Hewlett Packard

 Linda S. Cook

9/10/01

Barry University, Merritt Island, FLProgram: MSIT

Instructor: Joanna BassMIS 675 Strategic Uses of Information

TechnologyTerm Project

HP History

• Founded in 1939 by engineers Bill Hewlett and David Packard.

• The first product, invented in 1938 .– Resistance capacity audio oscillator (HP 200A). – Disney ordered eight for the production of

Fantasia.

Bill Hewlett &David PackardIn “the” garage.

First invention,The resistanceCapacity audioOscillator (HP200A).

Inventions

• Management by Walking Around (MBWA).– Style created by Mr. Packard, 1940.

• 1951 HP’s sales 5.5 million & 215 employees.• 1959 HP became global.

– Boeblingen, Germany manufacturing facility.

– Germany and European headquarters in Geneva, Switzerland.

• 1965, sales were $165 million with 9,000 employees, HP went public.

• 1966 HP Labs became company’s central research facility.

• 1968 decentralization to group general managers who ran divisions with related product lines.– Introduced the first scientific desktop calculator

HP 9100.

• 1972 introduced first handheld scientific calculator HP 35.

• 70’s HP branched out into business computing with the HP 3000 minicomputer.

• 1973 HP instituted flexible work hours.• 1980’s four “sector” organizations were

formed to oversee the growing number of P&L groups.– Established China Hewlett Packard (CHP).

• 1988 HP Deskjet Printer.• 1989 HP celebrated it’s 50th anniversary.

– Garage became a California State Historical Landmark.

• HP introduced HP 9000, the first desktop mainframe.

• Introduction of the ThinkJet printer and the HP LaserJet.– LaserJet became the “world’s most popular

personal desktop laser printer and HP's most successful product ever.

• During the 90’s innovations included:– HP 95LX, an 11-ounce palm PC.

– The HP SONOS 1500 echocardiograph.

– The HP Pavilion PC.

– Intel and Hewlett Packard collaborated to develop a common 64-bit microprocessor hoping to “define computing in the 21st century”.

– Developed JetSend allows wireless interaction between computer peripherals.

– Introduced Teramac, uses nanotechnology.

– HP OfficeJet 700 series first printer-fax-copier color product.

• 1994 HP formalized telecommuting policies.– Result was increased job satisfaction, reduced

commute time, flexibility to coordinate personal and work schedules, and lower levels of stress.

– Reduced office-space requirements and improved employee retention.

– HP's intranet—the world's largest—links its global operations and ensures communication with employees wherever they are.

HP Today

• The corporate headquarters:– 3000 Hanover Street, Palo Alto, California.– 88,500 employees worldwide.– More than 540 sales offices and distributorships

in more than 120 countries.– CEO-Carlton (Carly) S. Fiorina, 1999.– Chairman of the Board 2000.

HP Business

• Global provider of computing and imaging solutions and services for business and home.

• Three divisions.– Imaging and Printing Systems.– Computing Systems.– IT Services.

HP Revenue

• “For the six months ended 4/30/01, net revenue fell 1% to $23.56 billion. Net income from continuing operations before extraordinary item fell 78% to $360 million. Results reflect lower UNIX and PC server revenues, lower margins and $765 million in special costs. For the 3 months ended 07/31/2001, revenues were $10,147 million; after tax earnings were $103 million. (Preliminary; reported in millions of dollars.)” (Yahoo Finance, 2001)

HP’s mission & strategy

• E-Services is HP's Internet strategy.– HP believes that “the Internet will evolve from

a collection of Web sites accessed via PC to a virtual marketplace of Internet-based services that can be invoked, on the fly, from any device.

– HP is building the next-generation IT infrastructure devices required to “support a world where billions of devices are generating trillions of transactions”.

Environmental Analysis

• Alliances are an important element of its value-creation strategy.– May 2000 cooperative agreement with

Heidelberger Druckmaschinen AG.• To leverage its printing and imaging expertise in the

$400 billion commercial printing market.

– October, 2000 allied with Indigo N.V. • A digital color printing systems provider.

– Sept. 2001 acquisition of Indigo N.V.

• HP controls.– 60% of the ink-jet-printer market.– 55% of the laser business.

• Last year HP sold about $9 billion of ink and supplies.– Printers carry gross profit margins of 15% to

20%.– The margin on ink is 50%.

Strength

• PA-RISC architecture for systems and workstations and its Explicitly Parallel Instruction Computing (EPIC) technology, which provides the foundation for Intel's next-generation, 64-bit high-end Itanium processor family.

Weaknesses

• Most of the businesses Fiorina inherited are aging or slow-growing or both.– The $20-billion-a-year printer and ink group, is

based on products developed in 1984.– HP's PC business is struggling to break even.– Software and services are growing, but they

make up only 17% of HP's $48 billion in revenues.

