Will Your Next TV Be an HP?

Hewlett-Packard may have lost its lead in terms of worldwide PC shipments to rival Dell in the first quarter of this year, but the company is planning a comeback that it hopes will not just upset Dell's PC market, but its consumer electronics play as well.

At least that's the aim of Jim McDonnell, vice president of sales and marketing for HP's Personal Systems Group, who said Monday that the company is steadily working to retake the top spot in global PC shipments, and has plans to dive even further into the consumer market.

McDonnell's comments come after HP's announcement of new consumer strategy last month, accompanied by the introduction of more than 150 new consumer products, including digital cameras, printers, and PCs.

Future Plans

"Absolutely we are expanding our consumer product line," McDonnell said. The executive also hinted that HP could soon be moving into TVs and perhaps expanded music offerings.

According to McDonnell, HP will be "probably" be entering the TV market "very soon" and rolling out products over the next five years. Although he didn't give specific details, he said that HP TVs would most likely have integrated functionality such as combined DVD players and music playback.

HP may also expand further into music with MP3 players or possibly an online music service. Although McDonnell would not confirm that HP has any immediate plans to jump into the music market, he recognized that photography and music are the main drivers in the current consumer PC and electronics market.

"Stay tuned," McDonnell said, when asked if HP was planning to launch any new music products and services.

Post-Merger Life

HP's expansion into the consumer market comes as the company enters its second year after its merger with Compaq Computer--a marriage that necessitated a major shift in the Personal Systems Group's product lineup and distribution channels.

But according to McDonnell, the company's dual-brand strategy of aiming HP PCs at the higher-end enterprise market and Compaq PCs at consumers is working "fabulously," pricing issues have been resolved, and distributors have been brought further into the fold.

Plus, the Personal Systems Group is "on plan" to be profitable this quarter, McDonnell said. Notebook and tablet sales are up, McDonnell said, and the group is now eyeing a broader consumer market.

Past the PC

Most PC vendors are looking at a wider consumer environment beyond the PC, such as providing an array of devices like MP3 players and digital TVs, according to Ranjit Atwal, a PC industry analyst with Gartner in the UK.

In fact, Gateway released a Gateway Digital Audio Player last month, while Dell announced a music player and download service last week.

"These vendors are basically trying to get their brands into consumer households, which is one of the advantages Japanese vendors like Sony have," Atwal said.

To really be successful in the consumer electronics category, HP will have to do some brand building, to be seen as more than a PC maker, Atwal said.

This kind of further product diversification may be necessary, however, given that even if HP overtakes Dell in terms of worldwide PC shipments, the market is not expected to post major profit growth over the next few years.

Sales Figures

In April, researcher IDC predicted that the value of worldwide PC shipments would shrink in 2003 by almost 2 percent, to $169.8 billion. Furthermore, the researcher predicted that the value of PC shipments would decrease by a compound annual growth rate of 2.8 percent from 2002 to 2007.

Although worldwide PC shipments are expected to be up 6.9 percent in 2003, to 145.6 million units, lower prices and heated competition for portable systems would keep revenue down in the short to medium term, IDC said in the April report.

This makes a shift to consumer products a smart strategy, according to IDC. HP unveiled a new consumer campaign August 11 with the introduction of an onslaught of new consumer products and services.

In a research note released last month by IDC Vice President of Personal Technology and Services Randy Giusto, the researcher said that "HP is one of the few technology vendors that can pull off something of this magnitude." However, Giusto said that the proof will be in the products themselves.

For HP, that "proof" may be its ability to go up against vendors like Dell and Gateway in hot markets like music players and services.

In the meantime, HP has its sights on Dell's number one place in worldwide PC shipments. HP managed to take the lead in the fourth quarter of 2002, but Dell overtook the company in the first and second quarters of this year, according to IDC.

That fact doesn't appear likely to deter McDonnell. "We are the biggest game in town," he said.

And according to Gartner's Atwal, with the merger pains mostly soothed, HP is on strong footing for a comeback.

It remains to be seen whether the addition of more consumer products into HP's lineup gives the company that extra punch.