled "Range of Common Stock Prices (In dollars per share)" at the bottom right of page 54 of the Annual Report shows that for the fiscal quarters in the years 1995 and 1996 (shown on the x-axis) the range of stock prices (shown on the y-axis) was in the respective amounts provided in the table entitled "Quarterly Summary (Unaudited)" on page 54 of the Annual Report. In addition, a note to the bar chart states that these amounts have been restated for the effect of a 2-for-1 stock split in 1996.

EXHIBIT 21 SUBSIDIARIES AND AFFILIATES OF HEWLETT-PACKARD COMPANY

EXHIBIT 21 SUBSIDIARIES AND AFFILIATES OF HEWLETT-PACKARD COMPANY Organized Under Laws of DOMESTIC SUBSIDIARIES OF HEWLETT-PACKARD COMPANY
Hewlett-Packard Chesapeake Inc. Hewlett-Packard Delaware, Inc. Hewlett-Packard Delaware Capital, Inc. Hewlett-Packard Delaware Funding, Inc. Hewlett-Packard Delaware Holding, Inc. Hewlett-Packard Delaware Investment, Inc. Hewlett-Packard Finance Company Hewlett-Packard Global Trading, Inc. Hewlett-Packard Hellas Hewlett-Packard Inter-Americas Hewlett-Packard Laboratories Japan, Inc. Hewlett-Packard Little Falls, Inc. Hewlett-Packard Pipeline Company Hewlett-Packard World Trade, Inc. Apollo World Trade, Inc. Convex Computer Corporation ElseWare Corporation The Tall Tree Insurance Company Versatest, Inc. DOMESTIC SUBSIDIARY OF HEWLETT-PACKARD CHESAPEAKE INC. Hewlett-Packard Puerto Rico California Delaware Delaware Delaware Delaware Delaware Delaware California California California California Delaware Delaware Colorado Delaware Delaware Delaware Washington Vermont California

DOMESTIC SUBSIDIARY OF HEWLETT-PACKARD LITTLE FALLS, INC.
Fleet Systems, Inc. California

DOMESTIC SUBSIDIARY OF HEWLETT-PACKARD WORLD TRADE, INC. Hewlett-Packard Export Trade Co. California

DOMESTIC SUBSIDIARIES OF CONVEX COMPUTER CORPORATION
Convex Computer (China) Inc. Convex International, Inc. Delaware Delaware

1

FOREIGN SUBSIDIARIES OF HEWLETT-PACKARD COMPANY
China Hewlett-Packard Company, Ltd. Grupo Hewlett-Packard Latin America S.A. de C.V. Hewlett-Packard Asia Pacific Ltd. Hewlett-Packard Australia Ltd. Hewlett-Packard Bilgisayar Ve Olcum Sistemleri Anonim Sirketi Hewlett-Packard Hong Kong Ltd. Hewlett-Packard Korea Ltd. Hewlett-Packard Medical Products (Qingdao) Ltd. PRC Mexico Hong Kong Australia Turkey Hong Kong Korea PRC

FOREIGN SUBSIDIARIES OF HEWLETT-PACKARD COMPANY
China Hewlett-Packard Company, Ltd. Grupo Hewlett-Packard Latin America S.A. de C.V. Hewlett-Packard Asia Pacific Ltd. Hewlett-Packard Australia Ltd. Hewlett-Packard Bilgisayar Ve Olcum Sistemleri Anonim Sirketi Hewlett-Packard Hong Kong Ltd. Hewlett-Packard Korea Ltd. Hewlett-Packard Medical Products (Qingdao) Ltd. Hewlett-Packard Penang Sdn. Bhd. Hewlett-Packard Portugal-Sistemas De Informatica E De Medida S.A. Hewlett-Packard Sales (Malaysia) Snd. Bhd. Hewlett-Packard Taiwan, Ltd. Edisa Hewlett-Packard S.A. EEsof K.K. EEsof Pte. Ltd. P.T. Hewlett-Packard Berca Servisindo FOREIGN SUBSIDIARIES OF CONVEX COMPUTER CORPORATION Convex Convex Convex Convex Convex Convex Convex Convex Convex Computer Computer Computer S.p.A. Computer Computer Computer Computer Computer Australia Pty Ltd. Barbados Ltd. Canada Ltd. Japan K.K. Pte. Ltd. AG B.V. Ltd. Australia Barbados Canada Italy Japan Singapore Switzerland The Netherlands U.K. PRC Mexico Hong Kong Australia Turkey Hong Kong Korea PRC Malaysia Portugal Malaysia ROC Brazil Japan Singapore Indonesia

