Hewlett-Packard (HPQ)

Note 5: Acquisitions

Pending acquisition in fiscal 2010

        In November 2009, HP entered into a definitive agreement to acquire 3Com Corporation ("3Com"), a global enterprise provider of networking switching, routing and security solutions, at a price of $7.90 per share in cash or an enterprise value of approximately $2.7 billion. The acquisition has received clearance from U.S. and European Union regulatory authorities and the approval of 3Com's stockholders. The closing of the acquisition is subject to certain closing conditions, including obtaining requisite approvals on clearances under certain antitrust or competition laws. The transaction is expected to close in HP's second fiscal quarter of 2010.

Note 5: Acquisitions

        In the first six months of fiscal 2009, HP completed the acquisition of Lefthand Networks, Inc., a leading provider of storage virtualization and solutions for approximately $347 million including direct transaction costs and the assumption of certain liabilities in connection with the transaction. HP recorded $273 million to goodwill, $95 million to purchased intangibles and $6 million to in-process research and development ("IPR&D") charges related to this acquisition. Lefthand Networks is being integrated into HP's Enterprise Storage and Servers segment within the Technology Solutions Group. HP does not expect goodwill recorded with respect to this acquisition to be deductible for tax purposes. HP has not presented pro forma results of operations because this acquisition is not material to HP's consolidated financial statements.

Acquisition of Electronic Data Systems Corporation ("EDS")

        As previously disclosed in its Consolidated Financial Statements for the fiscal year ended October 31, 2008, on August 26, 2008, HP completed its acquisition of EDS. The purchase price for EDS was $13.0 billion, comprised of $12.7 billion cash paid for outstanding common stock, $328 million for the estimated fair value of stock options and restricted stock units assumed, and $36 million for direct transaction costs. Of the total purchase price, a preliminary estimate of $10.5 billion has been allocated to goodwill, $4.5 billion has been allocated to amortizable intangible assets acquired and $2.0 billion has been allocated to net tangible liabilities assumed in connection with the acquisition. HP also expensed $30 million for IPR&D charges.

        The purchase price allocation as of the date of the acquisition reflects various preliminary estimates and analyses, including preliminary work performed by third-party valuation specialists, and is subject to change during the purchase price allocation period (generally one year from the acquisition date) as valuations are finalized.

        HP has evaluated and continues to evaluate certain pre-acquisition contingencies related to EDS that existed as of the acquisition date. Additional information, which existed as of the acquisition date but was at that time unknown to HP, may become known to HP during the remainder of the purchase price allocation period, and may result in goodwill adjustments. If these pre-acquisition contingencies

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HEWLETT-PACKARD COMPANY AND SUBSIDIARIES

Notes to Consolidated Condensed Financial Statements (Continued)

(Unaudited)

Note 5: Acquisitions (Continued)

become probable in nature and estimable after the end of the purchase price allocation period, amounts will be recorded for such matters in HP's results of operations.

Pro forma results for EDS acquisition

        The following table presents the unaudited results of HP (including EDS) for the three and six months ended April 30, 2009 and the unaudited pro forma results for the three and six months ended April 30, 2008. The unaudited pro forma financial information for the three and six months ended April 30, 2008 combines the results of operations of HP and EDS as though the companies had been combined as of the beginning of fiscal 2008. The pro forma financial information is presented for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisition and related borrowings had taken place at the beginning of fiscal 2008. The unaudited pro forma results presented include amortization charges for acquired intangible assets, eliminations of intercompany transactions, restructuring charges, IPR&D charges, adjustments for incremental stock-based compensation expense related to the unearned portion of EDS stock options and restricted stock units assumed, adjustments for depreciation expense for property, plant and equipment, adjustments to interest expense and related tax effects.

Note 5: Acquisitions

        In the first quarter of fiscal 2009, HP completed the acquisition of Lefthand Networks, Inc., a leading provider of storage virtualization and solutions for approximately $347 million including direct transaction costs and the assumption of certain liabilities in connection with the transaction. HP recorded $273 million to goodwill, $95 million to purchased intangibles and $6 million to in-process research and development charges ("IPR&D") related to this acquisition. Lefthand Networks is being integrated into HP's Enterprise Storage and Servers segment within the Technology Solutions Group. HP does not expect goodwill recorded with respect to this acquisition to be deductible for tax purposes. HP has not presented pro forma results of operations because this acquisition is not material to HP's consolidated results of operations.

Acquisition of Electronic Data Systems Corporation ("EDS")

        As previously disclosed in its Consolidated Financial Statements for the fiscal year ended October 31, 2008, on August 26, 2008, HP completed its acquisition of EDS. The purchase price for EDS was $13.0 billion, comprised of $12.7 billion cash paid for outstanding common stock, $328 million for the estimated fair value of stock options and restricted stock units assumed, and $36 million for direct transaction costs. Of the total purchase price, a preliminary estimate of $10.5 billion has been allocated to goodwill, $4.5 billion has been allocated to amortizable intangible assets acquired and $2.0 billion has been allocated to net tangible liabilities assumed in connection with the acquisition. HP also expensed $30 million for IPR&D charges.

