HP Reaches Settlement in Gray Market Case with P & E Distributing

PALO ALTO, Calif., March 16, 2006, HP today announced it has settled with P & E Distributing and its president, David Welker, two defendants in gray market litigation that HP filed in August 2004 in a Tennessee federal court.

HP sought to recover more than $8.6 million in pricing discounts for computer equipment that a former Tennessee reseller, Capital City Micro, Inc., purchased based on misrepresentations that the equipment would be resold to P & E Distributing of Kentucky.

HP continues to pursue its claims against Capital City Micro and its president, Martin Meeks.

Capital City Micro was an authorized reseller of HP and Compaq products and made unauthorized sales in 2001 and 2002. HP discovered the abuse and terminated its relationship with Capital City Micro. Shortly thereafter, Capital City Micro became a reseller with Compaq Computer Corp. and continued to make unauthorized sales of Compaq products. After HP and Compaq merged in May 2002, HP stopped all dealings with Capital City Micro.

"HP is committed to supporting our authorized business partners and protecting our mutual customers" said John Thompson, vice president and general manager, Solution Partners Organization - Americas, HP. "And we’re committed to prosecuting those parties selling HP product through unauthorized channels"

To better protect legitimate channel partners and joint customers, HP is focusing on three key initiatives: education and training; tightening business practices and controls; and taking appropriate action in relation to resellers who violate terms of their authorized reseller agreements.

HP is a founding member of the Alliance for Gray Market and Counterfeit Abatement, a global association formed in September 2001 composed of leading technology companies committed to addressing the global impact of the gray marketing and counterfeiting of technology products.

About HP

HP is a technology solutions provider to consumers, businesses and institutions globally. The company’s offerings span IT infrastructure, global services, business and home computing, and imaging and printing. For the four fiscal quarters ended Jan. 31, 2006, HP revenue totaled $87.9 billion. More information about HP (NYSE, Nasdaq: HPQ) is available at http://www.hp.com.

This news release contains forward-looking statements that involve risks and uncertainties, as well as assumptions that, if they ever materialize or prove incorrect, could cause the results of HP and its consolidated subsidiaries to differ materially from those expressed or implied by such forward-looking statements and assumptions. All statements other than statements of historical fact are statements that could be deemed forward-looking statements, including the expected development, performance or rankings of products or services; statements of expectation or belief; and any statement of assumptions underlying any of the foregoing. Risks, uncertainties and assumptions include the development, performance and market acceptance of products and services and other risks that are described from time to time in HP’s Securities and Exchange Commission reports, including but not limited to HP’s Annual Report on Form 10-K for the fiscal year ended Oct. 31, 2005 and other reports filed after such report. HP assumes no obligation and does not intend to update these forward-looking statements.

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