11-K







SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

_________________

FORM 11-K

(Mark One)

   
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT
  OF 1934 [FEE REQUIRED]
 
   
  for the fiscal year ended December 31, 2002
 
  OR
 
  TRANSITION REPORT PURSUANT TO SECTION 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED
 
  For the transition period from ____________ to ____________
   
  Commission File Number: 1-4423
   
 
A. Full title of the plan and address of the plan, if different from that of the issuer named below:
   
 
  HEWLETT-PACKARD COMPANY
TAX SAVING CAPITAL ACCUMULATION PLAN
   
 
B. Name of issuer of the securities held pursuant to the plan and the address of its principal executive office:
 
 
  HEWLETT-PACKARD COMPANY
3000 HANOVER STREET
PALO ALTO, CALIFORNIA 94304
   
 
   












FINANCIAL STATEMENTS AND
SUPPLEMENTAL SCHEDULE


Hewlett-Packard Company
Tax Saving Capital Accumulation Plan
December 31, 2002 and 2001 and for the year ended December 31, 2002
with Report of Independent Auditors


Hewlett-Packard Company
Tax Saving Capital Accumulation Plan

Financial Statements and Supplemental Schedule

December 31, 2002 and 2001 and for the year ended
December 31, 2002

Contents

Page ——
Report of Independent Auditors      1  
     
Audited Financial Statements    
     
Statements of Net Assets Available for Benefits    2  
Statement of Changes in Net Assets Available for Benefits    3  
Notes to Financial Statements    4  
     
Supplemental Schedule  
     
Schedule H, Line 4i--Schedule of Assets (Held At End of Year)    10  
     
Exhibits    
     
Exhibit 23      Consent of Ernst & Young LLP, Independent Auditors       12  
Exhibit 99.1   Certification of Chief Executive Officer and Chief Financial Officer Pursuant to
                       18 U.S.C. 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
      13  

Report of Independent Auditors

Plan Administrator
Hewlett-Packard Company Tax Saving Capital Accumulation Plan

We have audited the accompanying statements of net assets available for benefits of the Hewlett-Packard Company Tax Saving Capital Accumulation Plan as of December 31, 2002 and 2001, and the related statement of changes in net assets available for benefits for the year ended December 31, 2002. These financial statements are the responsibility of the Plan’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the Plan at December 31, 2002 and 2001, and the changes in its net assets available for benefits for the year ended December 31, 2002, in conformity with accounting principles generally accepted in the United States.

Our audits were performed for the purpose of forming an opinion on the financial statements taken as a whole. The accompanying supplemental schedule of assets (held at end of year) as of December 31, 2002 is presented for the purpose of additional analysis and is not a required part of the financial statements but is supplementary information required by the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. This supplemental schedule is the responsibility of the Plan’s management. The supplemental schedule has been subjected to the auditing procedures applied in our audits of the financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole.

  /s/ Ernst & Young LLP
   
San Jose, California  
May 12, 2003  

1


Hewlett-Packard Company
Tax Saving Capital Accumulation Plan

Statements of Net Assets Available for Benefits

December 31,
2002 2001


Assets            
Investments   $ 2,940,515,933   $ 3,321,195,594  
              
Receivables:            
   Company contribution receivable    11,971,229    12,200,403  
   Amount due from brokers for securities sold    1,119,761    226,056  
   Interest and dividends receivable    1,967,579    2,044,072  


Total receivables    15,058,569    14,470,531  


Total assets    2,955,574,502    3,335,666,125  
              
Liabilities            
Amounts due to brokers for securities purchased    2,166,412    149,356  


Total liabilities    2,166,412    149,356  


              
Net assets available for benefits   $ 2,953,408,090   $ 3,335,516,769  


See accompanying notes.

2


Hewlett-Packard Company
Tax Saving Capital Accumulation Plan

Statement of Changes in Net Assets Available for Benefits


Year ended December 31, 2002

Additions        
Interest and dividends   $ 47,163,464  
         
Contributions:  
   Cash:  
     Participant    238,765,160  
     Company    112,229,733  
     Rollover    60,298,416  

     411,293,309  
         
   Noncash:  
     Participant    12,548,762  
     Company    7,750,140  
     Rollover    2,554  

     20,301,456  

Total additions    478,758,229  
         
Deductions  
Benefits paid directly to participants    277,168,782  
Net realized and unrealized depreciation in fair value of investments    583,569,952  
Administrative expenses    128,174  

Total deductions    860,866,908  

         
Net decrease    (382,108,679 )
         
Net assets available for benefits:  
   Beginning of year    3,335,516,769  

   End of year   $ 2,953,408,090  

See accompanying notes.

3


Hewlett-Packard Company
Tax Saving Capital Accumulation Plan

Notes to Financial Statements

December 31, 2002

1. Description of the Plan

The following brief description of the Hewlett-Packard Company Tax Saving Capital Accumulation Plan (the Plan) provides only general information. Participants should refer to the plan document for a more complete description of the Plan’s provisions.

