HP Settles Patent Litigation with Gateway

PALO ALTO, Calif., March 1, 2006 -- HP today announced it has entered into a binding term sheet with Gateway, Inc. (and Gateway subsidiaries eMachines, Inc. and AD Technologies LLC) to settle all ongoing patent litigation relating to the companies’ respective PC patents.

Under the binding term sheet, Gateway will pay HP $47 million, $25 million to be paid within seven business days following the execution of a definitive settlement agreement and cross-license agreement, and $22 million to be paid not later than one year after that date. The parties also will enter into a limited patent cross-license agreement.

The settlement agreement will resolve all claims asserted in three federal court lawsuits, three International Trade Commission investigations and a state court lawsuit against eMachines stemming from its earlier license agreement with HP.

HP initiated lawsuits against Gateway and eMachines in 2004 and 2005, claiming infringement of 27 of HP’s patents. In counterclaims or independent actions, Gateway and AD Technologies asserted 13 patents against HP. As a result of the settlement agreement, each action will be dismissed.

“HP has a long history of innovation in PC technology, and we will continue to protect our investment in our PC patent portfolio,” said Joe Beyers, vice president, Intellectual Property Licensing, HP.

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 www.hp.com.

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