HP’s Challenges

The Economist writes about HP’s challenges after its disappointing quarterly results:

HP is far from stuck between Dell and IBM, she asserts. Instead, Dell, famous for its supply chain rather than its patents, represents low tech and low cost, while IBM, best known for its armies of technology consultants, peddles high tech and high cost, which leaves only HP to offer high tech and low cost and therefore the best customer experience.

HP is trying to be all things to all kinds of customers, and is leaving more and more of them plain confused. HP dominates in the market for printers, both laser and inkjet, and both for consumers and companies. It is also strong in handheld computers and some other consumer electronics items, such as digital cameras. In desktop personal computers and notebooks, HP runs neck-and-neck with Dell as the world’s biggest supplier.

But in enterprise computing, from storage systems to servers, the picture gets more complicated. [HP CEO Carly] Fiorina’s public-relations minions regularly circulate long and tedious lists of obscure sub-segments of the market in which HP has the largest market sharefault-tolerant systems, external storage systems, tape drives, virtualisation technology and so on. Being big in so many different areas, they argue, means that HP is the leader and vindicates the merger.

The opposite is more likely. HP’s profits disappointed precisely because the jumble of its business units selling to companies made a loss of $208m for the quarter. In each area, it turns out, HP is fighting separate wars against different and fiercely focused competitorsEMC in storage hardware, Veritas in storage software, StorageTek in tape drives, Sun Microsystems in Unix servers, IBM in consulting services, and so on. The only way that HP manages to stay in so many games, at least according to Dell, is by leaving its profit margins on the table for othersand above all for Dell itself.

Will HP go the way of AT&T (from the split point of view)?

Published by

Rajesh Jain

An Entrepreneur based in Mumbai, India.