<Page>
<Table>
EXHIBIT 99.2
</Table>
FINANCIAL INFORMATION
COMPAQ COMPUTER CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
<Table>
<Caption>
SEPTEMBER 30, DECEMBER 31,
(In millions, except par value) 2001 2000
- ------------------------------------------------------------------------------------------------------------------------------------
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents $ 3,940 $ 2,569
Trade accounts receivable, net 4,780 6,715
Leases and other accounts receivable 1,663 1,677
Inventories 1,582 2,161
Other assets 2,444 1,989
----------- -----------
Total current assets 14,409 15,111
Property, plant and equipment, net 3,244 3,431
Other assets, net 5,895 6,314
----------- -----------
Total assets $ 23,548 $ 24,856
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Borrowings $ 1,501 $ 711
Accounts payable 3,619 4,233
Deferred income 1,170 1,089
Other liabilities 4,755 5,516
----------- -----------
Total current liabilities 11,045 11,549
----------- -----------
Long-term debt 600 575
----------- -----------
Postretirement and other postemployment benefits 663 652
----------- -----------
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value
Shares authorized: 10 million; shares issued: none -- --
Common stock and capital in excess of $.01 par value
Shares authorized: 3 billion
Shares issued: September 30, 2001 - 1,755 million
December 31, 2000 - 1,742 million 8,213 8,039
Retained earnings 4,521 5,347
Accumulated other comprehensive income (loss) (52) 27
Treasury stock (shares: September 30, 2001 - 61 million
December 31, 2000 - 53 million) (1,442) (1,333)
----------- -----------
Total stockholders' equity 11,240 12,080
----------- -----------
Total liabilities and stockholders' equity $ 23,548 $ 24,856
=========== ===========
</Table>
See accompanying notes to interim condensed consolidated financial statements.
1
<Page>
COMPAQ COMPUTER CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
<Table>
<Caption>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------------------- --------------------------------
(In millions, except per share amounts) 2001 2000 2001 2000
- -----------------------------------------------------------------------------------------------------------------------------------
Revenue:
Products $ 5,835 $ 9,573 $ 20,051 $25,884
Services 1,641 1,644 5,075 4,973
-------------- -------------- -------------- -------------
Total revenue 7,476 11,217 25,126 30,857
-------------- -------------- -------------- -------------
Cost of sales:
Products 4,830 7,380 16,124 20,074
Services 1,161 1,154 3,607 3,528
-------------- -------------- -------------- -------------
Total cost of sales 5,991 8,534 19,731 23,602
-------------- -------------- -------------- -------------
Selling, general and administrative 1,298 1,502 4,084 4,369
Research and development 297 382 1,013 1,092
Restructuring and related charges -- -- 742 --
Other (income) expense, net 575 (20) 528 (69)
-------------- -------------- -------------- -------------
2,170 1,864 6,367 5,392
-------------- -------------- -------------- -------------
Income (loss) before income taxes (685) 819 (972) 1,863
Provision (benefit) for income taxes (186) 262 (272) 596
-------------- -------------- -------------- -------------
Income (loss) before cumulative effect of accounting change (499) 557 (700) 1,267
Cumulative effect of accounting change, net of tax -- -- -- (26)
-------------- -------------- -------------- -------------
Net income (loss) $ (499) $ 557 $ (700) $ 1,241
============== ============== ============== =============
Earnings (loss) per common share:
Basic:
Before cumulative effect of accounting change $ (0.29) $ 0.32 $ (0.41) $ 0.75
Cumulative effect of accounting change, net of tax -- -- -- (0.02)
-------------- -------------- -------------- -------------
$ (0.29) $ 0.32 $ (0.41) $ 0.73
============== ============== ============== =============
Diluted:
Before cumulative effect of accounting change $ (0.29) $ 0.31 $ (0.41) $ 0.73
Cumulative effect of accounting change, net of tax -- -- -- (0.02)
-------------- -------------- -------------- -------------
$ (0.29) $ 0.31 $ (0.41) $ 0.71
============== ============== ============== =============
Shares used in computing earnings (loss) per common share:
Basic 1,696 1,725 1,688 1,701
============== ============== ============== =============
Diluted 1,696 1,769 1,688 1,742
============== ============== ============== =============
</Table>
See accompanying notes to interim condensed consolidated financial statements.
