COMPAQ AND MICROSOFT FURTHER STRATEGIC ALLIANCE.

Microsoft Corp. (Nasdaq: MSFT) and Compaq Computer Corp. (NYSE: CPG) announced they are expanding their longstanding collaborative relationship by combining their services to better meet the needs of consumers in the Internet era. Under the three-year agreement, the two companies will strengthen the Compaq.Net service by seamlessly incorporating MSN services with Internet PCs from Compaq, the largest worldwide supplier of consumer PCs. The "Compaq.Net powered by MSN" service will offer Compaq customers a customized superset of MSN services deeply integrated with the Presario PCs to make signing up for the Internet and accessing the everyday web as simple as touching a key on the Compaq Internet keyboard.

This consumer offering will be preinstalled on new Compaq Presario PCs beginning this Summer, including MSN leading portal services, MSN Hotmail Web-based email service, MSN Search and MSN MoneyCentral, powered by Compaq servers. The new portal is available for early viewing at http://presario.compaq.net.

The joint online service being developed by MSN and Compaq is designed to improve the Internet experience for consumers in one complete hardware and services offering, with easier registration and more customized services. Getting up and running on the Internet will be easier - users simply take the PC out of the box, register the computer and get connected to the Internet.

Compaq will optimize its line of Presario PCs to feature MSN Internet Access in the Internet sign-up process. From there, Compaq's Internet keyboard, the industry's first Internet keyboard to provide easy, one-touch access to users' favorite Web sites will feature buttons that link directly to the co-branded service.

Under the agreement, the two companies will participate in joint marketing programs, service development and promotions, to increase the number of subscribers to the co-branded service. The co-branded service will extend beyond the Presario PCs to innovations in other areas including Compaq Internet appliances, wireless devices, home networking products and joint broadband initiatives.