FOREIGN SUBSIDIARIES OF GRUPO HEWLETT-PACKARD LATIN AMERICA S.A. DE C.V.
Arrendadora Hewlett-Packard S.A. de C.V. Hewlett-Packard de Mexico S.A. de C.V. FOREIGN SUBSIDIARY OF HEWLETT-PACKARD ASIA PACIFIC LTD. Hewlett-Packard Australia Finance Ltd. FOREIGN SUBSIDIARIES OF HEWLETT-PACKARD AUSTRALIA LTD. Hewlett-Packard New Zealand Ltd. Telstra Hewlett-Packard (R&D) Pty. Inc. 2 New Zealand Australia Australia Mexico Mexico

FOREIGN SUBSIDIARIES OF HEWLETT-PACKARD DELAWARE, INC. Hewlett-Packard Hewlett-Packard Hewlett-Packard Hewlett-Packard Hewlett-Packard Chile, S.A. de Venezuela, C.A. do Brasil, S.A. Malaysia Technology, Sdn. Bhd. (Thailand) Ltd. Chile Venezuela Brazil Malaysia Thailand

FOREIGN SUBSIDIARY OF HEWLETT-PACKARD DELAWARE HOLDING, INC.
Hewlett-Packard (India) Software Operation Pte. Ltd. India

FOREIGN SUBSIDIARY OF EDISA HEWLETT-PACKARD S.A. HP Computadores Brazil

FOREIGN SUBSIDIARIES OF HEWLETT-PACKARD DELAWARE, INC. Hewlett-Packard Hewlett-Packard Hewlett-Packard Hewlett-Packard Hewlett-Packard Chile, S.A. de Venezuela, C.A. do Brasil, S.A. Malaysia Technology, Sdn. Bhd. (Thailand) Ltd. Chile Venezuela Brazil Malaysia Thailand

FOREIGN SUBSIDIARY OF HEWLETT-PACKARD DELAWARE HOLDING, INC.
Hewlett-Packard (India) Software Operation Pte. Ltd. India

FOREIGN SUBSIDIARY OF EDISA HEWLETT-PACKARD S.A. HP Computadores Brazil

FOREIGN SUBSIDIARIES OF HEWLETT-PACKARD HOLDING GMBH
Hewlett-Packard GmbH CoCreate Software GmbH IDACOM Electronics GmbH Leasametric GmbH Germany Germany Germany Germany

FOREIGN SUBSIDIARIES OF COCREATE SOFTWARE GMBH
CoCreate Software, Inc. CoCreate Software Ltd. California U.K.

FOREIGN SUBSIDIARIES OF HEWLETT-PACKARD EUROPE B.V. Hewlett-Packard Hewlett-Packard Hewlett-Packard Hewlett-Packard Hewlett-Packard Hewlett-Packard Hewlett-Packard Hewlett-Packard Hewlett-Packard Hewlett-Packard Hewlett-Packard Hewlett-Packard Hewlett-Packard Belgium S.A./N.V. (Canada) Ltd. Caribe B.V. (China) Investment Co., Ltd. Colombia Limitada Coordination Center SC Far East Pte. Ltd. Holding GmbH Holding B.V. Holdings (M) Sdn. Bhd. India Ltd. Ireland Ltd. Ireland (Holdings) Ltd. Belgium Canada Netherlands PRC Columbia Belgium Singapore Germany Netherlands Malaysia India Ireland Ireland