        The purchase price allocation as of the date of the acquisition reflects various preliminary estimates and analyses, including preliminary work performed by third-party valuation specialists, and is subject to change during the purchase price allocation period (generally one year from the acquisition date) as valuations are finalized.

        HP has evaluated and continues to evaluate certain pre-acquisition contingencies related to EDS that existed as of the acquisition date. Additional information, which existed as of the acquisition date but was at that time unknown to HP, may become known to HP during the remainder of the purchase price allocation period, and may result in goodwill adjustments. If these pre-acquisition contingencies become probable in nature and estimable after the end of the purchase price allocation period, amounts would be recorded for such matters in HP's results of operations.

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HEWLETT-PACKARD COMPANY AND SUBSIDIARIES

Notes to Consolidated Condensed Financial Statements (Continued)

(Unaudited)

Note 5: Acquisitions (Continued)

Pro forma results for EDS acquisition

        The following table presents the unaudited results of HP (including EDS) for the three months ended January 31, 2009 and the unaudited pro forma results for the three months ended January 31, 2008. The unaudited pro forma financial information for the three months ended January 31, 2008 combines the results of operations of HP and EDS as though the companies had been combined as of the beginning of fiscal 2008. The pro forma financial information is presented for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisition and related borrowings had taken place at the beginning of fiscal 2008. The unaudited pro forma results presented include amortization charges for acquired intangible assets, eliminations of intercompany transactions, restructuring charges, IPR&D charges, adjustments for incremental stock-based compensation expense related to the unearned portion of EDS stock options and restricted stock units assumed, adjustments for depreciation expense for property, plant and equipment, adjustments to interest expense and related tax effects.

Note 5: Acquisitions

        During the first nine months of fiscal 2008, HP completed seven acquisitions. In addition, HP completed the purchase of the remaining 30% minority interest in China Hewlett-Packard Company Limited during the third quarter of fiscal 2008. Total consideration for the acquisitions and the minority interest purchase was approximately $1.5 billion, which includes direct transaction costs, the estimated fair value of earned unvested stock options and certain liabilities recorded in connection with these transactions. HP recorded approximately $927 million of goodwill, approximately $533 million of purchased intangibles and approximately $13 million of in-process research and development charges

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HEWLETT-PACKARD COMPANY AND SUBSIDIARIES

Notes to Consolidated Condensed Financial Statements (Continued)

(Unaudited)

Note 5: Acquisitions (Continued)

("IPR&D") related to these transactions. Projects that qualify for treatment as IPR&D have not yet reached technical feasibility and have no alternative use.

        The largest of the seven transactions was the acquisition of Exstream Software, LLC, which has been integrated into HP's Imaging and Printing Group. The total purchase price paid was approximately $720 million, which included direct transaction costs as well as certain debt that was repaid at the acquisition date. In connection with this acquisition, HP recorded approximately $434 million of goodwill and $235 million of purchased intangibles. HP also expensed $11 million for IPR&D. HP is amortizing the purchased intangibles on a straight-line basis over their estimated useful lives ranging from three to eight years.

        HP has recorded all acquisitions using the purchase method of accounting and, accordingly, included the results of operations in HP's consolidated results as of the date of each acquisition. HP allocates the purchase price of its acquisitions to the tangible assets, liabilities and intangible assets acquired, including IPR&D charges, based on their estimated fair values. The excess purchase price over those fair values is recorded as goodwill. The fair value assigned to assets acquired is based on valuations using management's estimates and assumptions. HP does not expect goodwill recorded on a majority of these acquisitions to be deductible for tax purposes. HP has not presented pro forma results of operations because these acquisitions are not material to HP's consolidated results of operations on either an individual or an aggregate basis.

Pending & Subsequent Acquisitions

        On August 26, 2008, HP completed its acquisition of Electronic Data Systems Corporation ("EDS") at a price of $25.00 per share or an enterprise value of approximately $13.9 billion. HP paid the purchase price utilizing both cash from operations and cash generated from the issuance of commercial paper under its existing commercial paper programs. HP expects to replace some of the commercial paper with issuances of term debt securities. EDS is a leading global technology services company, delivering a broad portfolio of information technology and business process outsourcing services to clients in the manufacturing, financial services, healthcare, communications, energy, transportation, and consumer and retail industries and to governments around the world. HP intends to include EDS within HP Services for financial reporting purposes.

        In August 2008, HP agreed to acquire Colubris Networks, Inc., a privately-held global provider of intelligent wireless networks for enterprises and service providers. The acquisition is subject to certain closing conditions and is expected to be completed by the end of HP's 2008 fiscal year. Following the close of the acquisition, HP plans to integrate the Colubris product line into its ProCurve Networking product portfolio.

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HEWLETT-PACKARD COMPANY AND SUBSIDIARIES

Notes to Consolidated Condensed Financial Statements (Continued)

(Unaudited)

Note 5: Acquisitions

        During the first six months of fiscal 2008, HP completed six acquisitions. Total consideration for the acquisitions was approximately $1.3 billion, which included direct transaction costs, the estimated fair value of earned unvested stock options and certain liabilities recorded in connection with these acquisitions. HP recorded approximately $779 million of goodwill, approximately $427 million of purchased intangibles and approximately $13 million of in-process research and development charges ("IPR&D") related to these acquisitions. Projects that qualify for treatment as IPR&D have not yet reached technical feasibility and have no alternative use.

