This laptop came installed with Windows-Vista. Due to some software applications that run only on Windows-XP, I had removed Vista and installed XP on it.
Most of the installation went well, but the audio was not functional. With some Google search and research I found the solution.
The HP support site has Drivers for XP Presario C700. A link in this page led me to the Software and Drivers page. I downloaded the Conexant High Definition Audio Driver and then from the Control Panel -> Sound and Audio Devices page, I reinstalled this driver. This fixed the problem.
Here is another page with instructions for fix this issue:
http://thepiratebay.org/torrent/4039731/windows_xp_drivers_for_Compaq_c7...