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Tuesday, December 20, 2005, 01:00 pm PT (04:00 pm ET)

HP to stop bundling iTunes next year

Following the termination of its exclusive deal with Apple Computer, Inc. to distribute re-branded iPods, Hewlett-Packard is preparing to reengage in the digital music business this January, and will likely do so without Apple's iTunes software, reports Macworld UK.

"The company's executive vice president Todd Bradley confirmed such plans last week, during which he also revealed the company would honor its contractual obligation to install iTunes on PCs HP ships until January 2006," according to the report. "Beyond that, the future of even vestiges of the HP/Apple deal are shady."

Bradley's comments corroborate an August AppleInsider report entitled "HP likely to stop bundling iTunes by '06," which quoted American Technology Research analyst Shaw Wu. In the report Wu predicted HP would abandon iTunes as its default music player by 2006 in favor of forming a new relationship with Microsoft and its Windows Media Player technology.

Similarly, Macworld UK also believes: "It's likely HP will now choose to deliver solutions based on Microsoft's Windows Media technology."

In January 2004, HP and Apple formed a strategic partnership where HP agreed to install Apple's iTunes music jukebox software on its computers in exchange for the rights to sell HP-branded iPods. Apple also sought the benefits of HP's 100,000-plus retail outlets world-wide, knowing they could quickly expand the iPod's reach.

Unfortunately, the partnership barely got off the ground. Almost immediately, the two company's began to quarrel over price protection on iPods and other business aspects. At one point HP halted orders to Apple for new iPods for several weeks, protesting a need for price protection which Apple failed to offer.

But by May of this year, it seemed as if the two companies had worked through their differences. HP began expanding its iPod offerings to include the iPod mini and iPod shuffle. At the same time, Apple was quietly negotiating its own presence in big box retailers such as Wal-Mart, which had previously sold only HP-branded iPods.

Only several weeks after launching a pilot prgram at Wal-Mart, Apple forced its foot in the door of another large HP iPod retailer: on July 21, AppleInsider reported that Apple had landed an iPod deal with RadioShack. Eight days later HP announced that it would stop reselling iPods.

According to Apple, HP iPod sales accounted for less than 8-percent of total iPod shipments during the last quarter in which sales results for HP iPods were released.