General

The Plan is a defined contribution plan covering employees of Hewlett-Packard Company (the Company) and designated domestic subsidiaries who are on the U.S. payroll and who are employed as regular full-time or regular part-time employees. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA).

The Company acquired Compaq Computer Corporation as of May 2002; however the impact of this acquisition on the Plan has not yet been determined. Indigo, N.V. (Indigo) was acquired as of March 2002, and as a result, employees of Indigo who became employees of the Company became eligible to participate in the Plan.

Contributions

All employees are deemed to have elected a three percent deferral effective on the first day of their employment, unless the employee makes a change to that election in the manner prescribed by the Company.

Participating employees may contribute, on a pretax basis, up to 20% of their eligible compensation as defined by the plan document. Subsequent to the June 2, 2000 spin off of Agilent Technologies, Inc. (Agilent) from the Company, participants may no longer direct their contributions to be invested in the Agilent Stock Fund. Contributions are subject to annual deductibility limits specified under the Internal Revenue Code (the Code). Participants may also contribute amounts representing distributions from other qualified defined benefit or defined contributions plans.

The Company contributes 100% of the first 3% and 50% of the next 2% of contributions that each participant contributes to the Plan. The Company matching contribution is deposited into each participant’s account after the end of each of the Company’s fiscal quarters, which are January 31, April 30, July 31 and October 31, provided that the participant is an employee on the last day of the quarter.

4


Hewlett-Packard Company

Tax Saving Capital Accumulation Plan

Notes to Financial Statements (continued)

1. Description of the Plan (continued)

Contributions (continued)

Participant and Company contributions are made in cash for all funds except the Hewlett-Packard Company Stock Fund (Company Stock Fund). Contributions to the Company Stock Fund are made in either cash or the Company’s common stock. Stock contributions attributable to employee deferrals totaled $12,548,762 in 2002. Stock contributions attributable to Company contributions totaled $7,750,140 in 2002. Stock contributions attributable to participant rollovers from other qualified plans totaled $2,554 in 2002. Contributions of the Company’s common stock are valued at their fair market value at the closing price, as quoted on the New York Stock Exchange, on the date of contribution.

Vesting

Participants are one hundred percent vested in the Plan at all times.

Participant Accounts

Each participant’s account is credited with the participant’s contributions and allocations of (i) Company contributions, and (ii) Plan earnings and losses. Allocations are determined in accordance with the provisions of the plan document. The benefit to which a participant is entitled is the benefit that can be provided from the vested portion of the participant’s account. All amounts in participant accounts, including amounts invested in the Agilent Stock Fund prior to the June 2, 2000 spin off of Agilent, are participant-directed.

5


Hewlett-Packard Company

Tax Saving Capital Accumulation Plan

Notes to Financial Statements (continued)

1. Description of the Plan (continued)

Participant Loans

Participants may borrow from their fund accounts a minimum of $1,000 up to a maximum equal to the lesser of $50,000 or 50% of their vested account balance. Loan terms range from one to four years. Loans are secured by the participant’s account and bear interest at a rate equal to the prevailing prime rate plus one-half of 1% (0.5%). Principal and interest is paid ratably through payroll deductions.

Payment of Benefits

Upon termination of service, death, disability, and retirement, participants may receive a lump-sum amount equal to the value of their account. Participants with account balances exceeding $5,000 may elect to receive a series of cash installment payments. Lump-sum payments may be made in cash or shares of stock for distribution from both the Company Stock Fund and the Agilent Stock Fund.

Administrative Expenses

Substantially all fees and expenses of the Plan for legal, accounting, and other administrative services are paid directly by the Company on behalf of the Plan. Certain other administrative fees are charged to individual participant’s accounts.

Plan Termination

Although it has not expressed any intent to do so, the Company has the right to discontinue its contributions at any time and to terminate the Plan subject to the provisions of ERISA.

6


Hewlett-Packard Company

Tax Saving Capital Accumulation Plan

Notes to Financial Statements (continued)

2. Summary of Significant Accounting Policies

Investment Valuation and Income Recognition

The Plan’s investments are stated at fair value. The shares of registered investment companies are valued at quoted market prices which represent the net asset values of shares held by the Plan at year-end. The shares of the common collective trust fund is valued at the quoted redemption value on the last business day of the plan year. The money market fund is valued at cost plus accrued interest, which approximates fair value. The Company’s and Agilent’s common stock is traded on a national securities exchange and is valued at the last reported sales price on the last day of the plan year. Participant loans are valued at their outstanding balances, which approximate fair value.

Purchases and sales of securities are recorded on a trade-date basis. Interest income is recorded on the accrual basis. Dividends are recorded on the ex-dividend date.

Use of Estimates

The preparation of the financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

3. Investments

The following investments represent 5% or more of the fair value of the Plan’s net assets:

December 31,
2002 2001


Hewlett-Packard Company common stock     $ 429,055,525   $ 523,368,587  
Fidelity Magellan Fund    583,405,476    810,777,087  
Fidelity Contrafund    261,702,195    289,215,736  
Fidelity Institutional Money Market Fund    384,551,899    324,112,255  
Fidelity Growth & Income Portfolio    199,820,517    239,897,782  
Vanguard Institutional Index Fund Plus    190,312,151    222,582,710  
Fidelity Intermediate Bond Fund    149,090,776             *  

* Fair value of the investment was less than 5% of net assets at December 31, 2001.

