Hewlett-Packard is setting its sights on rival Dell
Computer after bringing its PC business back to profitability for
the first time in several years.
HP has revamped its distribution system so that it straddles the
line between a reseller model and a direct sales model, and its
newer products such as Media Center PCs - which allow users to
control their home entertainment functions from their PC - Tablet
PCs and handhelds.
"This marketplace is coming down to a couple of major players,
us and Dell," said Duane Zitzner, executive vice president of HP's
personal systems group.
HP narrowly edged out Dell in terms of worldwide PC shipments in
the fourth quarter, according to market research from both
Dataquest and IDC. Both companies sold about four million more
units than IBM.
Zitzner claimed sales of HP's Media Center PCs have exceeded
expectations, although he declined to provide specific figures.
Consumer sales of those PCs with Microsoft's Windows XP Media
Center Edition operating system have remained strong into the new
year even after the holiday season.
HP is also courting enterprise customers with its Tablet PC and
iPaq handhelds. Zitzner said the company was pleased with sales of
the Compaq TC1000 Tablet PC, adding that the recently introduced
iPaq 5450 with 802.11b wireless Internet access capability has
attracted attention with its built-in fingerprint reader.
If HP is to remain competitive for the rest of the year, it
needed to continue to price its products aggressively and come up
with innovative designs, Zitzner said. "The cost savings [from the
Compaq acquisition] are allowing us to price competitively without
sacrificing innovation."
Dell's direct sales practice allowed the company to operate a
very lean distribution model, but stifled innovation, said Jim
McDonnell, senior vice president of the personal systems group.
"We're driving innovation in this industry. We're not Dell, and
we're not going to be Dell," he added.
There are two sides to the debate over the first-mover approach
of HP versus Dell's late entrances into established markets, said
Roger Kay, director of client computing at IDC.
"Dell lets others establish the market and take the risks, and
then comes in and sets commodity prices. But the iPaq shows that
HP's risk to go early into a market paid off," he said.
The iPaq was the second-most popular handheld in terms of
shipments in the fourth quarter, and enjoyed a strong lead among
Pocket PC devices, according to Dataquest research .
HP is committed to its resellers as a distribution channel for
the enterprise market, and will continue to sell its PCs at retail
as well, Zitzner said. However, he added that the company will ramp
up its direct website sales program, which is a key part of its
distribution strategy.
HP's PartnerOne program, which was introduced last
November, consolidates the Compaq and HP approaches to resellers
into a new program that provides incentives for resellers to
stimulate demand.
IDC's Kay said both direct and reseller models are needed to
satisfy different types of enterprise customers. Dell sells many of
its products through distributor Ingram Micro, and HP has added
Compaq's relative success in a direct distribution model to its
historical strength in the channel, he added.