2
<Page>
COMPAQ COMPUTER CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<Table>
<Caption>
NINE MONTHS ENDED
SEPTEMBER 30,
-------------------------------
(In millions) 2001 2000
- ------------------------------------------------------------------------------------------------------------------------------------
Cash flows from operating activities:
Net income (loss) $ (700) $ 1,241
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 1,039 1,062
Restructuring and related charges 742 --
Impairment charge for investments and related assets 583 --
Gain on sale of investments (158) (250)
Deferred income taxes and other (386) 517
Changes in operating assets and liabilities, net of
effects of acquired businesses 219 (2,282)
-------------- --------------
Net cash provided by operating activities 1,339 288
-------------- --------------
Cash flows from investing activities:
Capital expenditures, net (742) (751)
Proceeds from sale of investments 310 261
Purchases of investments (105) (450)
Decrease in short-term investments -- 636
Acquisitions of businesses, net of cash acquired -- (370)
Other, net (138) (55)
-------------- --------------
Net cash used in investing activities (675) (729)
-------------- --------------
Cash flows from financing activities:
Increase in short-term borrowings 515 36
Increase in long-term borrowings 300 575
Common stock transactions, net 42 (55)
Dividends to stockholders (126) (128)
-------------- --------------
Net cash provided by financing activities 731 428
-------------- --------------
Effect of exchange rate changes on cash and cash equivalents (24) 274
-------------- --------------
Net increase in cash and cash equivalents 1,371 261
Cash and cash equivalents at beginning of period 2,569 2,666
-------------- --------------
Cash and cash equivalents at end of period $ 3,940 $ 2,927
============== ==============
SUPPLEMENTAL CASH FLOW INFORMATION
- ------------------------------------------------------------------------------------------------------------------------------------
Acquisitions of businesses:
Fair value of:
Assets acquired $ -- $ 499
Liabilities assumed -- (129)
-------------- --------------
Cash paid $ -- $ 370
============== ==============
</Table>
See accompanying notes to interim condensed consolidated financial statements.
3
<Page>
COMPAQ COMPUTER CORPORATION
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The accompanying interim condensed consolidated financial statements of
Compaq Computer Corporation ("Compaq") as of September 30, 2001 and December 31,
2000 and for the three and nine month periods ended September 30, 2001 and 2000,
respectively, have been prepared on substantially the same basis as Compaq's
annual consolidated financial statements and should be read in conjunction with
Compaq's Annual Report on Form 10-K for the year ended December 31, 2000. The
interim condensed consolidated financial statements reflect all adjustments,
consisting of only normal recurring adjustments, necessary for a fair
presentation of the results for those periods and the financial condition at
those dates. The consolidated results for interim periods are not necessarily
indicative of results to be expected for the full year.
Compaq purchased certain assets and liabilities of InaCom Corp. in
February 2000. This transaction was accounted for as a purchase. Compaq's
interim condensed consolidated financial statements include the results of
operations from the date of acquisition through September 30, 2001.
NOTE 2 - RECENT PRONOUNCEMENTS
In July 2001, the Financial Accounting Standards Board issued
Statements of Financial Accounting Standards No. 141, BUSINESS COMBINATIONS
("FAS 141") and No. 142, GOODWILL AND OTHER INTANGIBLE ASSETS ("FAS 142"). FAS
141 requires all business combinations initiated after June 30, 2001 to be
accounted for using the purchase method. Under FAS 142, goodwill and intangible
assets with indefinite lives are no longer amortized but are reviewed annually
(or more frequently if impairment indicators arise) for impairment. Separable
intangible assets that are not deemed to have indefinite lives will continue to
be amortized over their useful lives (but with no maximum life). The
amortization provisions of FAS 142 apply to goodwill and intangible assets
acquired after June 30, 2001. With respect to goodwill and intangible assets
acquired prior to July 1, 2001, Compaq is required to adopt FAS 142 effective
January 1, 2002. Compaq is currently evaluating the effect that adoption of the
provisions of FAS 142 that are effective January 1, 2002 will have on its
results of operations and financial position.
NOTE 3 - ACCOUNTING CHANGES
Effective January 1, 2001, Compaq adopted Statement of Financial
Accounting Standards No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING
ACTIVITIES, as amended ("FAS 133"). This statement establishes accounting and
reporting standards for derivative instruments and hedging activities. Under FAS
133, all derivatives must be recognized as assets or liabilities and measured at
fair value. If the derivative is designated as a cash flow hedge, the effective
portions of changes in the fair value of the derivative are recorded in other
comprehensive income ("OCI") and are recognized in the income statement when the
hedged item affects earnings. Ineffective portions of changes in the fair value
of cash flow hedges are recognized in earnings. The adoption of this statement
did not have a significant impact on Compaq's results of operations or financial
position.
