<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549



                                    FORM 10-Q



               QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934



                FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2001



                          COMMISSION FILE NUMBER 1-9026



                           COMPAQ COMPUTER CORPORATION
             (Exact name of registrant as specified in its charter)



              DELAWARE                                      76-0011617
  (State or other jurisdiction of                        (I.R.S. Employer
   incorporation or organization)                      Identification No.)



                       20555 SH 249, HOUSTON, TEXAS 77070
                                 (281) 370-0670
         (Address, including zip code, and telephone number, including
            area code, of registrant's principal executive offices)



Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

                                 Yes [X] No [ ]


The number of shares of the registrant's Common Stock, $.01 par value,
outstanding as of September 30, 2001, was approximately 1.7 billion.



<PAGE>

                           COMPAQ COMPUTER CORPORATION
                                    FORM 10-Q
                 THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2001

                                TABLE OF CONTENTS



<Table>
<S>            <C>                                                                                            <C>
                                                         PART I

Item 1.         Financial Statements                                                                                 3

Item 2.         Management's Discussion and Analysis of Financial Condition and Results of Operations               13

Item 3.         Quantitative and Qualitative Disclosures About Market Risks                                         23


                                                         PART II

Item 1.         Legal Proceedings                                                                                   25

Item 2.         Changes in Securities and Use of Proceeds                                                           25

Item 6.         Exhibits and Reports on Form 8-K                                                                    25

                Signatures                                                                                          27
</Table>



                                       2
<PAGE>

                          PART I. FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                           COMPAQ COMPUTER CORPORATION
                      CONDENSED CONSOLIDATED BALANCE SHEET

<Table>
<Caption>
                                                                       SEPTEMBER 30,     DECEMBER 31,
(In millions, except par value)                                            2001              2000
-------------------------------                                        ------------      ------------
                                                                       (UNAUDITED)
<S>                                                                    <C>               <C>

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.



                                       3
<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
---------------------------------------                               ----------     ----------     ----------     ----------
<S>                                                                   <C>            <C>            <C>            <C>

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.



                                       4
<PAGE>

                           COMPAQ COMPUTER CORPORATION
                 CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
                                   (UNAUDITED)


<Table>
<Caption>
                                                                              NINE MONTHS ENDED
                                                                                 SEPTEMBER 30,
                                                                       ------------------------------
(In millions)                                                              2001              2000
-------------                                                          ------------      ------------
<S>                                                                    <C>               <C>

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.



                                       5
<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.



                                       6
<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
                                      ----------    ------------   -------------
<S>                                   <C>           <C>            <C>

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.



                                       7
<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
          ----              ------          -------------           ----------------              -------------

<S>                     <C>                 <C>                 <C>                              <C>
       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
          ----              ------          -------------           ----------------              -------------

<S>                     <C>                 <C>                 <C>                              <C>
        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
                                                            ------------      ------------      ------------      ------------
<S>                                                        <C>               <C>               <C>               <C>

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>



                                       8
<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
                                                            ------------      ------------      ------------      ------------
<S>                                                        <C>               <C>               <C>               <C>

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.



                                       9
<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
                                                            ------------      ------------      ------------      ------------
<S>                                                        <C>               <C>               <C>               <C>

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
                                                            ------------      ------------      ------------      ------------
<S>                                                        <C>               <C>               <C>               <C>

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



                                       10
<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



                                       11
<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.





                                       12
<PAGE>

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

         Founded in 1982, Compaq Computer Corporation ("Compaq") is a leading
global provider of enterprise technology and solutions. Compaq designs,
develops, manufactures and markets hardware, software, solutions and services,
including industry-leading enterprise storage and computing solutions,
fault-tolerant business-critical solutions, communication products, and desktop
and portable personal computers that are sold in more than 200 countries.

         The following discussion should be read in conjunction with the interim
condensed consolidated financial statements presented in Item 1.

RESULTS OF OPERATIONS

         Compaq purchased certain assets and liabilities of InaCom Corp. in
February 2000. This transaction was accounted for as a purchase. Accordingly,
Compaq's interim condensed consolidated financial statements include the results
of operations from the date of acquisition through September 30, 2001.

         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
                                                            ------------      ------------      ------------      ------------
<S>                                                        <C>               <C>               <C>               <C>

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
                                                            ------------      ------------      ------------      ------------
<S>                                                        <C>               <C>               <C>               <C>

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>

OVERVIEW

         Compaq reported third quarter and nine month consolidated revenue of
$7.5 billion and $25.1 billion, respectively, a decrease of 33 percent and 19
percent compared with the prior year periods. While revenue in Compaq Global
Services continued to grow, the higher services revenue was offset by declines
in Compaq's hardware segments resulting from a weakening global economy,
worsened by the events of September 11, and



                                       13
<PAGE>

other related supply chain and logistics events, as well as aggressive pricing.

         Consolidated gross margin of 19.9 percent of revenue ($1.5 billion) and
21.5 percent of revenue ($5.4 billion) for the three and nine months ended
September 30, 2001, respectively, declined by 4.1 and 2.0 percentage points from
the comparable periods in 2000. The decline in gross margin resulted primarily
from rapid price declines in the hardware segments.

         Consolidated operating expense was $1.6 billion for the third quarter
of 2001, a reduction of $289 million, or 15 percent, compared with the third
quarter of 2000. On a year to date basis, operating expense decreased $364
million, or 7 percent. While Compaq has successfully driven operating expense
lower through solid execution of restructuring plans and other cost reduction
initiatives, further benefits are expected to be realized upon conclusion of
these actions.