Opportunity

• Vyomesh Joshi, President of imaging and printing operations, predicts that he can boost HP's printing sales from $20 billion to $30 billion by 2004.– Use the Web to prompt consumers to print.– Break into the commercial market.– Get big customers to transmit digital copies to a

sales office to be produced on demand by an HP printer.

Weaknesses & Threats

• HP only recently introduced its first digital printer capable of handling big jobs for a satellite office.

• The company also faces competition from entrenched firms like Xerox and Canon.

More opportunities

• World e-Inclusion. – HP will sell, lease, or donate $1 billion in

products and services to governments, development agencies, and nonprofit groups in countries like Bangladesh and Senegal.

– Fiorina also expects e-Inclusion to improve HP's brand image and market position in developing countries.

More threats

• Key competitors.– Sun Microsystems, IBM, Dell, Compaq,

Gateway, Apple, Handspring, and Palm.• Dell Computer launched an aggressive price war in

the fourth quarter of 2000.

– Sony, Xerox, and Canon.

Merger

• Hewlett Packard and Compaq announced a merger September 3, 2001.– Plans to buy Compaq for $25 billion in stock.– Combined revenues about $90 billion.– New company will be slightly smaller than

IBM, the world's largest computer-maker.– Storage divisions combine to form a $6 billion

enterprise.

Strategic move

• Merger is response to the PC price wars.

• To capture a greater share of the high-end storage market.

• Enables the combination of Compaq’s handheld computer technology and HP’s imaging and printing technology.

• Improve its customer and support services.

Technical analysis: Internet Business Models

• CEO, Fiorina is implementing an Internet strategy.

• HP is banker and investor for start-up companies.

• E-services strategy “revolves around creating and delivering services over the Net.

• Infrastructure on Tap.– Online service, allows a client to deliver

services over the Internet without investing in information technology equipment or staff.

• E-speak.– A high-level services language based on Java

and eXtensible Markup Language.– Revived as open source code to win developer

support.– Automates common services between systems.

• HP WebQOS Web site application monitoring system & OpenView network management system.– Ensures customers will be able to deliver Web

service in high traffic conditions.

• HP-UX, version 11i.– Introduces partitioning.– Protects against internal application failure.– Built in support for wireless access protocol.

The Business Model

• Provide an end-to-end solution for start-up companies by providing the revenue, consulting services, system design and hardware to get the company started.– Establishes customer loyalty.– Establishes long-term relationships.– Won AOL and Amazon.com.

Conclusions and Recommendations

• Year 2000.– HP moved ahead of Compaq in the PC market.– Was ready to take on Dell for the lead.– Dell announced a PC price war.– Economy declined and technology stocks

crashed. – HP invested most of its future in Internet e-

business strategies.

• PC became a commodity.• Hewlett Packard cannot compete with direct

marketing.• HP must adapt by focusing on invention,

branding, and marketing initiatives.• Compaq acquisition increases HP’s abilities

to become a market leader in:– Printer technology.– Mobile computing.– Storage services.

• HP sees most of its future revenues coming from its e-business solutions.– Fastest growing area of electronic commerce.

• Mergers and acquisitions are a major growth engine for businesses.– Deeply affected by the organizational

characteristics of the merging companies.– Technology infrastructures & systems

integration.

“We take the integration challenge exceptionally seriously. This is a massive integration effort. One could argue it is the largest integration effort in the technology

industry and we’re trying to integrate in a very difficult overall environment. Price competition is fierce. Who knows when the economy is going to turn? We at HP are in the midst of a reinvention process. Compaq has been in the midst of its own transformation. Synergies are tough to get. They require decisiveness, they require speed, and they require the tough work of taking people out of the business.”

• Jobs eliminated.– 8500 from Compaq.– 6000 from Hewlett Packard.

• Merger is costing HP over $20 billion.

• Carly Fiorina will remain CEO.

• Michael Capellas, HP president.

• Operational costs cut by $2.5 billion.

• Merger not received well.

• Would overtake Dell Computer.

• Test will be bringing the two cultures together.– Must win the approval of regulators and

customers. – HP is integration leader.

• Merger answers business issues.– Will establish HP as the #1 player in the PC

industry.– Beef up its position in the enterprise server

market.– Combined $15 billion services business.– A very strong printer business. – HP gains top handheld computer, wireless, and

mainframe technologies.

Growth

• “We're not counting on improvement during the first half of our fiscal year." April 2001 revenues actually fell 2-4%. Revenues were down another 6% in May and Carly stated, “We think broadening the revenue range slightly [for Q3] from flat to flat to down 5% is prudent, (Fiorina, 2001).” The June 2001 pre-announcement for quarter 3 is that long-term growth will be at 10 – 12% and "HP is now more cautious regarding its guidance for the third quarter.