3

FOREIGN SUBSIDIARIES OF HEWLETT-PACKARD EUROPE B.V. (Continued)
Hewlett-Packard Hewlett-Packard Hewlett-Packard Hewlett-Packard Hewlett-Packard Hewlett-Packard Hewlett-Packard Hewlett-Packard Hewlett-Packard Technologies et Israel Science Center Ltd. Italiana S.p.A. Japan, Ltd. Ltd. Netherland B.V. Philippines S.A. Singapore (Sales) Pte. Ltd. Vietnam, Ltd. Participations S.A. Israel Italy Japan U.K. Netherlands Philippines Switzerland Singapore Vietnam France

FOREIGN SUBSIDIARIES OF HEWLETT-PACKARD EUROPE B.V. (Continued)
Hewlett-Packard Hewlett-Packard Hewlett-Packard Hewlett-Packard Hewlett-Packard Hewlett-Packard Hewlett-Packard Hewlett-Packard Hewlett-Packard Technologies et Israel Science Center Ltd. Italiana S.p.A. Japan, Ltd. Ltd. Netherland B.V. Philippines S.A. Singapore (Sales) Pte. Ltd. Vietnam, Ltd. Participations S.A. Israel Italy Japan U.K. Netherlands Philippines Switzerland Singapore Vietnam France

FOREIGN SUBSIDIARIES OF HEWLETT-PACKARD (CHINA) INVESTMENT CO., LTD.
Hewlett-Packard Computer Products (Shanghai) Co., Ltd. Hewlett-Packard Shanghai Analytical Products Co. Ltd. PRC PRC

FOREIGN SUBSIDIARY OF HEWLETT-PACKARD HOLDINGS (M) SDN. BHD. Hewlett-Packard Storage Products (M) Sdn. Bhd. Malaysia

FOREIGN SUBSIDIARIES OF HEWLETT-PACKARD IRELAND (HOLDINGS) LTD.
Hewlett-Packard (Manufacturing) Ltd. Hewlett-Packard Europe Finance Ltd. Ireland Ireland

FOREIGN SUBSIDIARY OF HEWLETT-PACKARD ITALIANA S.P.A. Hewlett-Packard Servizi Finanziari S.p.A. Italy

FOREIGN SUBSIDIARY OF HEWLETT-PACKARD JAPAN, LTD.
SYC Ltd. Japan

FOREIGN SUBSIDIARIES OF HEWLETT-PACKARD LTD. Hewlett-Packard Finance Ltd. Hewlett-Packard Product Leasing Ltd. Apollo Computer (UK) Ltd. BT&D Technologies Ltd. U.K. U.K. U.K. U.K.

4

FOREIGN SUBSIDIARIES OF HEWLETT-PACKARD S.A.
Hewlett-Packard Hewlett-Packard Hewlett-Packard Hewlett-Packard Hewlett-Packard Hewlett-Packard Hewlett-Packard Hewlett-Packard Hewlett-Packard Hewlett-Packard Hewlett-Packard Hewlett-Packard Argentina S.A. A/S Ges.m.b.H Espanola, S.A. (Malaysia) Sdn. Bhd. Norge AS OY (Schweiz) AG Singapore Pte. Ltd. Sverige AB Technical B.V. Trading S.A. Argentina Denmark Austria Spain Malaysia Norway Finland Switzerland Singapore Sweden Netherlands Switzerland