        The largest of the six transactions was the acquisition of Exstream Software, LLC, which has been integrated into HP's Imaging and Printing Group. The total purchase price paid was approximately $720 million, which included direct transaction costs as well as certain debts that were repaid at the acquisition date. In connection with this acquisition, HP recorded approximately $434 million of goodwill and $235 million of purchased intangibles. HP also expensed $11 million for IPR&D. HP is amortizing the purchased intangibles on a straight-line basis over their estimated useful lives ranging from three to eight years.

        HP has recorded all acquisitions using the purchase method of accounting and, accordingly, included the results of operations in HP's consolidated results as of the date of each acquisition. HP allocates the purchase price of its acquisitions to the tangible assets, liabilities and intangible assets acquired, including IPR&D charges, based on their estimated fair values. The excess purchase price over those fair values is recorded as goodwill. The fair value assigned to assets acquired is based on valuations using management's estimates and assumptions. HP does not expect goodwill recorded on a majority of these acquisitions to be deductible for tax purposes. HP has not presented pro forma results of operations because these acquisitions are not material to HP's consolidated results of operations on either an individual or an aggregate basis.

Pending and Subsequent Acquisitions

        In May 2008, HP announced that it had signed a definitive agreement with Electronic Data Systems Corporation ("EDS") under which HP will purchase EDS at a price of $25.00 per share, or an enterprise value of approximately $13.9 billion. EDS is a leading global technology services company, delivering a broad portfolio of information technology and business process outsourcing services to clients in the manufacturing, financial services, healthcare, communications, energy, transportation, and consumer and retail industries and to governments around the world. The transaction is subject to

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HEWLETT-PACKARD COMPANY AND SUBSIDIARIES

Notes to Consolidated Condensed Financial Statements (Continued)

(Unaudited)

Note 5: Acquisitions (Continued)

certain closing conditions and is expected to close in the second half of calendar year 2008. Following the closing, HP intends to treat EDS as a new business unit within HP Services for financial reporting purposes.

        In May 2008, HP completed the acquisition of Tower Software, a global provider of electronic document and records management and enterprise content management. Tower Software will be integrated into HP Software.

Note 5: Acquisitions

        In the first quarter of fiscal 2008, HP completed three acquisitions. Total consideration including direct transaction costs for the three acquisitions was approximately $266 million. HP recorded approximately $180 million of goodwill and approximately $99 million of purchased intangibles related to these acquisitions. The largest of these transactions was the acquisition of MacDermid ColorSpan, Inc., which has been integrated into HP's Imaging and Printing Group.

        HP has recorded all acquisitions using the purchase method of accounting and, accordingly, included the results of operations in HP's consolidated results as of the date of each acquisition. HP allocates the purchase price of its acquisitions to the tangible assets, liabilities and intangible assets acquired, based on their estimated fair values. The excess purchase price over those fair values is recorded as goodwill. The fair value assigned to assets acquired is based on valuations using management's estimates and assumptions. HP does not expect goodwill recorded on a majority of these acquisitions to be deductible for tax purposes. HP has not presented pro forma results of operations

12

HEWLETT-PACKARD COMPANY AND SUBSIDIARIES

Notes to Consolidated Condensed Financial Statements (Continued)

(Unaudited)

Note 5: Acquisitions (Continued)

because these acquisitions are not material to HP's consolidated results of operations on either an individual or an aggregate basis.

Subsequent Acquisitions

        In February 2008, HP completed the acquisition of EYP Mission Critical Facilities Inc., a consulting company specializing in strategic technology planning, design and operations support for large-scale data centers. The business is being integrated into HP Services.

        In February 2008, HP completed the acquisition of NUR Macroprinters Ltd., a maker of industrial wide-format digital inkjet printers. The business is being integrated into HP's Imaging and Printing Group.

        In March 2008, HP completed the acquisition of Exstream Software, LLC, a privately-held leading provider of enterprise software that streamlines the creation and delivery of personalized documents and other communications materials. The business is being integrated into HP's Imaging and Printing Group.

Note 5: Acquisitions

        During the first nine months of fiscal 2007, HP completed seven acquisitions. The largest of these transactions was the $4.9 billion acquisition of Mercury Interactive Corporation ("Mercury"), which is further described below. Total consideration for the six other acquisitions was approximately $609 million, which includes direct transaction costs, the estimated fair value of earned unvested stock options and certain liabilities recorded in connection with these acquisitions. HP recorded approximately $488 million of goodwill, approximately $111 million of purchased intangibles, and approximately $5 million of in-process research and development charges ("IPR&D") related to these six acquisitions. Projects that qualify for treatment as IPR&D have not yet reached technological feasibility and have no alternative use.

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        HP has recorded all acquisitions using the purchase method of accounting and, accordingly, included the results of operations in HP's consolidated results as of the date of each acquisition. HP allocates the purchase price of its acquisitions to the tangible assets, liabilities and intangible assets acquired, including IPR&D, based on their estimated fair values. The excess purchase price over those fair values is recorded as goodwill. HP has not presented pro forma results of operations because these acquisitions are not material to HP's consolidated results of operations on either an individual or an aggregate basis.