Effective January 1, 2000, Compaq adopted Staff Accounting Bulletin No.
101, REVENUE RECOGNITION IN FINANCIAL STATEMENTS, as amended ("SAB 101"), issued
by the Securities and Exchange Commission ("SEC") in December 1999. Compaq's
adoption of SAB 101 resulted in a change in method of accounting for certain
revenue product shipments. The cumulative effect of this accounting change was
$38 million ($26 million, net of tax). The accounting change did not have a
material effect on revenue or quarterly earnings during 2000. Compaq has
restated its results for the three and nine month periods ended September 30,
2000.
4
<Page>
NOTE 4 - RESTRUCTURING AND RELATED CHARGES
In the first and second quarters of 2001, Compaq's management approved
restructuring plans to realign its organization and reduce operating costs.
Compaq combined its commercial and consumer personal computer operations into a
single Access business. Compaq is also implementing significant changes in its
business model and supply chain operations. These actions are designed to
simplify product offerings, derive greater internal operating efficiencies,
lower order cycle time, reduce channel inventory and improve account and order
management. In addition, Compaq is consolidating certain functions within the
global business units and has reduced administrative functions. Accordingly,
Compaq plans to reduce associated employee positions by approximately 4,500 and
4,000 worldwide in connection with the first and second quarter plans,
respectively.
Restructuring and related charges of $249 million and $493 million were
expensed during the first and second quarters of 2001, respectively. The first
quarter charge was comprised of $173 million related to employee separations,
$64 million of related asset impairment charges and $12 million for other exit
costs. The second quarter charge was comprised of $303 million related to
employee separations, $138 million of related asset impairment charges, $40
million for facility closure costs and $12 million for other exit costs.
Employee separation benefits under each plan include severance, medical and
other benefits. Employee separations related to the first and second quarter
plans were 4,300 and 2,300, respectively, as of September 30, 2001. Compaq
expects to substantially complete the initiatives contemplated under both
restructuring plans by December 31, 2001.
Components of accrued restructuring costs and amounts charged against
the plans as of September 30, 2001 were as follows:
<Table>
<Caption>
BEGINNING SEPTEMBER 30,
(In millions) ACCRUAL EXPENDITURES 2001
------------------ ----------------- ------------------
FIRST QUARTER PLAN
Employee separations $ 173 $ 114 $ 59
Other exit costs 12 4 8
------------------ ----------------- ------------------
$ 185 $ 118 $ 67
------------------ ----------------- ------------------
SECOND QUARTER PLAN
Employee separations $ 303 $ 45 $ 258
Facility closure costs 40 13 27
Other exit costs 12 12 --
------------------ ----------------- ------------------
$ 355 $ 70 $ 285
------------------ ----------------- ------------------
$ 540 $ 188 $ 352
================== ================= ==================
</Table>
The accrual at September 30, 2001 includes amounts related to future
cash payments to employees separated prior to September 30, 2001.
NOTE 5 - CERTAIN BALANCE SHEET COMPONENTS
Raw materials, work in progress and finished goods were $338 million,
$322 million and $922 million, respectively, at September 30, 2001 and $540
million, $298 million and $1.3 billion, respectively, at December 31, 2000.
Accumulated depreciation was $4.2 billion and $3.6 billion at September
30, 2001, and December 31, 2000, respectively.
At September 30, 2001 and December 31, 2000, Compaq held $371 and $864
million of equity investments, respectively, included in other non-current
assets. As of September 30, 2001, the cost basis and fair value of Compaq's
available-for-sale securities were approximately $76 million and $77 million,
respectively.
5
<Page>
Compaq's $2.2 billion revolving credit facility expired in September
2001 and was renewed for a decreased amount of $1.75 billion. The $1.75 billion
revolver expires in September 2002. In August 2001, Compaq reduced its $3.0
billion revolving credit facility to $2.25 billion. The $2.25 billion facility
expires in October 2002. The facilities bear interest at LIBOR plus 0.625
percent and LIBOR plus 0.325 percent, respectively. Both of these facilities
were unused at September 30, 2001.