         The effective tax rate benefit was 27 percent for the three months
ended September 30, 2001 and 28 percent for the nine months ended September 30,
2001. For the comparable periods of 2000, Compaq's effective tax rate was 32
percent. The change was primarily driven by the tax effect of the write-down of
Compaq's 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. Compaq expects a full year 2001 effective tax rate
benefit of 28 percent.

         For the third quarter of 2001, Compaq's net loss (excluding special
items) was $120 million, or $(0.07) per diluted common share, compared with net
income (excluding special items) of $532 million, or $0.30 per diluted common
share, for the corresponding period in 2000. On a reported basis, Compaq's
consolidated net loss was $499 million, or $(0.29) per diluted common share, in
the third quarter of 2001, compared with consolidated net income of $557
million, or $0.31 per diluted common share, in the prior year quarter.

         For the nine months ended September 30, 2001, Compaq's net income
(excluding special items) was $146 million, or $0.09 per diluted common share,
compared with net income (excluding special items) of $1.1 billion, or $0.66 per
diluted common share, for the corresponding period in 2000. On a reported basis,
Compaq's consolidated net loss was $700 million, or $(0.41) per diluted common
share for the nine months ended September 30, 2001, compared with consolidated
net income of $1.2 billion, or $0.71 per diluted common share, in the prior year
period.

         Special items in the third quarter of 2001 included net investment
losses 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., and related tax effects, while the third quarter of 2000 included
net investment income of $38 million ($25 million, net of tax).

         Special items in the first nine months of 2001 included restructuring
charges of $742 million, net investment losses of $438 million, and related tax
effects, while the first nine months of 2000 included net investment income of
$144 million and related tax effect.

ENTERPRISE COMPUTING

         Enterprise Computing designs, develops, manufactures and markets
advanced computing and telecommunication products, including business-critical
servers, industry-standard servers and storage products.

Revenue

         Enterprise Computing revenue decreased $1.4 billion, or 38 percent,
compared with the third quarter of 2000 and represented 32 percent of
consolidated revenue during the quarter. On a year to date basis, revenue from
this segment decreased $2.2 billion, or 22 percent. The combination of weakness
in the economy, aggressive pricing practices particularly in low-end industry
standard servers, and Compaq's actions to



                                       14
<PAGE>

significantly reduce channel inventories drove average selling prices lower.
Sales of Compaq's business critical servers outperformed the segment average as
demand for Compaq Himalaya(TM) products remained steady.

Operating Income

         Enterprise Computing incurred an operating loss of $104 million during
the quarter compared with operating income of $493 million in the third quarter
of 2000. For the nine months ended September 30, 2001, operating income
decreased $1 billion, or 91 percent, compared with the corresponding period in
2000. Lower operating income in this segment resulted primarily from lower
margins in industry standard servers due to pricing actions in low-end products,
partially offset by improvements in Compaq's cost model and slightly higher
margins in business critical servers.

ACCESS

         The Access business delivers products and solutions targeting the
convergence of business and home-user computing for the Internet-connected
world.

Revenue

         Access revenue decreased $2.3 billion, or 42 percent, compared with the
third quarter of 2000 and represented 44 percent of consolidated revenue during
the quarter. On a year to date basis, Access revenue decreased $3.8 billion, or
25 percent. Deteriorating global economic conditions and declining consumer
confidence led to an aggressive pricing environment. In addition, Compaq took
strong pricing actions on existing model portable inventory in conjunction with
the introduction of the new Compaq Evo(TM) line, and significantly reduced
channel inventories during the quarter. These factors contributed to lower unit
sales and average selling prices.

Operating Income

         The Access business incurred an operating loss of $248 million during
the quarter compared with operating income of $142 million in the third quarter
of 2000. For the nine months ended September 30, 2001, Access incurred an
operating loss of $485 million compared with operating income of $201 million
for the corresponding period in 2000. While Compaq has increased direct sales is
beginning to realize increasing cost efficiencies from the combination of its
consumer and commercial personal computer operations, weakening economic
conditions and an aggressive pricing environment led to operating losses for the
quarter and year to date periods.

COMPAQ GLOBAL SERVICES

         Compaq Global Services delivers worldwide infrastructure and solution
design implementation, management and support services, as well as leasing and
asset management services.

Revenue

         Compaq Global Services revenue increased $38 million, or 2 percent (5
percent in constant currency), compared with the third quarter of 2000 and
represented 25 percent of consolidated revenue. On a year to date basis, revenue
from this segment increased $234 million, or 4 percent (9 percent in constant
currency). Compaq Global Services' broad portfolio and geographic
diversification contributed to higher revenue, despite a challenging economic
environment. Revenue growth was fueled by global enterprise technology
solutions. Given current economic uncertainties, customers are focused on
service and solution expenditures that reduce costs and increase productivity,
resulting in growth in revenue from outsourcing and support services. Revenue
also benefited from stronger service attachment rates as well as higher leasing
revenues due to growth in Compaq's leased asset portfolio.



                                       15
<PAGE>

Operating Income

         Compaq Global Services operating income increased $52 million, or 22
percent, in the third quarter of 2001 compared with the corresponding period in
2000. For the nine months ended September 30, 2001, operating income from this
segment increased $151 million, or 23 percent, compared with the corresponding
period in 2000. The increase in operating income resulted primarily from higher
revenue as noted above as well as lower operating costs resulting from
initiatives to align operating costs with the current economic climate and
revenue profile.