Mercury Acquisition

        On November 2, 2006, HP completed its tender offer for Mercury, a leading IT management software and services company, and acquired approximately 96% of Mercury common shares for cash consideration of $52 per share. On November 6, 2006, HP acquired the remaining outstanding common shares, and Mercury became a wholly owned subsidiary of HP. This acquisition combines Mercury's application management, application delivery and IT governance capabilities with HP's broad portfolio of management solutions.

        The aggregate purchase price of approximately $4.9 billion consisted of cash paid for outstanding stock, vested in-the-money stock options and direct transaction costs. In addition, the purchase price also included the estimated fair value of earned unvested stock options and out-of-the-money vested stock options assumed by HP.

        The preliminary purchase price allocation as of the date of acquisition is as follows:

        Note 7 contains information related to the cost of restructuring programs for Mercury employees, which was also included as part of other liabilities assumed.

        The purchase price allocation was based on management's preliminary valuation and the estimates and assumptions used are subject to change. The primary areas of the purchase price allocation that are not yet finalized relate to restructuring costs, certain income tax-related balances, certain legal matters and residual goodwill.

        HP has included Mercury in the OpenView business within the HP Software segment. Goodwill, which represents the excess of the purchase price over the net tangible and intangible assets acquired,

13

is not deductible for tax purposes. The amortizable intangible assets are being amortized over their estimated useful lives as follows:

Pending and Subsequent Acquisitions

        In July 2007, HP agreed to acquire Opsware Inc. ("Opsware"), a leading data center automation software company, through a cash tender offer for $14.25 per share, representing an estimated purchase price of approximately $1.6 billion. The transaction is subject to certain closing conditions and is expected to be completed during HP's fourth fiscal quarter of 2007. Following the close of the acquisition, Opsware will be integrated into the HP Software segment.

        Also in July 2007, HP agreed to acquire Neoware, Inc. ("Neoware"), a provider of thin client computing and virtualization solutions. The transaction is subject to certain closing conditions and is expected to be completed during the fourth calendar quarter of 2007. Following the completion of the acquisition, Neoware is expected to be integrated into the Personal Systems Group segment.

        On August 1, 2007, HP completed its acquisition of SPI Dynamics, Inc. ("SPI Dynamics"), a privately held provider of web application security assessment software and services. SPI Dynamics is being integrated into the HP Software segment.

Note 5: Acquisitions

        During the first six months of fiscal 2007, HP completed six acquisitions. The largest of these transactions was the $4.9 billion acquisition of Mercury Interactive Corporation ("Mercury"), which is further described below. Total consideration for the five other acquisitions was approximately $547 million, which includes direct transaction costs, the estimated fair value of earned unvested stock options and certain liabilities recorded in connection with these acquisitions. HP recorded approximately $433 million of goodwill, approximately $104 million of purchased intangibles and, approximately $5 million of in-process research and development ("IPR&D") related to these five acquisitions. Projects that qualify for treatment as IPR&D have not yet reached technological feasibility and have no alternative use.

12

        HP has recorded all acquisitions using the purchase method of accounting and, accordingly, included the results of operations in HP's consolidated results as of the date of each acquisition. HP allocates the purchase price of its acquisitions to the tangible assets, liabilities and intangible assets acquired, including IPR&D, based on their estimated fair values. The excess purchase price over those fair values is recorded as goodwill. HP has not presented pro forma results of operations because these acquisitions are not material to HP's consolidated results of operations on either an individual or an aggregate basis.

Mercury Acquisition

        On November 2, 2006, HP completed its tender offer for Mercury, a leading IT management software and services company, and acquired approximately 96% of Mercury common shares for cash consideration of $52 per share. On November 6, 2006, HP acquired the remaining outstanding common shares, and Mercury became a wholly owned subsidiary of HP. This acquisition combines Mercury's application management, application delivery and IT governance capabilities with HP's broad portfolio of management solutions.

        The aggregate purchase price of approximately $4.9 billion consisted of cash paid for outstanding stock, vested in-the-money stock options and direct transaction costs. In addition, the purchase price also included the estimated fair value of earned unvested stock options and out-of-the-money vested stock options assumed by HP.

        The preliminary purchase price allocation as of the date of acquisition is as follows:

        Note 7 contains information related to the cost of restructuring programs for Mercury employees, which was also included as part of other liabilities assumed.

        The purchase price allocation was based on management's preliminary valuation and the estimates and assumptions used are subject to change. The primary areas of the purchase price allocation that are not yet finalized relate to restructuring costs, certain income tax-related balances, certain legal matters and residual goodwill.

        HP has included Mercury in the OpenView business within the HP Software segment. Goodwill, which represents the excess of the purchase price over the net tangible and intangible assets acquired,

13

is not deductible for tax purposes. The amortizable intangible assets are being amortized over their estimated useful lives as follows:

        Based on further analysis completed during the second fiscal quarter of 2007, additional IPR&D expense of $14 million was recorded in HP's results of operations for the three months ended April 30, 2007, bringing the total IPR&D expense for the six months ended April 30, 2007 to $181 million.

Subsequent Acquisition

        On May 16, 2007, HP completed the acquisition of Arteis Inc., a privately held provider of web-based graphic design services through the Logoworks- and Logomaker-branded websites. The company's operations will be integrated into the Imaging and Printing Group segment.

