HP Execs Expound On Market Possibilities

Half Moon Bay, Calif.— With sales of several core product categories slowing in the United States and other technologically advanced nations, Hewlett-Packard is embarking on a course to refresh stagnant product lines and push the company into new geographical markets.

Vyomesh Joshi, imaging and personal systems group executive VP, described a shift in business priorities that will have HP push products like inkjet and monochrome laser printers into China, India, Russia and Brazil, countries that need inexpensive business and consumer products. Concurrently, HP will look to extend its U.S. operation by bringing new value to categories like digital imaging through its recent acquisition of online photo developer Snapfish. Joshi made his remarks at HP's recent Imaging and Printing Conference, held here.

“Certain parts of our core business are slowing down, so we must extend these core businesses into emerging geographies and reallocate resources from old core business into emerging categories like digital photography, color [laser] in the office, multifunction printers and digital publishing,” he said.

HP's digital imaging venture will have the greatest consumer and retail impact, said Larry Lesley, HP, consumer imaging and printing senior VP. With Snapfish now under the company's corporate umbrella, HP has a hand in every aspect of the digital imaging category and can take steps to take the customer experience to the next level.

“Our strategy for in the home is to remove the perceived inhibitors like quality, cost and complexity,” Lesley said. “HP's goal is to bring the photos to life through software tools and not let them simply be stored in a 'digital shoebox,' a PC's hard drive.”

The path HP envisions has consumer's capturing pictures with their digital and cellphone cameras, printing a few at home for immediate gratification then sending the bulk of the images off to Snapfish for printing. Not only can Snapfish print bulk orders less expensively then what can be done at home, but its wide array of products will give people a variety of ways to enjoy their photos and generate add-on sales, Lesley explained.

There is also an opportunity to utilize Snapfish's Web store to cross-sell HP merchandise, said Joshi. Since the Snapfish deal closed only five weeks ago, a firm plan is not in place, but it is possible that HP printers, cameras and other products could be sold on Snapfish.com.

Jim Ruder, personal inkjet printing VP, indicated that the emphasis on photo printing with the company's consumer product can be seen in the fact that the number of PhotoSmart single use and all-in-one SKUs now outnumber DeskJets. This trend will continue as HP further educates consumers that the PhotoSmart printers are capable of handling general and photo print needs.

Outside of the digital-imaging arena, HP views Digital Entertainment Centers (DEC), essentially Media Center PCs, and microdisplay and flat-panel televisions, as future profit drivers.

Jan-Luc Blackborn, HP's consumer digital entertainment director, said consumers are still foggy on the concept of combining consumer electronics and personal computing in a single platform. On the bright side, he said, the number of Media Center computers sold doubled in 2004, albeit from a very small base, and he sees growth in the two other primary enablers of this technology, broadband adoption and home networking.

Blackborn described the promise of Media Center as still part hype and part reality due to the device's inherent complexity and lofty price tag. Even with these unsolved issues HP is meeting its DEC sales goals, he said.

To take Media Center acceptance into the mainstream HP is focusing on two customer types, the PC-savvy and the home-theater enthusiast. The company's initial foray into the TV market is going through high-end specialty retailers, Blackborn said, while mass market retailers can at this time handle the DEC sales.

Because of this Blackborn expects the PC-like DECs will gain acceptance first, while those intended for use in a home theater set-up will take longer to attract an audience.

“The A/V specialty stores have a well-trained sales force to help the less-savvy customers. Meanwhile, this type of store's affluent customer base is OK with a DEC's $2,599 price,” he said, adding that people who understand computers can handle buying a DEC on a less intensively supported sales floor.