HEWLETT-PACKARD: High Growth, Elusive E

Taipei’s World IT Congress in June, Bill Gates and Taiwan’s President Chen
probably got less applause than Carly Fiorina. This charismatic chief of
Hewlett-Packard (HP), who has pushed hard to turn the IT giant’s image from
staid to a net-savvy innovator, went on to say, "We aren’t the boring old

An HP-Swatch ebiz wrist-watch? A Swiss tester walks through a
train-station turnstile, and the watch debits her bank account. E-services for
mobile users? HP will open 20 e-bazaars for services such as banking or stock
trading–one of them in India.

HP went through much change in 1999, including a new CEO.
Fiorina took over in July last year, and drove the new HP Invent global
campaign. At last, HP tried to convince the world that it was a Net-age
innovator. It also struggled for presence in a Net-dominated server market that
bought Unix servers mostly from Sun.

HP India’s new chief, Ganesh Ayyar, too had an eventful
first year. ‘Printer king’ HP went for the PC market. Ayyar took charge of
the key enterprise systems business. The test and measurement division first
became Agilent, and finally separated completely from HP India in October 1999.

The Rs 1,356 crore group in India includes Delhi-based HP
India (computers, peripherals, services) and Bangalore-based Indian Software
Operation (ISO). Agilent was part of the group for seven months, till October
1999. Subsidiaries VeriFone and Apollo do not add to HP group revenues in India.
(Apollo sells low-end inkjets via Wipro in India, sans the HP name to avoid
conflict with deskjets.)

Corporate desktops were hot–with low pricing, and a strong
channel and support program–as HP downplayed its ‘printer company’ image.
Local assembly in Bangalore helped. While Pavilions didn’t sell and the Vectra
did modestly, the Brio corporate desktops really moved. Based on standard,
outsourced designs and components, the Brio helped push PC sales to over 60,000,
making HP the top MNC PC brand in India in 2000’s first quarter. Sales were up
in most of Asia, but slumped 33% in China, keeping HP’s PC numbers to 227,300
in the quarter (HP is among the top three PC vendors in the US and in the

But HP gave up on portables. Barring the few palmtops its
distributor HOPE sells and a few Omnibooks, HP pushes out to corporates, it just
isn’t there.

HP’s new internet strategy centered on its e-speak
technology, with a media event in 1999 and a developer conference in Bangalore
in March 2000. Net impact so far: zero.

HP’s weakness has been the internet. E-speak, HP’s glue
to bring together transactions in ‘Chapter II’ of the internet, is a
compelling technology let down by weak marketing and fuzziness about what it
really is and does. A year down the line, there are no users in India.
(Microsoft’s new.Net technology, with similar aspirations, has made an early

From the enterprise, HP India got numbers for low-priced
Intel servers, especially the locally-made NetServer E200. It got revenues from
higher-end servers and storage systems. HP 9000 Unix server revenues were good,
but numbers were behind an aggressive Sun’s, which sells only Unix servers.
The fast-growing Rs 600 crore Unix server market in India is crucial, and HP
will focus on ISP/ASP users, helped by its new HP-UX 11i upgrade.

The Bangalore-based Indian Software Operation (ISO) has been
a success story for HP, with key development work for HP worldwide and its
partners and customers such as Amazon.com done there. The ISO develops
applications, system software, embedded code and firmware. It’s an e-speak
test center, and is also working on Linux applications support for the new HP-UX
11i OS.

Software is becoming crucial for this hardware giant, in its
move towards ‘internet infrastructure provider’ status. For instance, with
its VantagePoint software, HP is trying to take its OpenView family of products
in the same direction that CA took Unicenter–from network tool to enterprise
management to ecommerce infrastructure.

Peripherals continue to add a big chunk to HP India’s top
line, but margins there are tight, barring network lasers–and consumables.
Another success area last year, corporate desktops, has even thinner margins.
Given this fact, its services and enterprise systems business, including storage
solutions, is going to be of strategic importance for HP India’s bottom line.

Fiorina spoke of 20 HP e-services bazaars that would host
wireless e-services for personal banking, et al, for mobile users. Bangalore’s
will be one venue. Globally, if e is
the letter HP is trying to prefix, ‘services’ is the word driving its
strategy–"any asset that can be turned into a service on the web, will
be," as she put it.

Selling hardware, technical and marketing expertise, and even financing, HP–like
Cisco, Intel, CA and others–wants to be an e-infrastructure provider. It’s a
tough climb and a late start, but HP has the technology, products, expertise and
cash to do it. Meanwhile, in India, its challenge will be to keep up last year’s
growth, especially in PC numbers and enterprise systems revenues. DQ

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