Note 5: Acquisitions

In the first quarter of fiscal 2007, HP acquired two companies. The largest of these transactions was the acquisition of Mercury Interactive Corporation (“Mercury”), which is described below. The second acquisition, Knightsbridge Solutions Holdings Corporation (“Knightsbridge”), is a privately held services company specializing in the information management areas of business intelligence, data warehousing, data integration and information quality. Knightsbridge is included in HP Services.

HP has recorded these acquisitions using the purchase method of accounting and, accordingly, included the results of operations in HP’s consolidated results as of the date of each acquisition. HP allocates the purchase price of its acquisitions to the tangible assets, liabilities and intangible assets acquired, including in-process research and development (“IPR&D”), based on their estimated fair values. The excess purchase price over those fair values is recorded as goodwill.  HP has not presented the pro forma results of operations because the results are not material to HP’s consolidated results of operations on either an individual or an aggregate basis.

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HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements (Continued)
(Unaudited)

Note 5: Acquisitions (Continued)

Mercury Acquisition

On November 2, 2006, HP completed its tender offer for Mercury, a leading IT management software and services company, and acquired approximately 96% of Mercury common shares for cash consideration of $52 per share. On November 6, 2006, HP acquired the remaining outstanding common shares, and Mercury became a wholly owned subsidiary of HP. This acquisition combines Mercury's application management, application delivery and IT governance capabilities with HP's broad portfolio of management solutions.

The aggregate purchase price of approximately $4.9 billion consisted of cash paid for outstanding stock, vested in-the-money stock options and direct transaction costs. In addition, the purchase price also included the estimated fair value of earned unvested stock options and out-of-the-money vested stock options assumed by HP.

Note 6: Acquisitions

        HP has recorded acquisitions using the purchase method of accounting and, accordingly, included the results of operations in HP's consolidated results as of the date of each acquisition. HP allocates the purchase price of its acquisitions to the tangible assets, liabilities and intangible assets acquired, including in-process research and development ("IPR&D"), based on their estimated fair values. The excess purchase price over those fair values is recorded as goodwill. The fair value assigned to assets acquired is based on valuations using management's estimates and assumptions. HP does not expect goodwill recorded on a majority of these acquisitions to be deductible for tax purposes.

Peregrine

        On December 19, 2005, HP acquired the outstanding shares of Peregrine Systems, Inc. ("Peregrine") in a cash merger for $26.08 per share. The purchase price was approximately $538 million, consisting of $442 million of cash paid, which includes direct transaction costs, as well as the assumption of certain liabilities in connection with the transaction. The acquisition of Peregrine adds key asset and service management components to the HP OpenView portfolio, a distributed management software suite for business operations and IT. In connection with this acquisition, HP recorded approximately $342 million of goodwill and $162 million of amortizable intangible assets. HP also expensed $34 million for IPR&D. HP is amortizing the purchased intangibles, principally customer relationships and developed technology, on a straight-line basis over their estimated useful lives ranging from five to six years.

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Other Acquisitions in fiscal 2006

        HP also completed seven other acquisitions during fiscal 2006. Total consideration for these acquisitions and the buyout of a minority interest was approximately $473 million, which included direct transaction costs. The largest of these transactions was the acquisition of substantially all of the assets of Scitex Vision Ltd ("Scitex"). The Scitex asset acquisition is expected to expand HP's leadership in printing into the industrial wide-format market.

        HP recorded approximately $193 million of goodwill and $205 million of purchased intangibles in connection with these other acquisitions. HP also recorded approximately $18 million of IPR&D related to these acquisitions in fiscal 2006.

        In addition, HP paid approximately $17 million for the balance of the outstanding shares of Digital Globalsoft Limited, a consolidated subsidiary of HP ("DGS"), and as a result increased HP's ownership from 98.5% to 100%. This subsidiary has enhanced HP's capability in IT services, including expertise in life cycle services such as migration, technical and application services.

        HP has included the results of operations of these transactions prospectively from the respective date of the transaction. HP has not presented the pro forma results of operations of the acquired businesses because the results are not material to HP's results of operations on either an individual or an aggregate basis.

Mercury Acquisition

        On November 2, 2006, HP completed its tender offer for Mercury Interactive Corporation ("Mercury"), a leading IT management software and services company, and acquired approximately 96% of Mercury shares for cash consideration of $52 per common share. On November 6, 2006, HP acquired the remaining outstanding shares, and Mercury became a wholly owned subsidiary of HP. The aggregate purchase price was approximately $4.8 billion, consisting of cash paid for outstanding stock, the value of vested employee stock options and estimated direct transaction costs. The acquisition will combine Mercury's application management, application delivery and IT governance capabilities with HP's broad portfolio of management solutions.

        The acquisition will be recorded using the purchase method of accounting, and, accordingly, the results of operations will be included in HP's consolidated results as of the acquisition date. The purchase price will be allocated to the tangible assets, liabilities and intangible assets acquired based on their estimated fair values. These fair values will be determined based on independent third-party valuations and management estimates which have not yet been completed. The excess purchase price over those fair values will be recorded as goodwill. The goodwill will not be deductible for tax purposes. The intangible assets consist primarily of developed and core technologies, customer relationships, maintenance agreements and IPR&D. The IPR&D will be expensed in the first quarter of fiscal year 2007. The remaining intangibles will be amortized over their estimated useful lives, currently estimated to range from three to seven years. Pro forma results of operations have not been presented as these results are not material to HP's consolidated results of operations.

