HP fails to deliver narrative on future PC, printer strategy
How will HP remain relevant in a technology world that is increasingly moving on without it? The inability of executives to talk off-script about future strategy left me thinking the company is thinking too short-term to dig its way out of the PC and printing morass.
NEW YORK — I spent the best part of an hour and a half in two hotel rooms — it sounds seedy, it almost, nearly was — with five HP executives in all, being audibly schmoozed by industry-talk that would baffle even some of the most experienced workers in the enterprise and business field.
Prior to the meeting, I had a good idea of what I was going into.
The event was, in a nutshell, a less-than-glorified product launch of a range of new notebooks and printers designed with IT professionals in mind. Product launches for enterprise and business products and markets — so anything that isn't generally considered "consumer" — are not usually a grand affair. This was one of those less-than-grand affairs, despite it being held in a rather lavish hotel conference suite in New York, where you might expect those drab, dull, and mind-numbingly painful meetings to be held.
In that respect, it was spot on.
HP's PC and printing units both account for a rough quarterly distribution of the company's overall revenue, per its second fiscal quarter earnings. Yes, they were lighter and "stylish," as per the press release, and designed to accommodate some new IT department friendly features.
But my job was not, at least in this capacity, to dive into a new product range or line-up. Nor was it to receive a full-blown product review, which seemed to be more at the front of the mind of the executives I spoke to. I was there first and foremost to talk business and corporate strategy, which executives had agreed in advance to discuss, with the intention of leaving much of the product news aside.
Considering the PC market is in a dire place, and worldwide shipments of PCs are dropping off the face of the planet — even the chipmakers are beginning to see signs of struggle — I was there to seek answers on where the company is heading next at a time where traditional PC makers in particular are struggling to regain traction in the sectors they traditionally held in good stead. How are companies like HP going to remain relevant in a post-PC world?
The questions were going to go like this: What's coming up? How is the company faring against its competitors, and how is it planning to get ahead? Will the company aggressively target Asia and India, where its revenue still makes up a mere one-fifth of its overall global revenue?
These are all things that we want to know.
The first room I was bundled in was a briefing with two executives. Printing was up first. HP's printing division takes up about 21 percent of the company's revenue, but at its last second fiscal third quarter earnings, it was reported down four percent year-over-year. In fact, every HP division was down in some cases by double-digit percent at the last earnings call, with only its software division up by one percent.
Printing is important to HP, particularly where it goes to next. "And that's what I really want to focus on," I said. "I really want to know about where you guys are heading in the next year or so."
After nearly ten minutes of hearing about the products — new printer products, which, to be honest, is not a big deal — I aimed to get the conversation back on track. "While this is interesting, I'd really like to shuffle this along to the strategy side of things, like where HP plans to take its printing business in the next year or two," I said.
"At one point, it was like playing a game of enterprise 'buzzword bingo' in my head."
There was so much press release shpielspeak there was no room for maneuver. At one point, I noted the words "ubiquitous", "seamless", " rethink", and "solutions" at least twice, in one case three times in the space of just a couple of minutes.
It was like playing a game of enterprise "buzzword bingo" in my head.
When pressed on the "biggest pressure" in terms of the global strategy on printing, I asked if the company have any concerns in the short- or long-term? "What's the unique customer needs for that country? What we're hearing is we need mobile printing, and security," the executive said.
Finally. Mobile printing was highlighted as one of the driving forces for this next wave of products. Where is HP moving with mobile printing? "Before, you had to connect your device through wireless to print items. When you bring your own device from home and you try to connect, that becomes cumbersome," he said. "And people are not willing to work through those print."
They discussed mobile printing, but entirely from a product perspective. The ability to print via near-field communications (NFC), as well as printing via Wi-Fi ad-hoc networking was highlighted as a key point. "We are continuing to inject mobile communications in our printing products," one of the executives told me.