UNALLOCATED CORPORATE EXPENSES

         The results of the business segments exclude separately managed
unallocated corporate expenses, which are comprised primarily of general and
administrative costs as well as other items not controlled by the business
segments. Unallocated corporate expenses decreased 19 percent from $59 million
in the third quarter of 2000 to $48 million in the third quarter of 2001. On a
year to date basis, unallocated corporate expenses decreased 30 percent from
$188 million to $131 million.

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. Upon conclusion of its restructuring
initiatives, Compaq expects to achieve annualized savings of approximately $900
million in cost of sales and operating expenses as a result of the first and
second quarter restructuring actions. However, there can be no assurance that
such cost reductions can be sustained or that the estimated costs of such
actions will not change.



                                       16
<PAGE>

         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
                                      ------------     ------------     -------------
<S>                                   <C>              <C>              <C>

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.

LIQUIDITY AND CAPITAL RESOURCES

          Compaq's cash and cash equivalents increased $1.4 billion to $3.9
billion at September 30, 2001. The increase resulted primarily from $1.3 billion
and $731 million provided by operating and financing activities, respectively,
offset in part by $675 million used in investing activities.

         Net cash of $1.3 billion provided by operating activities consisted
primarily of a net loss of $700 million adjusted for non-cash items of $1.8
billion and $219 million provided by working capital and other activities. Net
cash provided by working capital and other activities resulted primarily from a
decrease in receivables and inventory, offset in part by a decrease in payables
and other current liabilities. Days sales outstanding were 59 days in the
current quarter compared with 53 days in the fourth quarter of 2000. Inventory
turns were 15.0 in the third quarter of 2001 compared with 16.3 in the fourth
quarter of 2000.

         Net cash of $675 million used in investing activities consisted of $742
million used for net capital expenditures, $105 million used for the purchase of
investments and $138 million used in other investing activities, partially
offset by proceeds received from the sale of investments of $310 million.

         Cash provided by financing activities of $731 million consisted
primarily of increases in short-term borrowings and long-term debt of $815
million and net common stock transactions of $42 million, partially offset by
dividends paid to stockholders of $126 million.

         Estimated future uses of cash in 2001 include capital expenditures for
land, buildings and equipment of approximately $200 million and purchases of
equipment to be leased to third parties of approximately $100 million. Compaq
has approximately $520 million remaining under the $1.0 billion program for the
repurchase of Compaq common shares authorized by the Board of Directors in
December 2000.

         Compaq also plans to use available liquidity to develop the purchased
in-process technology related to the Digital Equipment Corporation acquisition
into commercially viable products. At September 30, 2001, the estimated costs to
be incurred to develop the purchased in-process technology into commercially
viable products totaled approximately $640 million in the aggregate through the
year 2004 ($110 million in 2001, $330 million in 2002, $140 million in 2003 and
$60 million in 2004).

         Compaq currently expects to fund expenditures for capital requirements
as well as liquidity needs from a combination of available cash balances,
internally generated funds and financing arrangements. 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



                                       17
<PAGE>

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. Compaq operates two short-term commercial
paper programs totaling $4.7 billion. These programs are supported by the $2.25
billion and $1.75 billion credit facilities. Outstanding commercial paper
reduces available borrowings under these credit facilities. At September 30,
2001, Compaq had $1.2 billion in commercial paper outstanding under the
programs, with a weighted average interest rate of 3.6 percent. The carrying
amount of the borrowings under the commercial paper programs approximates their
fair value. Additionally, Compaq maintains various uncommitted lines of credit,
which totaled approximately $587 million at September 30, 2001. There were no
outstanding borrowings against these lines at September 30, 2001. Compaq
believes that these sources of credit provide sufficient financial flexibility
to meet future funding requirements. Compaq continually evaluates the need to
establish other sources of working capital and will pursue those it considers
appropriate based upon its needs and market conditions.

          In May 2000, Compaq filed a shelf registration statement with the
Securities and Exchange Commission 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
          ----              ------          -------------           ----------------              -------------

<S>                      <C>                <C>                <C>                              <C>
       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
          ----              ------          -------------           ----------------              -------------

<S>                      <C>                <C>                <C>                              <C>
        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
CFS and other subsidiaries), capital expenditures and repayment of outstanding
indebtedness (including commercial paper issued for working capital purposes).

FACTORS THAT MAY AFFECT FINANCIAL CONDITION AND FUTURE RESULTS

         Compaq participates in a highly volatile industry that is characterized
by intense industry-wide competition. Industry participants confront aggressive
pricing practices by competitors, continually changing customer demand patterns
and rapid technological developments. The following cautionary statements
discuss important factors that could cause actual results to differ materially
from the projected results contained in the forward-looking statements in this
report.