        Management is currently assessing and formulating product roadmap decisions and integration plans which may result in additional costs, including asset impairments and costs to terminate or relocate employees. Exit costs related to Mercury activities and employees will be accrued by HP as a liability in conjunction with recording the purchase of Mercury, which will result in an increase to

96

goodwill. In addition, HP will incur charges related to payments to Mercury executive officers and key employees under a retention plan adopted in connection with the acquisition, as well as costs related to integration efforts.

Pending Acquisitions

        In December 2006, HP agreed to acquire Knightsbridge Solutions Holdings Corporation, a privately held services company specializing in the information management areas of business intelligence, data warehousing, data integration and information quality. The transaction is subject to certain closing conditions and is expected to be completed during the first quarter of fiscal 2007. Upon completion, the business is expected to be fully integrated into HP Services.

        Also in December 2006, HP agreed to acquire Bitfone Corporation, a privately held global software and services company that develops software solutions for mobile device management for the wireless industry. The transaction is subject to certain closing conditions and is expected to be completed by February 2007. Following the close of the acquisition, the business is expected to be fully integrated into the Handheld Business Unit of HP's Personal Systems Group.

Acquisitions in fiscal 2005

        In fiscal 2005, HP acquired five companies for an aggregate purchase price of approximately $648 million, which includes direct transaction costs and certain liabilities recorded in connection with these acquisitions. The largest of these transactions were the acquisitions of SAC, LLC, doing business as "Snapfish," and AppIQ, Inc. ("AppIQ"), which HP completed on April 15, 2005 and October 24, 2005, respectively.

        Snapfish is a leading online photo service. The acquisition of Snapfish enables HP to capitalize on the growing market for online photo printing, with customers benefiting from a more affordable, simpler and more comprehensive digital photography experience.

        AppIQ is a leading provider of open storage area network management and storage resource management solutions. The acquisition of AppIQ strengthens HP's ability to give customers a single integrated console that controls and better manages their storage and server infrastructure.

        HP recorded approximately $537 million of goodwill and $108 million of amortizable purchased intangible assets in connection with these five acquisitions. HP also recorded approximately $2 million of IPR&D charges related to these five acquisitions.

        In fiscal 2005, HP paid approximately $8 million in cash for additional shares of DGS, a consolidated subsidiary of HP, to increase HP's ownership from approximately 97.2% to approximately 98.5%. HP recorded approximately $7 million and $281 million of goodwill in connection with the share purchases in fiscal 2005 and 2004, respectively.

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Note 5: Acquisitions

Peregrine

        On December 19, 2005, HP acquired the outstanding shares of Peregrine Systems, Inc. ("Peregrine") in a cash merger for $26.08 per share. The purchase price was approximately $489 million, consisting of $442 million of cash paid, which includes direct transaction costs, as well as the assumption of certain liabilities in connection with the transaction. HP intended the acquisition of Peregrine to add key asset and service management components to the HP OpenView portfolio, a distributed management software suite for business operations and IT. In connection with this acquisition, HP recorded approximately $294 million of goodwill and $162 million of amortizable

15

intangible assets. HP also expensed $34 million for in-process research and development ("IPR&D"). HP is amortizing the purchased intangibles, principally customer relationships and developed technology, on a straight-line basis over their estimated useful lives ranging from five to six years.

Other Acquisitions

        HP also completed six other acquisitions during the first nine months of fiscal 2006. Total consideration for these acquisitions and the buyout of a minority interest was approximately $456 million, which includes direct transaction costs. The largest of these transactions was the acquisition of substantially all of the assets of Scitex Vision Ltd ("Scitex"). The Scitex asset acquisition is expected to expand HP's leadership in printing into the industrial wide-format market.

        HP recorded approximately $187 million of goodwill and $194 million of purchased intangibles in connection with these other acquisitions. HP also recorded approximately $18 million of IPR&D related to these acquisitions in the first nine months of fiscal 2006.

        HP has included the results of operations of these transactions prospectively from the respective date of the transaction. HP has not presented the pro forma results of operations of the acquired businesses because the results are not material to HP's results of operations on either an individual or an aggregate basis.

Pending Acquisitions

        On July 25, 2006, HP entered into an Agreement and Plan of Merger pursuant to which HP will acquire Mercury Interactive Corporation ("Mercury"), a leading IT management software and services company, for $52 per share, representing an enterprise value of approximately $4.5 billion, net of existing cash and debt.

        The acquisition is being conducted by means of a tender offer for all of the outstanding shares of Mercury. HP commenced the tender offer on August 17, 2006, and HP expects to complete the acquisition in the fourth calendar quarter of 2006.

        The closing of the merger is subject to customary closing conditions, and, depending on the number of shares held by HP after its acceptance of the shares properly tendered in connection with the offer, approval of the merger by the holders of Mercury's outstanding shares remaining after the completion of the tender offer also may be required. In addition, the closing of the merger is subject to the filing with the SEC of Mercury's Annual Report on Form 10-K for Mercury's fiscal year ended December 31, 2005.

