HP Seeks Desktop, Enterprise Gains

The company must improve call center ops to catch Dell in the desktop market and cut costs to put its enterprise unit back in black, HP's CFO said.
Posted September 3, 2003
By

Colin C. Haley


BOSTON -- Hewlett-Packard must improve call center operations to catch Dell in the consumer desktop market, the company's CFO said.

"We're not moving enough through the direct channel," Bob Wayman said at the SG Cowen Fall Technology Conference this morning.

He conceded that Dell call center representatives do a better job cross-selling and up-selling their systems, booking more revenue per call than HP.

To close the gap, HP, which came by much of its PC business through the Compaq acquisition, needs to get the "right information, tools and training" to its staffers.

In addition, HP has piloted a new sales incentive program. It expects to expand the model to more call centers in the second half of the year.

Generally, Wayman said the company's pricing is competitive with Dell for comparable desktop PC products.

In the near term, Wayman feels "fairly good" about consumer PC market in North America, which is seasonally helped by back-to-school purchases and early holiday shopping. He "cautious" about European sales.

One segment HP does not trail Dell is PC notebook sales. HP owns 17.3 percent of the market and increasing its lead over rivals, according to new numbers from research firm IDC.

An area of concern for HP is its enterprise systems group. Previously, the company predicted profitability for the unit in fiscal 2004, but recently pushed that back to 2005 as large companies continue to spend cautiously on servers, storage and other gear.

The unit has seen merger-related consolidation. Of the 3,500 people HP layed off in the third quarter, a significant portion came from the group. Cuts will continue through 2004, Wayman said.

Richard Chu, managing director of SG Cowen's Enterprise/PC Hardware practice, said his firm cut growth projections for HP's enterprise group from the mid-single digits to 2 percent.

HP will continue adjusting research and development investments to try and boost sales of higher-margin products, Wayman said. And though revenues are lagging, other actions should lower the break-even point -- including consolidation of some U.S. manufacturing systems.

On the upside, Wayman said it sees little immediate threat to its printer and imaging business. The company has an advantage of a large customer base, which produces recurring revenues for supplies such as new printing cartridges.

That's a barrier to entry to Dell or anyone else thinking of mounting a serious challenge, Wayman said. The company plans a marketing push to reinforce the company's brand name in that market.

New products, including large machines that can print posters, should also help the unit, especially with supplies sales.






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