         Compaq's business and stock price may be adversely affected if the
merger with Hewlett-Packard Company ("HP") is not completed. On September 4,
2001, Compaq entered into an agreement to combine its business with HP. If the
merger is not completed, Compaq could be subject to a number of risks that may
adversely affect its business and stock price, including: Compaq would not
realize the benefits it expects by being part of a combined company with HP, as
well as the potentially enhanced financial and competitive position as a result
of being part of the combined company, would not be realized; the diversion of
management attention from Compaq's day-to-day business and the unavoidable
disruption to its employees and its relationships with customers and joint
venture partners as a result of efforts and uncertainties relating to Compaq's
anticipated merger with HP may detract from its ability to grow revenues and
minimize costs, which may lead to a loss of market position that Compaq could be
unable to regain if the merger does not occur; the market price of shares of
Compaq's common stock may decline to the extent that the current market price of
those shares reflects a market assumption that the merger will be completed;
Compaq could be required to pay HP a $675 million termination fee; Compaq must
pay the costs related to the merger, such as legal and accounting fees and a



                                       18
<PAGE>

portion of the investment banking fees; and Compaq may not be able to continue
its present level of operations and have to scale back its business, may have to
consider additional reductions in force, and may not be able to take advantage
of future opportunities or effectively respond to competitive pressures, any of
which could have a material adverse effect on its business and results of
operations. In connection with the proposed merger, Compaq and HP expect to file
a joint proxy statement/prospectus with the Securities and Exchange Commission.
The joint proxy statement/prospectus will be mailed to all holders of Compaq
stock and will contain important information about Compaq, HP and the proposed
merger, risks relating to the merger and the combined company, and related
matters. Compaq urges all of its stockholders to read the joint proxy
statement/prospectus when it becomes available.

         The announcement of the planned merger could have an adverse effect on
Compaq's revenues in the near-term if customers delay, defer, or cancel
purchases pending resolution of the planned merger with HP. While Compaq is
attempting to mitigate the risk through customer assurance programs, prospective
customers could be reluctant to purchase Compaq's products if they are uncertain
about the direction of the combined company's product offerings and its
willingness to support and service existing products. To the extent Compaq's
announcement of the merger creates uncertainty among those persons and
organizations contemplating hardware, software or service purchases such that
one large customer, or a significant group of small customers, delays purchase
decisions pending resolution of the planned merger, this could have an adverse
effect on Compaq's results of operations and quarterly revenues could be
substantially below the expectations of market analysts and could cause a
reduction in stock price.

         Worsening global economic conditions could adversely impact Compaq's
revenues and growth rate. During the first nine months of 2001, the information
technology market weakened, first in the United States, then in Europe and Asia.
Continued softness in these markets, particularly in the telecommunications and
consumer sectors, and purchasers' uncertainty about the extent of the global
economic downturn could result in lower demand for products and services. While
worsening economic conditions have had a negative impact on revenues to date,
revenues and earnings could further deteriorate or Compaq's growth rate could be
adversely impacted in the future as a result of economic conditions.

         The competitive environment in the information technology industry
places pressure on revenue, gross margins and market share. Competition remains
intense in the information technology industry with a large number of
competitors vying for customers and market share domestically and
internationally. These competitive factors have spurred more aggressive pricing
tactics due to the softness in the information technology industry, which
continues to put pressure on revenue, gross margins and market share. In the
fourth quarter of 2001, Compaq intends to continue aggressive pricing and
programs to drive demand generation in core markets and to reduce reseller
inventories. Compaq cannot guarantee that programs and lower prices will
generate growth in demand, or that the growth in demand will offset the relative
reduction in its gross margins. Further, if its pricing and programs are not
sufficiently competitive with the pricing and programs offered by its current
and future competitors, Compaq may lose market share, which could adversely
affect its revenues and prospects. Failure to successfully manage operating
expenses, in connection with pricing programs, could adversely affect results of
operations.

         Expansion of Compaq's solutions model could be delayed by cost
constraints and organizational transition, which may have an adverse impact on
its revenues. Compaq is focusing its business development on offering total
information technology solutions to its customers. To succeed in this effort,
Compaq must continue to expand its vertical industry presence, increase its
service and software offerings, and offer programs that enable its customers to
purchase information technology as a utility. Compaq must also invest
significant resources in developing new solutions offerings and retain or
develop significant new employee skills while under significant company-wide
cost constraints. Compaq's failure to successfully expand its information
technology solutions model or delay in its internal development or its
acquisition of significant external resources in this area could result in its
offerings not being competitive and lead to a reduction in consumer demand for
its products and services, which could adversely affect its revenues.



                                       19
<PAGE>

         The consolidation of Compaq's high performance servers on a single
microprocessor architecture could adversely affect its revenues. In June 2001,
Compaq announced a strategic alliance with Intel Corp. ("Intel") that, over a
multi-year period, will lead to consolidation of its high-end performance
enterprise servers on a single microprocessor architecture. Plans to consolidate
high-end performance enterprise servers on a single microprocessor architecture
could lead to the loss of high-end business. Compaq believes that the Compaq
Alpha(TM) microprocessor offers significant advantages for its customers and
that the cost effectiveness of the Intel(R) Itanium(TM) microprocessor will be
an attractive value. However, the transition to the Intel architecture could
lead to the loss of potential new business for Compaq's high-end enterprise
products with a different microprocessor architecture and service business
associated with such products and, more significantly, the loss of current
customers to high-end enterprise hardware competitors in this sector. Such a
loss of business or current customers in the high-end performance enterprise
server market could adversely affect Compaq's revenues.

         Compaq's failure to timely and successfully implement changes in its
delivery models could negatively affect its revenues. Compaq uses a variety of
delivery models to sell its broad array of products and services. Compaq sells
directly to end users in all market sectors, but the largest proportion of its
direct hardware sales is in large enterprise accounts. Compaq's computing
hardware products are sold to the commercial market primarily through
third-party resellers while consumer personal computing products are sold
principally through retail outlets. Compaq has established a variety of programs
designed to achieve improved operational capabilities for all of its delivery
models by simplifying its product-set and pricing model, re-engineering its
channel delivery model and more rapidly expanding its e-commerce capabilities
for large, medium and small businesses. Should Compaq fail to implement the most
advantageous delivery model for each of its products and services, Compaq could
lose market opportunities that result in an adverse impact on its revenues.

