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Hi All
Seems I am not the only one having problems installing the new WEBCAM for Touchsmart 4.0:
http://forum.cyberlink.com/forum/posts/list/11166.page#76275
The problem is, the installations fails with an error message that it needs WMP 11 or newer which is ludicrous because I have Windows Media Player 12 which comes with Windows 7.
If anyone know how to fix this then please speak up! 
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Ok I am making a HP request ticket about this problem...