In May 2000, Compaq filed a shelf registration statement with the SEC
to register $2.0 billion of debt securities. Compaq had the following debt
securities outstanding under its effective registration statement as of
September 30, 2001:
<Table>
<Caption>
DATE AMOUNT INTEREST RATE INTEREST PAYABLE MATURITY DATE
---------------- -------------- -------------- ----------------------------- ---------------------
August 2000 $300 million 7.65% February 1 and August 1 August 1, 2005
August 2000 $275 million 7.45% February 1 and August 1 August 1, 2002
</Table>
In February 2001, Compaq established under its effective registration
statement a $1.4 billion medium-term notes program for issuance of debt
securities due nine months or more from date of issue. Compaq had the following
debt securities outstanding under its medium-term notes program as of September
30, 2001:
<Table>
<Caption>
DATE AMOUNT INTEREST RATE INTEREST PAYABLE MATURITY DATE
---------------- --------------- -------------- ----------------------------- ---------------------
May 2001 $300 million 6.2% May 15 and November 15 May 15, 2003
</Table>
The net proceeds from the sale of these senior unsecured debt
securities were used for general corporate purposes including investments in
Compaq's leasing operations, capital expenditures and repayment of outstanding
indebtedness (including commercial paper issued for working capital purposes).
At September 30, 2001, borrowings included $1.2 billion in commercial
paper and $275 million in debt securities maturing August 1, 2002. At December
31, 2000, borrowings principally included commercial paper.
On October 17, 2001, the Board of Directors of Compaq ("Board")
approved a cash dividend of $0.025 per share of common stock, or approximately
$42 million, to stockholders of record as of December 31, 2001, payable on
January 18, 2002. On July 26, 2001, the Board approved a cash dividend of $0.025
per share of common stock, or approximately $42 million, to stockholders of
record as of September 29, 2001, paid on October 19, 2001. On July 27, 2000, the
Board approved a cash dividend of $0.025 per share of common stock, or
approximately $43 million, to stockholders of record as of September 29, 2000,
paid on October 20, 2000.
NOTE 6 - COMPREHENSIVE INCOME (LOSS)
The components of comprehensive income (loss), net of tax, are listed
below:
<Table>
<Caption>
THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------- -------------------------------
(In millions) 2001 2000 2001 2000
-------------- -------------- -------------- -------------
Net income (loss) $ (499) $ 557 $ (700) $ 1,241
Other comprehensive income (loss):
Unrecognized losses on cash flow hedges (20) -- (9) --
Foreign currency translations 8 1 4 3
Unrealized gains (losses) on investments 55 (647) (74) (2,985)
-------------- -------------- -------------- -------------
Comprehensive loss $ (456) $ (89) $ (779) $(1,741)
============== ============== ============== =============
</Table>
6
<Page>
NOTE 7 - OTHER INCOME AND EXPENSE
Other (income) and expense consisted of the following:
<Table>
<Caption>
THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------- -------------------------------
(In millions) 2001 2000 2001 2000
-------------- -------------- -------------- ---------------
Interest and dividend income $ (44) $(108) $(199) $(200)
Investment (income) loss, net 514 (38) 438 (144)
Interest expense 58 74 181 204
Currency losses, net 27 37 70 64
Other, net 20 15 38 7
------------- ------------- ------------- -------------
$ 575 $ (20) $ 528 $ (69)
============= ============= ============= =============
</Table>
In the third quarter of 2001, Compaq recorded a net investment loss of
$514 million due to a decline in market value of certain equity investments and
other related assets, primarily related to Compaq's investment in CMGI, Inc.
Compaq's effective tax rates changed to a 27 percent and 28 percent benefit for
the three and nine months ended September 30, 2001, respectively, due primarily
to the tax effect of the write-down of its investment portfolio during the third
quarter of 2001. This write-down could result in future capital losses that are
not expected to result in a corresponding tax benefit. Other income and expense
for the nine months ended September 30, 2001 included investment losses of $438
million, net of unrelated investment gains. The investment gains and interest
income of $61 million resulted primarily from the sale of an investment in a
limited liability corporation.
NOTE 8 - EARNINGS PER COMMON SHARE
Basic earnings per common share is computed using the weighted average
number of common shares outstanding during the period. Diluted earnings per
common share is computed using the combination of dilutive common share
equivalents and the weighted average number of common shares outstanding during
the period. Diluted loss per common share for the three and nine month periods
ended September 30, 2001 is based only on the weighted average number of common
shares outstanding during the periods, as the inclusion of 12 million and 18
million common share equivalents, respectively, would have been antidilutive.
Incremental shares of 44 million and 41 million were used in the calculation of
diluted earnings per share for the three and nine month periods ended September
30, 2000, respectively.