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Note 5: Acquisitions

Peregrine

        On December 19, 2005, HP acquired the outstanding shares of Peregrine Systems, Inc. ("Peregrine") in a cash merger for $26.08 per share. The purchase price was approximately $489 million, consisting of $442 million of cash paid, which includes direct transaction costs, as well as certain liabilities recorded in connection with the transaction. The acquisition of Peregrine is intended to add key asset and service management components to the HP OpenView portfolio, a distributed management software suite for business operations and IT. In connection with this acquisition, HP recorded approximately $294 million of goodwill and $162 million of amortizable intangible assets. HP

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also expensed $34 million for in-process research and development ("IPR&D"). HP is amortizing the purchased intangibles, principally customer relationships and developed technology, on a straight-line basis over their estimated useful lives ranging from five to six years.

Other Acquisitions

        HP also completed four other acquisitions during the first six months of fiscal 2006. Total consideration for these acquisitions was approximately $393 million, which includes direct transaction costs. The largest of these transactions was the acquisition of substantially all of the assets of Scitex Vision Ltd ("Scitex"). The Scitex asset acquisition is expected to expand HP's leadership in printing into the industrial wide-format market.

        HP recorded approximately $153 million of goodwill and $168 million of purchased intangibles in connection with these other acquisitions. HP also recorded approximately $18 million of IPR&D related to these acquisitions in the first six months of fiscal 2006.

        HP has included the results of operations of these transactions prospectively from the respective date of the transaction. HP has not presented the pro forma results of operations of the acquired businesses because the results are not material to HP's results of operations on either an individual or an aggregate basis.

Note 5: Acquisitions

Peregrine

        On December 19, 2005, HP acquired the outstanding shares of Peregrine Systems, Inc. ("Peregrine") in a cash merger for $26.08 per share. The purchase price was approximately $588 million, consisting of $442 million of cash paid, which includes direct transaction costs, as well as certain liabilities recorded in connection with the transaction. The acquisition of Peregrine is intended to add key asset and service management components to the HP OpenView portfolio, a distributed management software suite for business operations and IT. In connection with this acquisition, HP recorded approximately $393 million of goodwill and $162 million of amortizable intangible assets. HP also expensed $34 million for in- process research and development ("IPR&D"). HP is amortizing the purchased intangibles, principally customer relationships and developed technology, on a straight-line basis over their estimated useful lives ranging from five to six years.

Other acquisitions

        HP also completed three other acquisitions during the first quarter of fiscal 2006. Total consideration for these acquisitions was approximately $267 million, which includes direct transaction costs. The largest of these transactions was the acquisition of substantially all of the assets of Scitex Vision Ltd ("Scitex"). The Scitex asset acquisition is expected to expand HP's leadership in printing into the industrial wide-format market.

        HP recorded approximately $67 million of goodwill and $130 million of purchased intangibles in connection with these other acquisitions. HP also recorded approximately $16 million of IPR&D related to these acquisitions in the first quarter of fiscal 2006.

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        HP has included the results of operations of these transactions prospectively from the respective date of the transaction. HP has not presented the pro forma results of operations of the acquired businesses because the results are not material to HP's results of operations on either an individual or an aggregate basis.

        In February 2006, HP completed its acquisition of OuterBay Technologies, Inc, a private company that sells database archiving software.

Note 5: Acquisitions

        HP has recorded acquisitions using the purchase method of accounting and, accordingly, included the results of operations in HP's consolidated results as of the date of each acquisition. HP allocates

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the purchase price of its acquisitions to the tangible assets, liabilities and intangible assets acquired, including in-process research and development ("IPR&D"), based on their estimated fair values. The excess purchase price over those fair values is recorded as goodwill. The fair value assigned to assets acquired is based on valuations using management's estimates and assumptions. HP does not expect goodwill recorded on a majority of these acquisitions to be deductible for tax purposes.

        In fiscal 2005, HP acquired five companies for an aggregate purchase price of approximately $648 million, which includes direct transaction costs and certain liabilities recorded in connection with these acquisitions. The largest of these transactions were the acquisitions of SAC, LLC, doing business as "Snapfish," and AppIQ, Inc. ("AppIQ"), which HP completed on April 15, 2005 and October 24, 2005, respectively.

        Snapfish is a leading online photo service. The acquisition of Snapfish is intended to enable HP to capitalize on the growing market for online photo printing, with customers benefiting from a more affordable, simpler and more comprehensive digital photography experience.

        AppIQ is a leading provider of open storage area network management and storage resource management solutions. The acquisition of AppIQ is intended to strengthen HP's ability to give customers a single integrated console that controls and better manages their storage and server infrastructure.

        HP recorded approximately $537 million of goodwill and $108 million of amortizable purchased intangible assets in connection with these five acquisitions. HP also recorded approximately $2 million of IPR&D charges related to these five acquisitions.