FOREIGN SUBSIDIARIES OF HEWLETT-PACKARD S.A.
Hewlett-Packard Hewlett-Packard Hewlett-Packard Hewlett-Packard Hewlett-Packard Hewlett-Packard Hewlett-Packard Hewlett-Packard Hewlett-Packard Hewlett-Packard Hewlett-Packard Hewlett-Packard Argentina S.A. A/S Ges.m.b.H Espanola, S.A. (Malaysia) Sdn. Bhd. Norge AS OY (Schweiz) AG Singapore Pte. Ltd. Sverige AB Technical B.V. Trading S.A. Argentina Denmark Austria Spain Malaysia Norway Finland Switzerland Singapore Sweden Netherlands Switzerland

FOREIGN SUBSIDIARIES OF HEWLETT-PACKARD SINGAPORE PTE. LTD.
Hewlett-Packard Investment Ltd. Geneva Investments N.V. W.W. Investment Holding Pte. Ltd. FOREIGN SUBSIDIARY OF HEWLETT-PACKARD INVESTMENT LTD. Banque de Savoie S.A. FOREIGN SUBSIDIARY OF W.W. INVESTMENT HOLDING PTE. LTD. W.W. Real Estate and Development Pte. Ltd. Singapore France Liberia Netherlands Antilles Singapore

FOREIGN SUBSIDIARIES OF W.W. REAL ESTATE AND DEVELOPMENT PTE. LTD. W-Wide Offshore Ventures Pte. Ltd. Singapore CB Pierre France FOREIGN SUBSIDIARIES OF HEWLETT-PACKARD WORLD TRADE, INC.
Hewlett-Packard AO Hewlett-Packard Europe B.V. Hewlett-Packard International Sales Corporation B.V. Hewlett-Packard Magyarorszag Kft. Hewlett-Packard Polska spol.z.o.o. Hewlett-Packard RE Ltd. Hewlett-Packard s.r.o. P.T. Hewlett-Packard Finance Indonesia Yokogawa Analytical Systems, Inc. 5 Russia Netherlands Netherlands Hungary Poland Ireland Czech Republic Indonesia Japan

FOREIGN SUBSIDIARY OF LEASAMETRIC GmbH Leasametric S.A. France

FOREIGN SUBSIDIARIES OF TECHNOLOGIES et PARTICIPATIONS S.A.
Hewlett-Packard France Technologies et Participations Immobilieres FOREIGN SUBSIDIARY OF HEWLETT-PACKARD FRANCE Hewlett-Packard France Finance France France France

FOREIGN SUBSIDIARY OF LEASAMETRIC GmbH Leasametric S.A. France

FOREIGN SUBSIDIARIES OF TECHNOLOGIES et PARTICIPATIONS S.A.
Hewlett-Packard France Technologies et Participations Immobilieres FOREIGN SUBSIDIARY OF HEWLETT-PACKARD FRANCE Hewlett-Packard France Finance France France France

6

EXHIBIT 23 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the following Registration Statements on Form S-8 of our report dated November 18, 1996 which appears on page 52 of the 1996 Annual Report to Shareholders of Hewlett-Packard Company which is incorporated in this Annual Report on Form 10-K. Registration No. 2-66780 through Post-Effective Amendment No. 6 Registration No. 2-90239 Registration No. 2-92331 through Post-Effective Amendment No. 3 Registration No. 2-96361 through Post-Effective Amendment No. 1 Registration No. 33-30769 Registration No. 33-31496 Registration No. 33-31500 Registration No. 33-38579 Registration No. 33-50699 Registration No. 33-52291 Registration No. 33-58447 Registration No. 33-65179
/s/ Price Waterhouse LLP - -----------------------PRICE WATERHOUSE LLP San Jose, California January 24, 1997

ARTICLE 5 This schedule contains summary financial information extracted from the consolidated balance sheer and the consolidated

