HP ANNIVERSARY - HP in street fight over PCs with Dell

When Hewlett-Packard (HP) edged out Dell Computer for the top position worldwide in PC shipments by the end of 2002, it achieved one of its goals when it announced its Compaq Computer acquisition. However, Dell was able to fight back and regain the top spot worldwide in the first quarter this year, setting up what promises to be a close race throughout the coming year.

HP's efforts toward integrating the different PC product lines was key to remaining competitive with Dell, as former HP and Compaq customers would have flocked to Dell had they felt HP emphasized the wrong products, said Toni DuBoise, desktop PC industry analyst for ARS Inc. in La Jolla, California.

Corporate customers were especially sensitive to potential problems with the product line integration, since they didn’t have the same brand loyalty to HP products that consumers did, she said.

HP pursued a dual-brand strategy with consumers, emphasizing the Compaq Presario and HP Pavilion desktops in different ways, she said. HP chose to make the Pavilion into its high-end consumer desktop machine, while the Presario line stepped down in terms of its available features, she said.

Loyal HP consumers tended to be techies, more interested in high-end features and willing to spend more for those features, she said. Compaq customers, on the other hand, were more interested in a budget PC.

This strategy will continue in the second year of the merged company, said Jim McDonnell, vice president for sales and marketing for HP's personal systems group. HP will sell the Compaq brand as the price-performance PC, and stack it up against companies such as Dell and eMachines Inc., he said.

The HP side of the consumer PC business will benefit from a focus on digital imaging, with several new products for home entertainment such as new Media Center PCs and other multimedia applications, he said. HP’s goal for the HP-branded PCs is to market them against other vendors that make high-end PCs, such as Apple Computer Inc. or Sony Corp., he said.

Although commercial PC customers remained reluctant to upgrade their PCs in the first year of the merged company, they still represent the lion’s share of the merged company’s PC business, and HP had to approach that market with a united front, DuBoise said.

The company was able to do this by eliminating the HP Vectra, and choosing instead to focus on the Compaq Evo.

"One thing they have done well is the clear decision to take certain product lines and do away with others," said Jonathan Eunice, principal analyst at research firm Illuminata Inc. in Nashua, New Hampshire.

Business users are also getting more mobile, and HP released several products to capitalize on that trend, including notebooks based on Intel’s Centrino technology and Tablet PCs.

HP will have to move its mix of products more toward notebooks as the market for PCs changes, said analyst Roger Kay of IDC. Notebooks offer higher margins than desktops, and shipments are expected to grow this year, as opposed to an uncertain forecast for desktops, he said.

The merged company was able to turn a profit in the personal systems group, earning $33 million in the first quarter of the company’s 2003 fiscal year, compared to a loss of $68 million for the combined company in the first quarter of last year.

HP’s focus on the dual-brand consumer strategy helped it to profitability in the fourth quarter, traditionally strong among holiday-buying consumers. But the jury is still out on whether the acquisition of Compaq’s PC business has helped the company overall. Critics of the merger were wary about increasing HP’s stake in a stagnant PC business, and business PC customers have still resisted the opportunity to upgrade their PCs despite low prices and new features.

The company’s flagship printer business remains largely unaffected by the acquisition. Dell entered the printer market this year, but HP is expected to maintain its market share due to strong brand loyalty, at least for a while, Kay said.

The impact on other business lines might appear if Dell is able to cut into HP’s profits from printers through a price war or market share gain, Kay said.

"If they have this big, highly profitable printer business, they can ease expectations on other businesses. If Dell printers reduce profit margins through competition, that reduces the contributions to businesses that need help," he said.

Join the newsletter!

Or

Sign up to gain exclusive access to email subscriptions, event invitations, competitions, giveaways, and much more.

Membership is free, and your security and privacy remain protected. View our privacy policy before signing up.

Error: Please check your email address.
Keep up with the latest tech news, reviews and previews by subscribing to the Good Gear Guide newsletter.

Tom Krazit

IDG News Service
Show Comments

Brand Post

Most Popular Reviews

Latest Articles

Resources

PCW Evaluation Team

Luke Hill

MSI GT75 TITAN

I need power and lots of it. As a Front End Web developer anything less just won’t cut it which is why the MSI GT75 is an outstanding laptop for me. It’s a sleek and futuristic looking, high quality, beast that has a touch of sci-fi flare about it.

Emily Tyson

MSI GE63 Raider

If you’re looking to invest in your next work horse laptop for work or home use, you can’t go wrong with the MSI GE63.

Laura Johnston

MSI GS65 Stealth Thin

If you can afford the price tag, it is well worth the money. It out performs any other laptop I have tried for gaming, and the transportable design and incredible display also make it ideal for work.

Andrew Teoh

Brother MFC-L9570CDW Multifunction Printer

Touch screen visibility and operation was great and easy to navigate. Each menu and sub-menu was in an understandable order and category

Louise Coady

Brother MFC-L9570CDW Multifunction Printer

The printer was convenient, produced clear and vibrant images and was very easy to use

Edwina Hargreaves

WD My Cloud Home

I would recommend this device for families and small businesses who want one safe place to store all their important digital content and a way to easily share it with friends, family, business partners, or customers.

Featured Content

Product Launch Showcase

Don’t have an account? Sign up here

Don't have an account? Sign up now

Forgot password?