Business Summary

Net revenue in the United States was $6.0 billion, an increase of 13% from the year-ago quarter. Revenue from outside the U.S. rose 20% (26% in local currency) to $7.3 billion. In Europe, revenue was $4.5 billion, an increase of 15% (27% in local currency). In Asia Pacific, revenue was $1.9 billion, an increase of 36% (34% in local currency). In Latin America, revenue increased 11% to $0.6 billion.

Imaging and Printing Systems

The imaging and printing systems segment -- laser and inkjet printing, and imaging devices and associated supplies -- grew 6% in revenue year over year (9% in local currency) against a very strong quarter last year. Internet printing and a migration to color are driving strategy and growth. Strong sales of supplies, scanners, all-in-one (AiO) products, and consumer imaging devices, as well as overall strength in Europe and Asia, partially offset softness in the U.S. business printing market and continuing price erosion in inkjet printers.

Nearly 12 million printing and scanning devices were shipped during the quarter. HP's color LaserJet market share continues to grow and new products began shipping in October. Imaging revenues grew 31% over the year-ago period, driven by strong performances in all product lines: AiOs up 31%, scanners up 12% and digital cameras and printers up 137%. AiO units were up 53% and PhotoSmart printer units were up 208%. Supplies revenues grew 15% against a strong quarter last year.

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

Computing Systems

The computing systems segment -- a broad range of Internet infrastructure systems and solutions for businesses and consumers, including workstations, desktops, notebooks, mobile devices, UNIX(R) and PC servers, storage and software solutions -- grew 29% in revenue year over year (32% in local currency) with strong performances across all product categories.

UNIX server revenues rose 23% year over year, with orders up 43%, driven by excellent performance in low- and mid-range servers. Superdome, HP's new high-end server introduced this quarter, is achieving stronger-than-expected market acceptance, and volume shipments remain on schedule for January. NetServer revenues were up 20%. Enterprise storage revenues were up 40% with the HP Surestore E Disk Array XP512, HP's flagship enterprise storage product, up 90% in revenues with strong backlog. Software revenues (excluding VeriFone) were up 18%, but down sequentially with strong order backlog at the end of the quarter. OpenView revenues were up 29% with orders up 60%. PC revenues were up 40%, with home PC revenues up 62%, notebooks up 164%, workstations up 11%, and commercial desktops up 8%.

Operating margin was 3.7%, up from 3.2% last year, but down sequentially from 7.3% in the third quarter primarily due to margin pressures, higher expenses and mix changes.

IT Services

The IT services segment -- hardware and software services, along with mission-critical, outsourcing, consulting and customer financing services -- grew 15% in revenue year over year (18% in local currency). HP's consulting business achieved in 46% revenue growth, with substantial new hires broadening and deepening the organization's capabilities.

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

Costs and Expenses

Cost of goods sold this quarter was 72.5% of net revenue, up from 71.3% in the year-ago period. Expenses grew 15%. After adjusting for currency, expense growth was 17%. Operating expenses, as reported, were 20.3% of net revenue. This compares with 20.7% in the comparable period last year.

Asset Management

Return on assets for the quarter was 10.5% compared with 9.8% in the comparable quarter last year. Inventory was 11.7% of revenue compared with 11.5% in last year's fourth fiscal quarter. Trade receivables were 13.1% of revenue compared with 14.1% in the prior year period. Net property, plant and equipment was 9.2% of revenue compared with 10.2% in the year-ago quarter.

Full-year Review

Net revenue increased 15% to $48.8 billion. Net revenue in the United States rose 14% to $21.6 billion, while revenue from outside the United States increased 16% to $27.2 billion.

Net earnings from continuing operations were $3.6 billion, an increase of 15%, compared with $3.1 billion in fiscal 1999. Net earnings per share were $1.73 on a diluted basis, up 16% from $1.49 last year.

Outlook for FY 2001

For the 2001 fiscal year ending Oct. 31, 2001, HP expects to achieve revenue growth in the range of 15 to 17%, compared to 15% in FY 2000. Gross margin percentage in FY 2001 is expected to be in the range of 27.5 to 28.5%, compared to 28.5% in FY 2000, with improvements beginning in the 2nd quarter. Total operating expenses in FY 2001 are expected to be approximately 10 to 12% above FY 2000. Tax rate is expected to remain constant at approximately 23%.

The forward-looking statements in this Outlook are based on current expectations and are subject to risks, uncertainties and assumptions described under the sub-heading "Forward-Looking Statements." Actual results may differ materially from the expectations expressed above. These statements do not include the potential impact of any mergers, acquisitions or other business combinations that may be completed after Oct. 31, 2000.

HP will be discussing its fourth quarter results and its 2001 outlook on a conference call today, beginning at 6 a.m. (PST). A live Webcast of the conference call will be available at http://www.hp.com/hpinfo/investor/quarters/2000/q4webcast.html. A replay of the Webcast will be available at the same Web site shortly after the call and will remain available through 4:30 p.m. PST on Nov. 22, 2000.

The rise of Silicon Valley

Hewlett-Packard was Silicon Valley's first large firm and due to its success one of the area's most admired electronics firms.

While HP was important for the initial growth of the area and at first was based on electronic devices, the actual Silicon Valley fever was launched in the mid-1950s with Shockley and Fairchild, and other semiconductor firms, and went on to the microelectronics revolution and the development of the first PCs in the mid-1970s, continuing till today.

Invention of the transistor

One major event was crucial for this whole development. It was the invention of the transistor that revolutionized the world of electronics.

By the 1940s, the switching units in computers were mechanical relays, which were then replaced by vacuum tubes. But these vacuum tubes soon turned out to have some critical disadvantages, which impeded the further progress in computing technology. In contrast, transistors were much better. They could perform everything the vacuum tubes did, but "required much less current, did not generate as much heat, and were much smaller"⁾ than vacuum tubes.