HP Bets on Corporate Market for Turnaround

– Launches ‘Tablet as PC’ for Enterprises
– Consumers Strangely Missing in Its Strategy

Is HP the new Sony? Are its desktop, laptop and printer
operations deadweight like Sony’s TV operation?

HP chief Meg Whitman this week said it would take longer to
turn around HP than she thought a year ago when she took the
job. She said 2013 will be a “fix and rebuild” year, but the
company will begin to grow again with good years in 2014 and

Whitman subsequently appeared on CNBC’s “Squawk on the Street”
to explain her plan.

Asked what took so long to diagnose the company’s problems and
its plan to fix it, she said HP is a complex organization with
six major divisions and 320,000 employees in 166 countries. It
took time to dive into each business and meet with customers,
partners and employees. After a year, she said, she had peeled
the onion and could say, “Here are the products and services
we’re going to rebuild the company with: servers, PCs and
printers with a four to five year plan.”

She has stabilized the company, she said by providing a steady
hand on the tiller. The interviewer pointed out that revenue
in several key areas has decreased recently. She said the core
of the company is hardware, servers, storage and networking.

One interviewer, of which there were several, said that some
people don’t share her optimism in the two key HP areas of PCs
and printers. There has been a move to tablets and many take a
tablet home to look at documents rather than the printed
documents. Why will they continue to be an important component
at HP?

Whitman responded that the desire to compute, create and share
is increasing, not decreasing. She said the new HP laptops
have received a positive reception. HP offers a full line of
computing hardware and is now entering the tablet market, she
said, but not with just another tablet, but rather a tablet
that is easily converted to a PC. HP’s new Elite Pad is the
first tablet that’s designed specifically for the enterprise
market, she said. It has serviceability. Its smart jackets,
which are docking stations, can add functionality such as
increased battery usage from 10 hours to 20 hours. She said
commercial printing is also increasing.

One of the company’s major strengths is its enterprise
division, which contributes 43% of the company’s profit, she
said. HP’s problems, she said are fixable, but there’s no
silver bullet — just blocking and tackling.

Asked about the fact that people are asking for Apple, not HP
and about Microsoft, directly competing against HP in tablets,
Whitman said the PC market is a very big market and HP ships
two PCs every second. It has added a design element to its
product development, so it now has good engineering combined
with good design.

She sees HP as an incredible company with a lot of strengths
but it has run into the headwinds of the global economic
turmoil and major changes in the market. She said HP now has a
management team that has a handle on the problems and knows
what to do. It has a plan to fix the problem with such
products as ARM-based servers that will revolutionize the
server market.

One interviewer pointed out that HP has 2,300 SKUs (models) of
laser printers and asked, “Is HP too large to manage?” Whitman
said, “no” and that she would not bet against HP. We will do
anything for customers, she said, and can offer a full suite
of products and services.

Whitman’s explanation of HP’s status sounds very much like
Howard Stringer and his predecessor’s explanation of the
situation at Sony, which has been hampered by Asian
competition in TVs (Samsung and LG) and Sony’s inability to
take advantage of market changes caused by the rise of digital
media. The Sony leaders have every year announced new plans
that would return Sony to dominance in TV sets, but Sony’s
financial predicament has not improved.

Whitman never once used the word “consumer” in her interview
and instead, talked only about the corporate market. She did
not answer the question about Microsoft competing against HP
in tablets. That could mean HP will focus exclusively on “the
tablet as computer” for the corporates. Another indicator of
that is HP having not announced an ARM-based Windows 8 tablet,
which consumers are more likely to buy.

HP and other PC companies that are only making Intel-based
tablets will have to watch that corporates don’t start buying
ARM-based tablets because of their lower costs, lighter weight
and long usage between battery charges. Microsoft is greasing
the skids for exactly that by developing a version of its
Office suites that runs on tablets with ARM processors.

If indeed the use of tablets causes printing in the corporates
to decline, HP will also face headwinds in a market that it
now dominates.

Whitman said she would not bet against HP and its employees,
but she did not provide any new reasons to bet on HP.

About the Author

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