7


Hewlett-Packard Company

Tax Saving Capital Accumulation Plan

Notes to Financial Statements (continued)

3. Investments (continued)

During 2002, the Plan’s investments (including investments purchased, sold, as well as held during the year) depreciated in fair value as determined by quoted market prices as follows:

Net Realized and
Unrealized
Depreciation in Fair
Value of
Investments

Registered investment companies     $ (465,829,288 )
Common collective trust fund    (6,222,158 )
Common stock    (111,518,506 )

    $ (583,569,952 )

4. Income Tax Status

The Plan has received a determination letter from the Internal Revenue Service dated August 22, 2000, stating that the Plan is qualified under Section 401(a) of the Code and, therefore, the related trust is exempt from taxation. Subsequent to the issuance of the determination letter, the Plan was amended. Once qualified, the Plan is required to operate in conformity with the Code to maintain its qualification. The Plan administrator believes that the Plan is being operated in compliance with the applicable requirements of the Code and therefore, believes that the Plan, as amended, is qualified and the related trust is tax exempt.

5. Related Party Transactions

Transactions in shares of the Company’s common stock qualify as party-in-interest transactions under the provisions of ERISA. During 2002, the Plan made purchases of approximately $102,724,146 and sales of approximately $117,694,514 of the Company’s common stock.

6. Subsequent Event

Effective January 1, 2003, the limit on participant pretax contributions was increased from 20% to 50% of eligible compensation. Effective February 1, 2003, the Company matching contributions were changed from a fiscal quarter funding basis to a per pay period funding basis.

8










Supplemental Schedule










9


Hewlett-Packard Company
Tax Saving Capital Accumulation Plan

EIN 94-1081436, Plan #004

Schedule H, Line 4i—Schedule of Assets (Held At End of Year)

December 31, 2002

(a) (b)
Identity of issue, borrower, lessor, or
similar party
(c)
Description of Investments
including Maturity Date,
Rate of Interest, Collateral,
Par, or Maturity Value
(e)
Current Value




      Registered investment companies:              
       Harbor Capital Appreciation Fund   3,946,620 shares   $ 79,761,188  
       ICAP Equity Portfolio   935,284 shares    29,994,554  
       Templeton Foreign Index Fund   7,534,773 shares    62,613,960  
       Janus Aspen Series Worldwide Growth Portfolio   3,867,577 shares    81,412,493  
       MAS Mid Cap Growth Fund   7,584,380 shares    91,619,313  
       PIMCO Total Return Fund   10,464,389 shares    111,655,035  
       Domini Social Equity Fund   785,934 shares    16,976,166  
       Vanguard Institutional Index Fund Plus   2,365,595 shares    190,312,151  
*      Fidelity Magellan Fund   7,388,621 shares    583,405,476  
*      Fidelity Contrafund   6,779,850 shares    261,702,195  
*      Fidelity Growth & Income Portfolio   6,592,561 shares    199,820,517  
*      Fidelity Intermediate Bond Fund   13,894,760 shares    149,090,776  
*      Fidelity Low-Priced Stock Fund   5,613,570 shares    141,293,561  

             1,999,657,385  
    Common collective trust fund:  
       Spartan Extended Market Index Fund   1,504,897 shares    28,939,166  
    Money market fund:  
*      Fidelity Institutional Money Market Fund   384,551,899 shares    384,551,899  
      
*   Participant loans   Interest rates from
4.75%-10.5%
    47,931,338  
    Common stock:   
*      Hewlett-Packard Company   24,715,180 shares    429,055,525  
       Agilent Technologies, Inc.   2,805,157 shares    50,380,620  

                
    Total investments       $ 2,940,515,933  

_________________

* Indicates a party-in-interest to the Plan

Column (d) cost, has been omitted as investments are all participant-directed.

10








SIGNATURES



The Plan. Pursuant to the requirements of the Securities and Exchange Act of 1934. The trustees (or other persons who administer the employee benefits plan) have duly caused this annual report to be signed by the undersigned thereunto duly authorized.



HEWLETT-PACKARD COMPANY
  TAX SAVING CAPITAL ACCUMULATION PLAN

June 26, 2003 /s/ Charles N. Charnas
—————————————————
  CHARLES N. CHARNAS
  Vice President, Deputy General Counsel
     and Assistant Secretary



11


Exhibit 23



CONSENT OF ERNST &YOUNG LLP, INDEPENDENT AUDITORS


We consent to the incorporation by reference in the Registration Statement (Form S-8 No. 2-92331) pertaining to the Hewlett-Packard Company Tax Saving Capital Accumulation Plan of our report dated May 12, 2003, with respect to the financial statements and schedule of the Hewlett-Packard Company Tax Saving Capital Accumulation Plan included in this Annual Report (Form 11-K) for the year ended December 31, 2002.



  /s/ Ernst & Young LLP
   
San Jose, California  
June 26, 2003  

12