EXHIBIT 23 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the following Registration Statements on Form S-8 of our report dated November 18, 1996 which appears on page 52 of the 1996 Annual Report to Shareholders of Hewlett-Packard Company which is incorporated in this Annual Report on Form 10-K. Registration No. 2-66780 through Post-Effective Amendment No. 6 Registration No. 2-90239 Registration No. 2-92331 through Post-Effective Amendment No. 3 Registration No. 2-96361 through Post-Effective Amendment No. 1 Registration No. 33-30769 Registration No. 33-31496 Registration No. 33-31500 Registration No. 33-38579 Registration No. 33-50699 Registration No. 33-52291 Registration No. 33-58447 Registration No. 33-65179
/s/ Price Waterhouse LLP - -----------------------PRICE WATERHOUSE LLP San Jose, California January 24, 1997

ARTICLE 5 This schedule contains summary financial information extracted from the consolidated balance sheer and the consolidated statement of earnings and is qualified in its entirety by reference to such financial statements. MULTIPLIER: 1,000,000 CURRENCY: U.S. DOLLARS

PERIOD TYPE FISCAL YEAR END PERIOD START PERIOD END EXCHANGE RATE CASH SECURITIES RECEIVABLES ALLOWANCES INVENTORY CURRENT ASSETS PP&E DEPRECIATION TOTAL ASSETS

12 MOS OCT 31 1996 NOV 01 1995 OCT 31 1996 1 2,885 442 7,126 0 6,401 17,991 10,198 4,662 27,699

ARTICLE 5 This schedule contains summary financial information extracted from the consolidated balance sheer and the consolidated statement of earnings and is qualified in its entirety by reference to such financial statements. MULTIPLIER: 1,000,000 CURRENCY: U.S. DOLLARS

PERIOD TYPE FISCAL YEAR END PERIOD START PERIOD END EXCHANGE RATE CASH SECURITIES RECEIVABLES ALLOWANCES INVENTORY CURRENT ASSETS PP&E DEPRECIATION TOTAL ASSETS CURRENT LIABILITIES BONDS PREFERRED MANDATORY PREFERRED COMMON OTHER SE TOTAL LIABILITY AND EQUITY SALES TOTAL REVENUES CGS TOTAL COSTS OTHER EXPENSES LOSS PROVISION INTEREST EXPENSE INCOME PRETAX INCOME TAX INCOME CONTINUING DISCONTINUED EXTRAORDINARY CHANGES NET INCOME EPS PRIMARY EPS DILUTED

12 MOS OCT 31 1996 NOV 01 1995 OCT 31 1996 1 2,885 442 7,126 0 6,401 17,991 10,198 4,662 27,699 10,623 2,579 0 0 1,014 12,424 27,699 33,114 38,420 22,013 25,499 9,195 0 327 3,694 1,108 2,586 0 0 0 2,586 2.46 0

EXHIBIT 99 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 11-K (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] For the fiscal year ended October 31, 1996 OR TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period from _______________ to _______________ Commission File Number: 1-4423 A. Full title of the plan and address of the plan, if different from that of the issuer named below: HEWLETT-PACKARD COMPANY EMPLOYEE STOCK PURCHASE PLAN

EXHIBIT 99 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 11-K (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] For the fiscal year ended October 31, 1996 OR TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period from _______________ to _______________ Commission File Number: 1-4423 A. Full title of the plan and address of the plan, if different from that of the issuer named below: HEWLETT-PACKARD COMPANY EMPLOYEE STOCK PURCHASE PLAN B. Name of issuer of the securities held pursuant to the plan and the address of its principal executive office: HEWLETT-PACKARD COMPANY 3000 HANOVER STREET PALO ALTO, CALIFORNIA 94304 REQUIRED INFORMATION Not applicable. SIGNATURES PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE ADMINISTRATOR OF THE PLAN HAS DULY CAUSED THIS ANNUAL REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED THEREUNTO DULY AUTHORIZED. HEWLETT-PACKARD COMPANY EMPLOYEE STOCK PURCHASE PLAN
By: /s/ Ann O. Baskins --------------------------------------Ann O. Baskins Managing Counsel and Assistant Secretary

Date: January 28, 1997


								
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