         The terrorist attacks that took place in the United States on September
11, 2001 were unprecedented events that have created many economic and political
uncertainties, some of which may materially harm Compaq's business and revenues.
The disruption of Compaq's business as a result of the terrorist attacks of
September 11, 2001 on the United States, including transportation and
supply-chain disruptions and deferrals of customer purchasing decisions, had an
immediate adverse impact on its business. The long-term effects of the September
11, 2001 attacks on Compaq's business and revenues are unknown. The potential
for future terrorist attacks, the national and international responses to
terrorist attacks, and other acts of war or hostility have created many economic
and political uncertainties, which could adversely affect Compaq's business and
revenues in the short or long-term in ways that cannot presently be predicted.

         Erosion of the financial condition of computer resellers or equipment
lessees could adversely affect Compaq's business. Much of Compaq's revenue
results from selling products through distributors and resellers. Compaq
continually monitors and manages the credit it extends to distributors and
resellers and attempts to limit credit risks by utilizing risk transfer
arrangements and obtaining security interests. Compaq's business could be
adversely affected in the event that the financial condition of its distributors
and resellers erodes. As the global information technology market weakens, the
likelihood of the erosion of the financial condition of these distributors and
resellers increases. Upon the financial failure of a distributor or reseller,
Compaq could experience disruptions in distribution as well as a loss associated
with the unsecured portion of any of its outstanding accounts receivable.
Additionally, Compaq provides information technology leasing and financing
solutions to customers. As a consequence, Compaq is exposed to the risk that
lessees will be unable to make required lease payments and to the risk that
leased equipment will be worth less upon its return to Compaq than was estimated
at lease inception. While Compaq believes that its allowances for credit losses
are adequate and that its estimates of the residual values of leased equipment
are reasonable, these allowances may not cover actual losses and Compaq may not
realize estimated residual values, both of which could adversely affect its
business.

           Compaq's failure to successfully align its service practices with the
trend toward industry standard products could adversely affect its business.
Compaq's Global Services business has traditionally provided services that
included the design and implementation of both high-end proprietary systems and
industry standard products. If the trend for design and implementation of
systems continues to move from proprietary



                                       20
<PAGE>

environments to industry standard products, Compaq will need to continue and
accelerate retraining its services personnel to compete in the new environment.
Compaq's failure to successfully continue training, attracting and retaining the
necessary personnel to achieve this transition as Compaq adapts its service
practices to changing conditions could adversely affect its business.

         Unanticipated delays in Compaq's product schedules could negatively
affect product demand and adversely affect its business. The process of
developing new high-technology products and services is complex and often
uncertain due to the frequent introduction of new products that offer improved
performance and pricing. Compaq's ability to successfully transition products
and deploy new products requires that Compaq make accurate predictions of the
product development schedule as well as volumes, product mix, customer demand
and configuration. Compaq may anticipate demand and perceived market acceptance
that differs from the product's realizable customer demand and revenue stream.
Further, in the face of intense industry competition, any delay in the
development, production or marketing of a new product could decrease any
advantage Compaq may have to be the first or among the first to market. Compaq's
failure to carry out a product rollout in the time frame anticipated and in the
quantities appropriate to customer demand could adversely affect the future
demand for its products and the related services and have an adverse effect on
its business.

         Compaq's quarterly sales cycle makes planning and operational
efficiencies difficult and future financial results less predictable. Like other
technology companies, Compaq generally sells more hardware products in the third
month of each quarter than in the first and second months. This sales pattern
places pressure on manufacturing and logistics systems based on internal
forecasts and may adversely affect Compaq's ability to predict its financial
results accurately. In addition, to rationalize manufacturing utilization,
Compaq may build products early in the quarter in anticipation of demand late in
the quarter. Developments late in a quarter, such as lower-than-anticipated
product demand, a systems failure, component pricing movements, or global
logistics disruptions could adversely impact inventory levels, cash and related
profitability in a manner that is disproportionate to the number of days in the
quarter affected.

         The risks of doing business in developing countries and economically
volatile areas could adversely affect Compaq's operations and earnings. Compaq's
manufacturing operations in developing countries, such as Brazil and China, and
the expansion of sales into economically volatile areas, such as Asia-Pacific,
Latin America and other emerging markets, subject Compaq to a number of economic
and other risks. Such risks include financial instability among resellers in
these regions and the volatility of economic conditions in countries dependent
on exports from the United States and European markets. Compaq generally has
experienced longer accounts receivable cycles in emerging markets, in particular
Latin American markets, when compared with the United States and European
markets. Compaq is also subject to any political and financial instability in
the countries in which it operates, including inflation, recession, trade
protection measures, local labor conditions, and unexpected changes in
regulatory requirements, currency devaluation and interest rate fluctuations.
Compaq's failure to successfully manage economic, political and other risks
relating to doing business in developing countries and economically volatile
areas could adversely affect its business.

