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HP, Apple to Sell Digital Music Device

Posted on: Thursday, 8 January 2004, 06:00 CST

Hewlett-Packard Co. and Apple Computer Inc. are teaming up on a digital music device to extend the computer companies' reach into the consumer electronics market.

The companies said Thursday that, starting this summer, HP would sell an HP-branded portable music player based on the top-selling Apple iPod.

As part of the reselling agreement, HP will also pre-install in its computers and notebooks Apple's popular iTunes music jukebox program, which is linked to Apple's iTunes online music store.

Like many computer makers, Apple and HP are branching into the consumer electronics niche to take advantage of the higher profit margins. PC makers are also trying to turn their devices into hubs for accessing, storing, managing and sharing digital content.

Apple approached HP about the proposed alliance while HP was crafting a digital entertainment strategy, HP chairman and chief executive Carly Fiorina said in an interview.

Fiorina said she would provide more details about HP's consumer electronics strategy, and discuss the Palo Alto, Calif.-based company's entry into the television market, during her keynote address Thursday at the annual Consumer Electronics Show in Las Vegas.

"We knew we had to provide our consumers with access to digital content and music is part of that," Fiorina said. And instead of building its own music products, "we looked at the music space and said, `There's a great digital music player and a great music store out there, so it's logical for us to partner.'"

Apple sells nearly one out of three digital music devices, and iPod sales generated $121 million in revenue in Apple's fourth quarter, which ended in late September.

But the Cupertino, Calif.-based computer maker controls less than 5 percent of the worldwide PC market.

"Apple's goal is to get iPods and iTunes into the hands of every music lover around the world, and partnering with HP ... is going to help us do just that," Apple chief executive Steve Jobs said.

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