Stock options to purchase 237 million and 39 million shares of common
stock for the three month periods and 221 million and 41 million shares of
common stock for the nine month periods ended September 30, 2001 and 2000,
respectively, were outstanding but not included in the computation of diluted
earnings per common share because the option exercise price was greater than the
average market price of the common shares.
NOTE 9 - SEGMENT DATA
During the first quarter of 2001, Compaq combined Commercial Personal
Computing with Consumer to form the Access business, and realigned its financing
business within the Compaq Global Services segment. Further, Compaq allocated
certain shared expenses to the segments during 2001. Financial data for prior
periods has been restated to conform to the current presentation.
7
<Page>
Summary financial data by business segment follows:
<Table>
<Caption>
THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
----------------------------------- ----------------------------------
(In millions) 2001 2000 2001 2000
---------------- --------------- --------------- ---------------
Enterprise Computing
Revenue $ 2,376 $ 3,811 $ 7,995 $10,205
Operating income (loss) (104) 493 102 1,138
Access
Revenue 3,255 5,604 11,453 15,213
Operating income (loss) (248) 142 (485) 201
Compaq Global Services
Revenue 1,879 1,841 5,757 5,523
Operating income 284 232 809 658
Segment Eliminations and Other
Revenue (34) (39) (79) (84)
Operating income (loss) 6 (9) 3 (15)
Consolidated Segment Totals
Revenue $ 7,476 $11,217 $25,126 $30,857
Operating income (loss) $ (62) $ 858 $ 429 $ 1,982
</Table>
A reconciliation of Compaq's consolidated segment operating income
(loss) to consolidated income (loss) before income taxes follows:
<Table>
<Caption>
THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
--------------------------------- ----------------------------------
(In millions) 2001 2000 2001 2000
------------- --------------- --------------- --------------
Consolidated segment operating income (loss) $ (62) $ 858 $ 429 $ 1,982
Unallocated corporate expenses (48) (59) (131) (188)
Restructuring and related charges -- -- (742) --
Other income (expense), net (575) 20 (528) 69
------------- --------------- --------------- --------------
Income (loss) before income taxes $ (685) $ 819 $ (972) $ 1,863
============= =============== =============== ==============
</Table>
NOTE 10 - LITIGATION
Compaq is subject to legal proceedings and claims that arise in the
ordinary course of business. Compaq does not believe that the outcome of any of
those matters will have a material adverse effect on Compaq's consolidated
financial position, operating results or cash flows.
Compaq and certain of its current and former officers and directors are
named in two consolidated class action lawsuits pending in the United States
District Court for the Southern District of Texas, Houston Division ("USDC -
Houston"). One lawsuit was filed in 1998 and the other in 1999. The 1998
litigation consolidates five class action lawsuits brought by persons who
purchased Compaq common stock from July 10, 1997 through March 6, 1998. It
asserts claims under Section 10(b) of the Securities Exchange Act of 1934
("Exchange Act") and Rule 10b-5 promulgated thereunder and Section 20(a) of the
Exchange Act. Allegations in the 1998 lawsuit include the claim that the
defendants withheld information and made misleading statements about channel
inventory and factoring of receivables in order to inflate the market price of
Compaq's common stock and further alleges that certain individual defendants
sold Compaq common stock at the inflated prices. The 1999 litigation also
consolidates a number of class action lawsuits. The litigation is brought on
behalf of purchasers of Compaq common stock between January 27, 1999 and April
9, 1999. It asserts claims for alleged violations of Section 10(b) of the
Exchange Act and Rule 10b-5 promulgated thereunder, Section 20(a) of the
Exchange Act; and Sections 11 and 15 of the Securities Act of 1933 ("Securities
Act"). Allegations in the 1999 litigation include the claim that certain
defendants and Compaq issued a series of materially false and misleading
statements concerning Compaq's prospects in 1999 in order to inflate the market
price of Compaq's common stock and further alleges that certain individual
defendants sold Compaq common stock at the inflated prices. Lead counsels for
the plaintiffs have been appointed in both the 1998 and 1999 litigation. The
plaintiffs seek
8
<Page>
monetary damages, interest, costs and expenses in both the 1998 and 1999
litigation. In the 1998 litigation, USDC - Houston entered an order granting
class certification. Compaq appealed class certification to United States Court
of Appeals for the Fifth Circuit ("Fifth Circuit Appellate Court"). On July 25,
2001, Fifth Circuit Appellate Court vacated USDC - Houston's order certifying a
class and appointing class representatives and remanded the case to USDC -
Houston for further proceedings in accordance with its opinion. On August 8,
2001, plaintiffs' filed a petition for rehearing before Fifth Circuit Appellate
Court. Compaq filed an opposition to the petition and is awaiting a ruling from
the court. All discovery on the 1998 litigation has been stayed. On December 12,
2000, USDC - Houston judge dismissed the consolidated amended complaint in the
1999 litigation after finding that it failed to comply with pleading
requirements under the law. The plaintiffs filed a second amended complaint on
January 31, 2001. Compaq moved to dismiss the second amended complaint on March
6, 2001 and is awaiting a ruling. Compaq is vigorously defending both lawsuits.