        In fiscal 2005, HP paid approximately $8 million in cash for additional shares of Digital GlobalSoft Limited, a consolidated subsidiary of HP ("DGS"), to increase HP's ownership from approximately 97.2% to approximately 98.5%. In fiscal 2004, HP paid approximately $315 million in cash for shares of DGS to increase HP's ownership from 50.1% to approximately 97.2%. DGS is a globally-focused software development and IT services company. This subsidiary has enhanced HP's capability in IT services, including expertise in life cycle services such as migration, technical and application services. HP recorded approximately $7 million and $281 million of goodwill in connection with the share purchases in fiscal 2005 and 2004, respectively.

        On November 1, 2005, HP acquired substantially all of the assets of Scitex Vision Ltd., a market leader in super-wide digital imaging, for $230 million in cash. This acquisition is expected to expand HP's leadership in printing into the industrial wide-format market.

        On September 19, 2005, HP announced it signed a definitive agreement to acquire Peregrine Systems, Inc. ("Peregrine") in a cash merger for $26.08 per share, representing an aggregate equity value of $425 million. The acquisition of Peregrine is intended to add key asset and service management components to the HP OpenView portfolio, a distributed management software suite for business operations and IT.

Synstar

        In October 2004, HP acquired approximately 99.7% of the outstanding stock of UK-based Synstar plc ("Synstar"). The purchase price was approximately $343 million, which included $298 million of cash paid as well as direct transaction costs and certain liabilities recorded in connection with the

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transaction. Synstar is a leading independent provider of information technology ("IT") services across Europe. This acquisition is intended to further strengthen HP's offering primarily in the area of multi-technology support services. HP recorded approximately $172 million of goodwill and $122 million of amortizable purchased intangible assets in connection with this acquisition. HP is amortizing the purchased intangibles, principally customer contracts and relationships, on a straight-line basis over their estimated useful lives ranging from three to seven years.

Triaton

        In April 2004, HP acquired all of the outstanding stock of Triaton GmbH (with subsidiaries in Singapore, China and Brazil), Triaton France SAS and Triaton N.A, Inc. (USA) (collectively, "Triaton"). The purchase price was approximately $464 million, which included $306 million of cash paid as well as direct transaction costs and certain liabilities recorded in connection with the transaction. Triaton is one of Germany's largest independent IT service providers. This acquisition is intended to increase HP's capacity to deliver its Adaptive Enterprise offerings, with customers benefiting from added managed services, technology services and consulting and integration capabilities. HP recorded approximately $285 million of goodwill and $179 million of amortizable purchased intangible assets in connection with this acquisition. HP is amortizing the purchased intangibles, principally customer contracts and relationships, on a straight-line basis over their estimated useful lives ranging from two to eight years.

Other Acquisitions

        HP also acquired other companies during fiscal 2004 and 2003 that were not significant to its financial position or results of operations. Total consideration for these acquisitions was approximately $250 million and $185 million in fiscal 2004 and 2003, respectively. HP recorded approximately $181 million of goodwill and $49 million of purchased intangibles in fiscal 2004 and $91 million of goodwill and $53 million of purchased intangibles in fiscal 2003 in connection with these other acquisitions. HP also recorded approximately $37 million and $1 million of IPR&D related to these acquisitions in fiscal 2004 and 2003, respectively.

        HP has included the results of operations of these transactions prospectively from the respective date of the transaction. HP has not presented the pro forma results of operations of the acquired businesses because the results are not material to HP's consolidated results of operations on either an individual or an aggregate basis.

Acquisition-Related Charges

        Acquisition-related charges of approximately $54 million in fiscal 2004 consisted of deferred compensation, merger-related inventory adjustments and professional fees, while the charges of approximately $280 million in fiscal 2003 were attributable primarily to costs incurred for employee retention bonuses in connection with HP's acquisition of Compaq Computer Corporation ("Compaq") as well as professional fees and consulting services.

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Note 4: Acquisitions

        In the first nine months of fiscal 2005, HP acquired two companies and increased its ownership in a consolidated subsidiary from 97.2% to 98.5%. The aggregate purchase price for these transactions was approximately $339 million, which includes direct transaction costs. The largest of these transactions was the acquisition of SAC, LLC, doing business as "Snapfish," a leading online photo

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service. This acquisition is intended to enable HP to capitalize on the growing market for online photo printing, with customers benefiting from a more affordable, simpler and more comprehensive digital photography experience.

        HP recorded approximately $293 million of goodwill and $46 million of amortizable purchased intangible assets in connection with these acquisitions. HP has included the results of operations of these transactions prospectively from the respective date of the transaction. HP has not presented the pro forma results of operations of the acquired businesses because the results are not material to HP's results of operations on either an individual or an aggregate basis.

        On August 11, 2005, HP announced it signed an agreement to acquire substantially all of the assets of Scitex Vision Ltd., a market leader in super-wide digital printing, for $230 million in cash. This acquisition is subject to certain regulatory approvals and customary closing conditions and is expected to be completed within approximately 90 days.

        In connection with our March 2002 acquisition of Indigo, N.V., HP issued approximately 53 million non-transferable contingent value rights ("CVRs") that entitle each holder to a one-time contingent cash payment of up to $4.50 per CVR, based on the achievement of certain cumulative revenue results over a three-year period that ended on March 31, 2005. We have not incurred a liability associated with the CVRs as of July 31, 2005, and, based on our estimate of such revenue results, we do not expect any material payments in the future.