         Compaq's reliance on third party suppliers of material components for
its products could curtail production. Compaq depends on many third party
suppliers for key components contained in its product offerings and certain
other supply chain functions. For some of these components, Compaq may only use
a single source supplier. From time to time, the supply for key components in
its products lags behind worldwide demand. If the supply of a key material
component is delayed or curtailed, Compaq's ability to ship the related product
in desired quantities and in a timely manner could be adversely affected. In the
event that the financial condition of Compaq's third party suppliers for key
components were to erode, the delay or curtailment of deliveries of key material
components could occur. Further, Compaq's reliance on third party suppliers of
key material components exposes it to potential product quality issues that
could affect the reliability and performance of its product set. Compaq's
inability to ship its products in desired quantities and in a timely manner due
to a delay or curtailment of the supply of material components, or product
quality issues arising from faulty components manufactured by third party
suppliers, could adversely affect the market for its products and lead to a
reduction in its revenues. Compaq's attempts to mitigate the risk of reliance on
third party



                                       21
<PAGE>

suppliers by working closely on product plans, coordinated product
introductions, purchases on the spot market and selected strategic purchases
could also fail.

         Compaq could incur losses in connection with its minority investments
or be unable to recover the carrying value of its minority investments, which
could adversely affect earnings. Compaq holds minority interests in companies
having operations or technology in areas within its strategic focus. Certain of
its investments are in publicly traded companies whose share prices are highly
volatile. Further adverse changes in market conditions or poor operating results
of underlying investments could result in its incurring losses or its inability
to recover the carrying value of its investments.

         Delays in implementing Compaq's business and information management and
system improvements could adversely affect its business. Compaq continues to
focus on increasing the effectiveness and efficiency of its business and
information management processes to increase customer satisfaction, improve
productivity and lower costs. In 2001, Compaq is focusing on improvements
required to support more direct sales and changes in its manufacturing supply
chain operations to improve inventory levels. Capital investments to improve its
systems infrastructure and increase system security could be hampered by its
need to balance increased operational efficiency against budgetary constraints.
Delays in implementing the improvements necessary to support more direct sales
and changes to Compaq's manufacturing supply chain operations could adversely
affect its business.

         Compaq's stock price, like that of other technology companies, can be
volatile. Some of the factors that could affect Compaq's stock price are
Compaq's, or a competitor's, announcement of new products, services or
technological innovations, quarterly increases or decreases in revenue or
earnings, changes in revenue or earnings estimates by the investment community,
and speculation in the press or investment community about Compaq's financial
condition or results of operations. General market conditions and domestic or
international economic factors unrelated to Compaq's performance may also affect
its stock price. For these reasons, investors should not rely on recent trends
to predict future stock prices or financial results. In addition, following
periods of volatility in a company's securities, securities class action
litigation against a company is sometimes instituted. This type of litigation
could result in substantial costs and the diversion of management time and
resources.

         Restructuring activity and expense constraints could adversely affect
Compaq's operations and divert management's focus. Compaq has undertaken two
restructuring plans to realign its organization and bring its operational
expenses to appropriate levels for each of its businesses while simultaneously
implementing extensive new company-wide programs. The significant risks
associated with these actions include the delays in implementation of
anticipated reductions in force in highly regulated locations in a number of
countries in Europe, adverse impact on employee morale and retention, and the
failure to meet operational targets by not matching commitments in new programs
to reductions in ongoing programs.

         Income taxes. Compaq anticipates an effective tax rate benefit of 28
percent for 2001. Compaq's manufacturing entity in Singapore was subject to a
tax holiday that expired on August 31, 2001. Compaq's tax rate has historically
been heavily dependent upon the proportion of earnings derived from its
Singaporean manufacturing subsidiary and its ability to reinvest those earnings
permanently outside the United States. If Compaq's intercompany transfer pricing
with respect to its Singaporean manufacturing subsidiary for prior years
requires significant adjustment due to audits or regulatory changes, Compaq's
overall tax rate could be adversely affected.



                                       22
<PAGE>

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

         Compaq is exposed to market risks, which include changes in currency
exchange rates as measured against the U.S. dollar and each other, changes in
United States and international interest rates as well as changes in equity
security prices. Compaq attempts to reduce certain of these risks by utilizing
derivatives and other financial instruments.

         Compaq uses market valuations and value-at-risk valuation methods to
assess the market risk of its financial instruments and derivative portfolios.
It uses software by RiskMetrics to estimate the value-at-risk of its financial
instruments and derivative portfolios based on estimates of volatility and
correlation of market factors drawn from RiskMetrics data sets for the dates
calculated. RiskMetrics defines loss as a reduction in the value of a portfolio
in the event of adverse market conditions, using a predetermined confidence
interval, over a specified period of time. Compaq's model uses a
variance/covariance method for a holding period of one day with a 95 percent
confidence level.

FOREIGN CURRENCY RISK

         The value of the U.S. dollar affects Compaq's financial results.
Changes in exchange rates may positively or negatively affect Compaq's revenues,
gross margins, operating expenses and retained earnings as expressed in U.S.
dollars. Compaq engages in hedging programs aimed at limiting in part the impact
of currency fluctuations. Principal currencies hedged include the Euro, Japanese
yen and British pound sterling. Compaq primarily uses forward exchange contracts
to hedge those assets and liabilities that impact the income statement when
remeasured according to accounting principles generally accepted in the United
States. For some markets, Compaq has determined that ongoing hedging of non-U.S.
dollar net monetary assets is not cost effective and instead attempts to
minimize currency exposure risk through working capital management. There can be
no assurance that such an approach will be successful, especially if a
significant and sudden decline occurs in the value of local currencies. Compaq
purchases foreign currency option contracts from time to time as well as forward
exchange contracts to protect against currency exchange risks associated with
the anticipated revenues of Compaq's international marketing subsidiaries, with
the exception of certain subsidiaries that reside in countries in which such
activity would not be cost effective or local regulations preclude this type of
activity. These hedging activities provide only limited protection against
currency exchange risks. Factors that could impact the effectiveness of Compaq's
hedging programs include accuracy of sales forecasts, volatility of the currency
markets and availability of hedging instruments. All currency contracts that are
entered into by Compaq are components of hedging programs and are entered into
for the sole purpose of hedging an existing or anticipated currency exposure,
not for speculation. Although Compaq maintains these programs to reduce the
impact of changes in currency exchange rates, Compaq's revenues or costs are
adversely affected when the U.S. dollar sustains a strengthening position
against currencies in which Compaq sells products and services or a weakening
exchange rate against currencies in which Compaq incurs costs.