Several purported class action lawsuits were filed against Digital
Equipment Corporation ("Digital") during 1994 alleging violations of Federal
securities laws arising from alleged misrepresentations and omissions in
connection with Digital's issuance and sale of Series A 8 7/8 percent Cumulative
Preferred Stock and Digital's financial results for the quarter ended April 2,
1994. During 1995, the lawsuits were consolidated into three cases, which were
pending before the United States District Court for the District of
Massachusetts. Compaq settled all remaining class action lawsuits relating to
this matter for approximately $5 million on July 11, 2001.
Compaq is vigorously defending several consumer class action lawsuits
alleging certain defects in its computers. One set of five related cases,
involving claims in North Carolina, Illinois, Texas, Washington and California
state courts with respect to certain desktop computers sold in 1996 and 1997, is
in the process of being resolved. A Texas court has preliminarily approved a
proposed settlement agreement under which Compaq will offer some combination of
cash, coupons and software updates to qualifying class members. If approved,
Compaq believes that this settlement will not have a material adverse effect on
Compaq's consolidated financial position or its results of operations. Two other
consumer class action lawsuits, (LaPray v. Compaq and Sprung v. Compaq) are part
of a series of similar lawsuits filed against other major computer
manufacturers, involving claims that the computer industry sold computers with
allegedly defective floppy disk controllers. LaPray is pending in the District
Court of Jefferson County, Texas, 60th Judicial District in Beaumont ("State
District Court - Beaumont") while Sprung is pending in the United States
District Court for the District of Colorado ("USDC - Colorado"). A class
certification hearing was held in LaPray on June 8, 2001. State District Court -
Beaumont entered an order granting class certification on July 23, 2001. Compaq
has appealed the class certification order. The Sprung case has been stayed
while USDC - Colorado considers Compaq's motion to dismiss. Compaq continues to
provide information to the Federal government and state attorneys general in
California and Illinois in response to inquiries regarding floppy disk
controllers in computers sold to government entities.
NOTE 11 - PROPOSED MERGER WITH HEWLETT-PACKARD COMPANY
On September 3, 2001, Compaq and Hewlett-Packard Company ("HP")
announced that a definitive merger agreement was unanimously approved by both
Boards of Directors, subject to regulatory approval and affirmative
stockholders' vote by both companies. Under the terms of the agreement dated
September 4, 2001, Compaq stockholders will receive 0.6325 of a newly issued HP
share for each outstanding share of Compaq common stock. The transaction, which
is expected to be tax-free to stockholders of both companies for U.S. Federal
income tax purposes, will be accounted for as a purchase. Subject to regulatory
and stockholder approvals and customary closing conditions, the transaction is
expected to close in the first half of 2002. The details of this transaction are
discussed in Compaq's Form 8-K filed with the SEC on September 4, 2001.
In connection with the announced proposed merger of Compaq and HP, on
September 3, 2001, Compaq's Board adopted a stockholder rights plan and declared
a dividend distribution of one right for each outstanding share of Compaq common
stock to stockholders of record as of the close of business on September 17,
2001. Each right entitles the registered holder to purchase from Compaq a unit
consisting of one one-thousandth of a share of Compaq's Series A Junior
Participating Preferred Stock, par value $.01 per share, at a
9
<Page>
purchase price of $70.00 per unit, subject to adjustment. The rights expire on
September 3, 2011 unless such date is extended or the rights are earlier
redeemed or exchanged by Compaq. A complete description of the rights and their
terms are set forth in the Rights Agreement dated as of September 4, 2001, as
the same may be amended from time to time, between Compaq and EquiServe Trust
Company, N.A., as Rights Agent, filed as Exhibit 4.1 to Compaq's Form 8-K filed
with the SEC on September 5, 2001.
10