HP and Microsoft Expand Relationship to Target Server and Storage Consolidation with NAS Solutions

PALO ALTO, Calif., and REDMOND, Wash., Jan. 21, 2003 — HP (NYSE:HPQ) and Microsoft Corp. (Nasdaq:MSFT) today broadened their worldwide relationship with a strategic initiative to expand the market for HP StorageWorks and Microsoft® Windows®
Powered NAS (network attached storage) solutions.

The HP StorageWorks and Windows Powered NAS initiative is designed to increase HP and Microsoft’s presence in the global NAS marketplace, which, according to Gartner Dataquest1, is $1.8 billion. Together, the companies are delivering products and solutions that enable server and storage consolidation, as well as lower the total cost of ownership for storage.

Collaborating with industry leaders such as Microsoft is a key component of HP’s strategy to deliver an adaptive infrastructure that strengthens the link between IT and business objectives. With an adaptive infrastructure, customers can anticipate and rapidly respond to new market requirements, as well as create and capture new opportunities. Windows Powered NAS has grown to 30 percent unit share in the NAS marketplace since its introduction two years ago.2

One of the first components of the initiative will be a North American road show beginning in March to demonstrate joint architecture and solutions. The road show will reach more than 3,500 customers and channel partners via live events and simultaneous Webcasts.

The tour will include the following cities: Atlanta, Boston, Chicago, Houston, Los Angeles, Miami, New York, San Francisco, Toronto and Washington. Complete schedule information is available at http://www.winnetmag.com/roadshows/nas.

“HP’s strategy of integrating leading NAS solutions with SANs to provide a single, managed storage pool has advanced our market position considerably over the past three quarters,”
said Howard Elias, senior vice president and general manager, HP Network Storage Solutions.
“By collaborating with Microsoft and integrating Windows Powered NAS as a key part of our NAS portfolio, HP is able to reach the broadest cross-section of customers with the industry’s most comprehensive set of NAS and NAS/SAN fusion solutions.”

“Companies today are challenged by data growth and strained IT resources, requiring innovative and complete storage solutions,”
said Bob Muglia, senior vice president of the Enterprise Storage Division at Microsoft.
“Microsoft is building on our long-standing relationship with HP to further exhibit our commitment to NAS and to deliver integrated, easy-to-manage and cost-effective solutions to our customers. This joint initiative opens up significant revenue opportunities for Microsoft and HP.”

Worldwide customer revenue for server consolidation is expected to grow from $5.2 billion in 2003 to $8.5 billion by 2006, according to industry research firm IDC.3 According to company estimates, the server consolidation opportunity is enormous, with approximately 1.2 million old Windows NT®
and competitor file and print servers and 400,000 Exchange 5.5 and older messaging servers installed by HP customers worldwide.

“This collaboration will strengthen both players’ position in the enterprise,”
said Steve Duplessie, senior analyst and founder, Enterprise Storage Group.
“Microsoft gets a big partner to continue moving its NAS operating system into the datacenter. HP enhances its relationship with the fastest growing NAS player on top of its SAN business. In both cases, the ultimate customer gets better solutions.”

HP StorageWorks and Windows Powered NAS for Server Consolidation

HP StorageWorks and Windows Powered NAS solutions are optimized, function-focused file and data servers based on Microsoft Windows technology designed for high reliability, availability and ease of management. HP offers a full range of NAS solutions based on Windows Powered NAS and delivers them as part of a total storage and server consolidation strategy to businesses of any size.

In July 2000, HP became the first vendor to co-develop and deliver a Microsoft Windows Powered NAS solution to market. In addition, HP was also the first company to recognize NAS and SAN technologies as complementary solutions best architected as a single storage solution — NAS/SAN fusion. These solutions provide file and application server consolidation to enterprise data centers by bringing together NAS and SAN technologies in a scalable, manageable common pool of storage that provides both file- and block-level access.

“We are very pleased with this initiative and commitment between HP and Microsoft,”
said Eric Craig, managing director of technology, Continental Airlines.
“Windows Powered NAS front ending HP storage is a strategic combination for us. It enables the scalability we need, both in raw storage growth and concurrent user access, while lowering our IT management costs.”

Consolidating servers on HP StorageWorks and Windows Powered NAS products provides a lower cost of ownership with higher availability and scalability. Customers enjoy the benefits of advanced features such as snapshot and advanced storage management, full integration with the Active Directory service, combined with low per-gigabyte storage cost, simple network plug-and-play deployment, clustering and replication support.

As part of their initiative, HP and Microsoft will conduct joint sales and marketing activities, including sales training and technical seminars. The companies will reach enterprise data center and remote office customers through direct sales, and SMB/departmental customers predominantly through channel partners. Training, sales tools and marketing materials developed for the HP StorageWorks and Windows Powered NAS initiative, including migration blueprints, case studies and collateral, will be made available to HP and Microsoft channel partners, distributors and system integrators.

More information on HP StorageWorks NAS and NAS/SAN fusion solutions is available at http://www.hp.com/go/windowspowerednas/.

About Microsoft

Founded in 1975, Microsoft (Nasdaq
) is the worldwide leader in software, services and Internet technologies for personal and business computing. The company offers a wide range of products and services designed to empower people through great software — any time, any place and on any device.

About HP

HP is a leading global provider of products, technologies, solutions and services to consumers and businesses. The company’s offerings span IT infrastructure, personal computing and access devices, global services and imaging and printing. HP completed its merger transaction involving Compaq Computer Corporation on May 3, 2002. More information about HP is available at http://www.hp.com/.

1 Gartner Dataquest,
“Network-Attached Storage Market Forecast: 2001-2006,”
June 2002.

2 IDC Appliance Server Tracker for Q3 2002, released December 2002.

3 IDC, Enterprise Server Fundamentals: Server and Storage Consolidation Market Forecast and Analysis, 2001-2006, July 2002.

This news release contains forward-looking statements that involve risks and uncertainties, as well as assumptions that, if they never 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. All statements other than statements of historical fact are statements that could be deemed forward-looking statements, including any projections of earnings, revenues, or other financial items; any statements of the plans, strategies, and objectives of management for future operations; any statements concerning proposed new services or developments; any statements regarding future economic conditions or performance; statements of belief and any statement of assumptions underlying any of the foregoing. The risks, uncertainties and assumptions referred to above include employee management issues; the timely development, production and acceptance of services and their feature sets; the challenge of managing asset levels, including inventory; the difficulty of keeping expense growth at modest levels while increasing revenues; 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 quarterly report on Form 10-Q for the quarter ended July 31, 2002 and reports filed subsequent to HP’s annual report on Form 10-K, as amended on January 30, 2002, for the fiscal year ended October 31, 2001. HP assumes no obligation to update these forward-looking statements.

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