         Based on Compaq's foreign currency exchange instruments outstanding at
September 30, 2001, Compaq estimates a maximum potential one-day loss in fair
value of approximately $47 million. Compaq included all foreign exchange
contracts in the value-at-risk calculation. The holding period for these
instruments varies from one day to nine months, with the exception of
instruments held in connection with leasing operations, which have holding
periods up to four years.

INTEREST RATE RISK

         Changes in interest rates affect interest income earned on Compaq's
cash equivalents and short-term investments, interest expense on short-term
borrowings, and the fair value of Compaq's debt and investment portfolios.
Compaq does not enter into derivative transactions related to its cash, cash
equivalents or short-term investments. Compaq does periodically enter into
interest rate swap transactions for the purpose of hedging existing or
anticipated liabilities. All interest rate swaps entered into by Compaq are for
the sole purpose of hedging existing or anticipated interest rate sensitive
positions, not for speculation.

         Based on Compaq's debt and investment portfolios outstanding at
September 30, 2001, Compaq estimates a maximum potential one-day loss in fair
value of $2 million. Compaq included all fixed income



                                       23
<PAGE>

investments, interest rate swaps, commercial paper and long-term debt
obligations in the value-at-risk calculation. The holding period for these
instruments varies from one day to five years.

EQUITY PRICE RISK

         Compaq is exposed to equity price risks on the marketable portion of
investments in publicly traded equity securities. These investments are
generally in companies having operations or technology in areas within Compaq's
strategic focus. Compaq does not attempt to reduce or eliminate its market
exposure on these securities. As of September 30, 2001, the fair value of
Compaq's available-for-sale securities was $77 million. A 20 percent adverse
change in equity prices would result in an approximate $15 million decrease in
the fair value of Compaq's available-for-sale securities as of September 30,
2001.

         Because of the foregoing factors (Factors That May Affect Financial
Condition and Future Results and Market Risk), as well as other variables
affecting Compaq's operating results, past financial performance should not be
considered a reliable indicator of future performance and investors should not
use historical trends to anticipate results or trends in future periods.




                                       24
<PAGE>

                           PART II. OTHER INFORMATION


ITEM 1. LEGAL PROCEEDINGS

         See Note 10 to unaudited interim condensed consolidated financial
statements.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

         On September 3, 2001, Compaq's Board of Directors 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 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 Securities and Exchange Commission on September
5, 2001.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

    a)   Exhibits

         Exhibit No.     Description

         2.1             Agreement and Plan of Reorganization dated September 4,
                         2001, by and among Hewlett-Packard Company, Heloise
                         Merger Corporation and Compaq Computer Corporation
                         (incorporated herein by reference to Exhibit 2.1 to the
                         Company's Current Report on Form 8-K dated September 3,
                         2001 (filed September 4, 2001) (File No. 1-09026))

         4.1             Rights Agreement dated as of September 4, 2001, between
                         Compaq Computer Corporation and EquiServe Trust
                         Company, N. A., as Rights Agent, setting forth the
                         rights of the registered holder to purchase from the
                         Company a unit consisting of one one-thousandth of a
                         share of Series A Junior Participating Preferred Stock,
                         par value $.01 per share at a Purchase Price of $70 per
                         Unit, subject to adjustment, including the Form of
                         Rights Certificate as Exhibit B and the Summary of
                         Rights to Purchase Preferred Stock as Exhibit C
                         (incorporated herein by reference to Exhibit 4.1 to the
                         Current Report on Form 8-K dated September 4, 2001
                         (filed September 5, 2001) (File No. 1-09026))

         10.1            $1,750,000,000 Revolving Credit Agreement (364 Day)
                         dated as of September 28, 2001, among Compaq Computer
                         Corporation, Citibank, N.A., as sole Administrative
                         Agent, Bank of America, N.A. and The Chase Manhattan
                         Bank, as Co-Syndication Agents, Fleet National Bank and
                         The Royal Bank of Scotland plc, as Co-Documentation
                         Agents and the other banks party thereto.

         10.2            Letter dated as of June 7, 2001, regarding Notice of
                         the Company's Commitment Reduction to the
                         $3,000,000,000 Credit Agreement among Compaq Computer
                         Corporation, the banks signatory thereto and Bank of
                         America National Trust and Savings Association, as
                         Administrative Agent.

