HP stunned onlookers this week when it announced that it will license the iPod from Apple Computer and bundle Apple's iTunes application with select consumer-oriented PCs. Sometime this summer, HP will ship an HP-branded iPod portable music player that will feature a unique blue color, the company told me.

Given HP's strong relationship with Microsoft, the Apple deal comes as a surprise. But HP's PC competitors, including companies such as Dell and Gateway, have launched their own digital-music strategies and partnered with other companies to get into the market quickly. Clearly, HP felt that the Apple deal would give it a unique competitive position.

HP's blockbuster deal with Apple will have one exciting side effect. The company will be working with Apple to add support for Microsoft's superior Windows Media Audio (WMA) format to the iPod by mid-year. You heard it here first. Carly Fiorina, chairman and chief executive officer of HP, holds the new HP Digital Music Player, the HP-branded digital music player based on the Apple iPod design.