NETWARE & LAN MANAGER UPGRADE PRICING POLICY In the next year, HP anticipates major enhancement releases of our PC-LAN offerings, in particular, LAN Manager/X 2.1 (LM/X 2.1) and NetWare 4.0 for HP-UX platforms. With these major enhancement releases on the horizon, we wish to point your attention to a pricing policy which you should consider sharing with your customers and setting expectations accordingly. With major PC-LAN functionality revisions such as these (see note), HP plans to charge existing customers who wish to purchase these enhanced versions. In particular, HP will charge existing LM/X and NetWare/9000 customers (with or without support contracts) who wish to upgrade to the new revisions. These new revisions have significant functionality enhancements and will have new part numbers. This will work as follows: * Customers who have purchased the following products: P/N's B1011A/B/C, B1003A/B/C, J2240A, J2239A or J2243A, will be entitled to an upgrade credit toward the purchase of these major revisions. The not-to-exceed price for these customers is 50% of list price. * Customer's who maintain current support contracts and who choose not to purchase the upgrade (to LM/X 2.1 and NetWare 4.0) can remain on LM/X 1.4 and NetWare 3.11. For these customers, HP will fulfill it's support obligation for five years after discontinuance. HP is planning to charge customers for several reasons: 1) Charging for upgrades is consistent with the PC-LAN industry. Microsoft and Novell charge PC server customers for upgrades not only on major revisions (such as NetWare 3.11 to 4.0) but for minor revisions (e.g. NetWare 3.01b to 3.11) as well. This is regardless of whether the customer holds a support contract. By continuing to include maintenance revisions as part of our customers regular support contract, HP is is softening the impact of this charge and is providing a benefit customers do not realize in the PC market. 2) The major revision upgrade charge enhances HP's ability to provide customers with current functionality in a reasonable time-frame. These LM/X and NetWare revisions include major architectural changes which require significant R&D investment. In addition, HP is required to pay a royalty to Microsoft and Novell for these upgrades. Given that this upgrade policy is consistent with what customers already are realizing with their PC based NetWare and LAN Manager Servers, most customers are probably anticipating this upgrade charge and will understand the nature of this policy. This policy makes it financially feasible for HP to provide more competitive functionality to our customers. By providing a significant upgrade credit to customers with current support contracts or who have purchased previous versions, we are encouraging our customers to continue to grow with HP. If you have any further questions, please contact the Sales Response Center. --------------------- Note: A major revision is one that provides significant enhancements over the previous release. Customers with current support contracts will continue to receive maintenance revisions under the terms of their support contract. A maintenance revision can provide support for OS versions, defect repairs, and/or minor enhancements. Examples of maintenance revisions include the LM/X 1.2 to 1.3 and NetWare 3.01b to NetWare 3.11.