         10.3            Amendment to the 1985 Stock Option Plan.*

         10.4            Amendment to the 1985 Executive and Key Employee Stock
                         Option Plan.*

         10.5            Amendment to the 1985 Non-Qualified Stock Option Plan.*



                                       25
<PAGE>

         10.6            Amendment to the 1989 Equity Incentive Plan.*

         10.7            Amendment to the 1995 Equity Incentive Plan.*

         10.8            Amendment to the 1998 Stock Option Plan.*

         10.9            Amendment to the 2001 Stock Option Plan.*

         10.10           Amendment to the Non-Qualified Stock Option Plan for
                         Non-Employee Directors.*

         10.11           Form of Executive Severance Agreement. *

         *        Indicates management contract or compensatory plan or
                  arrangement.

    b)   Reports on Form 8-K

         (i)             Report on Form 8-K dated September 4, 2001, containing
                         (a) Compaq's and Hewlett-Packard Company's joint news
                         release dated September 3, 2001, announcing the planned
                         merger of Hewlett-Packard Company and Compaq, and (b)
                         the Agreement and Plan of Reorganization, dated
                         September 4, 2001, by and among Hewlett-Packard
                         Company, Heloise Merger Corporation and Compaq.

         (ii)            Report on Form 8-K dated September 5, 2001, containing
                         information about Compaq's stockholder rights plan, as
                         approved by Compaq's Board of Directors and attaching
                         the Rights Agreement, dated as of September 4, 2001,
                         between Compaq and EquiServe Trust Company, N.A., as
                         Rights Agent, including the Form of Rights Certificate
                         as Exhibit B and the Summary of Rights to Purchase
                         Preferred Stock as Exhibit C.

         (iii)           Report on Form 8-K/A dated September 12, 2001, amending
                         the reported number of authorized shares of
                         Hewlett-Packard Company's common stock, par value $0.01
                         per share, as set forth in Section 3.2(a) of the
                         Agreement and Plan of Reorganization attached as an
                         exhibit to Compaq's Form 8-K filed on September 4,
                         2001.

         (iv)            Report on Form 8-K dated September 17, 2001, containing
                         Compaq's news release dated September 17, 2001,
                         announcing the resumption of Compaq's stock repurchase
                         program, of approximately $550 million remaining under
                         the $1 billion program, as previously authorized by
                         Compaq's Board of Directors in December 2000.

         (v)             Report on Form 8-K dated October 2, 2001, containing
                         Compaq's news release dated October 1, 2001, reporting
                         that, based on preliminary financial data, earnings on
                         an operational basis for the third quarter ended
                         September 30, 2001, are expected to be a loss in the
                         range of ($0.05) to ($0.07) per diluted common share
                         and revenue to be in the range of $7.4 to $7.5 billion
                         for the same period.

All other items specified by Part II of this report are inapplicable and
accordingly have been omitted.



                                       26
<PAGE>

                                   SIGNATURES

         Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.


October 23, 2001
                                      COMPAQ COMPUTER CORPORATION



                                      /s/ Jeff Clarke
                                      ------------------------------------------

                                      Jeff Clarke
                                      Senior Vice President, Finance and
                                      Administration and Chief Financial Officer
                                      (as authorized officer and as principal
                                      financial officer)



                                       27
<PAGE>


                               INDEX TO EXHIBITS

<Table>
<Caption>
      EXHIBIT
      NUMBER             DESCRIPTION
      -------            -----------
<S>                      <C>

         2.1             Agreement and Plan of Reorganization dated September 4,
                         2001, by and among Hewlett-Packard Company, Heloise
                         Merger Corporation and Compaq Computer Corporation
                         (incorporated herein by reference to Exhibit 2.1 to the
                         Company's Current Report on Form 8-K dated September 3,
                         2001 (filed September 4, 2001) (File No. 1-09026))

         4.1             Rights Agreement dated as of September 4, 2001, between
                         Compaq Computer Corporation and EquiServe Trust
                         Company, N. A., as Rights Agent, setting forth the
                         rights of the registered holder to purchase from the
                         Company a unit consisting of one one-thousandth of a
                         share of Series A Junior Participating Preferred Stock,
                         par value $.01 per share at a Purchase Price of $70 per
                         Unit, subject to adjustment, including the Form of
                         Rights Certificate as Exhibit B and the Summary of
                         Rights to Purchase Preferred Stock as Exhibit C
                         (incorporated herein by reference to Exhibit 4.1 to the
                         Current Report on Form 8-K dated September 4, 2001
                         (filed September 5, 2001) (File No. 1-09026))

         10.1            $1,750,000,000 Revolving Credit Agreement (364 Day)
                         dated as of September 28, 2001, among Compaq Computer
                         Corporation, Citibank, N.A., as sole Administrative
                         Agent, Bank of America, N.A. and The Chase Manhattan
                         Bank, as Co-Syndication Agents, Fleet National Bank and
                         The Royal Bank of Scotland plc, as Co-Documentation
                         Agents and the other banks party thereto.

         10.2            Letter dated as of June 7, 2001, regarding Notice of
                         the Company's Commitment Reduction to the
                         $3,000,000,000 Credit Agreement among Compaq Computer
                         Corporation, the banks signatory thereto and Bank of
                         America National Trust and Savings Association, as
                         Administrative Agent.

         10.3            Amendment to the 1985 Stock Option Plan.*

         10.4            Amendment to the 1985 Executive and Key Employee Stock
                         Option Plan.*

         10.5            Amendment to the 1985 Non-Qualified Stock Option Plan.*
</Table>


<PAGE>

<Table>
<S>                      <C>
         10.6            Amendment to the 1989 Equity Incentive Plan.*

         10.7            Amendment to the 1995 Equity Incentive Plan.*

         10.8            Amendment to the 1998 Stock Option Plan.*

         10.9            Amendment to the 2001 Stock Option Plan.*

         10.10           Amendment to the Non-Qualified Stock Option Plan for
                         Non-Employee Directors.*

         10.11           Form of Executive Severance Agreement. *
</Table>

         *        Indicates management contract or compensatory plan or
                  arrangement.