"We're trying to make mobile printing simpler than going 'File, Print'," he said. Printing from tablets and smartphones, I asked, which was confirmed. The "mobile revolution" was, as it was pointed out, important to the company, at least going forward from a product perspective.
At the heart of HP's current printing business efforts is to create a number of printing solutions that work within existing IT infrastructures but also cater to the needs of the ever-mobile workforce. This falls firmly in line with existing trends — we see them all as enterprise workers — of bringing mobile devices into the workplace. But the executives were reluctant to explain how mobile was the driving force behind the future of the printing division, and were more interested in tapping numerous devices against the printer to show how "seamless" and "ubiquitous" this mobile technology was.
In asking what printing means to HP, and how it fits into the company's cultural identity — knowing that only a year ago it was being merged with its PC building unit (more on that later). Was the decision right for the company, as it continues to see falling growth in its quarter-on-quarter printing revenue?
"Printing had the right strategy. Meg said at our quarterly statement that…" at which point the other executive interrupted. "But if you look at our products today, where we're focusing on…" and continued to talk about the features of the product that were on display in this cramped hotel room.
I asked about the impact to HP's China and India market share. As per its second quarter earnings, HP has just 19 percent of the Asia market, but it has potential.
"We're very pleased with our results," the executive told me. "We're the number one laser printing brand in both markets. We've got a significant presence there. They're an important market for both HP and the laser printing business," he added. "Meg made it clear that it's still a strategic part of the company," said the press officer in the room, but declined to budge on what this meant when pressed further.
Tell me something I didn't know. Tell me something that wasn't in the HP playbook of suave journalist-dodging questions. At one point, I looked behind me for the teleprompter. (There wasn't one, much to my actual surprise.)
Despite peppering the conversation with questions in a bid to steer the executives away from the products that were taking up much of the room, they were reluctant to explain how mobile was the driving force behind the future of the printing division. The impression I left with was one of pride across the products themselves, but little in way of forward-thinking strategy.
After the twenty-minute mental waterboarding, it was (albeit vaguely) clear that HP is pushing ahead with mobile-based printing by simply adding additional features to its existing line-up of products.
It was, to be fair, a glorified product preview. I felt like I was there under different motives to which I went in with. It was a display of incremental updates and features based on customer feedback, but at no point was there any meaningful look ahead on what the company is doing in terms of its future printing strategy. The impression I left with was that the company is updating its product line with an array of new devices that appear to compete with those who are already ahead of the curve, rather than aggressively pushing into a space that has yet to exist.
"I'll defer to IDC figures"
Another room, another briefing. Pressed awkwardly between two PC executives on a rounded sofa, I was once again subject to death-by-PowerPoint for a good few minutes before I broke the conversation into questions about the company's crown jewel: the PC building unit.
HP was once the leader in PC and notebook sales. But in recent years, the PC market has begun to unwind thanks to the increased pressure from tablets and smartphones, which are cannibalizing the traditional desktop and notebook market.
In order to stay relevant, HP has to pull out all the stops in order to tackle its declining share in the PC market. According to latest IDC figures, worldwide PC shipments are expected to fall by 10 percent by the end of 2013. HP, which remains in second place of worldwide PC shipments according to IDC and Gartner, is losing about 5-7 percent in share year-over-year.
But under the Apotheker regime, the PC unit was on its knees ready to take a bullet to the back of its head. I wanted to know if the company continues to invest in the space, despite falling revenue and shipments.
HP's PC division represents 27 percent of the company's revenue, but this is down 20 percent year-over-year based on its second quarter revenue. It's slipping fast. How was the company going to tackle its decline in the PC market, knowing that Lenovo is aggressively charging ahead with its new models and technologies? What were its rivals doing that it could learn from?
According to the company, its margins are thinning — although somewhat better than Dell's. But instead of consolidating its notebook and laptop offering, executives confirmed that it would continue to add even more devices to its range. Citing BYOD culture, another executive told me that the "devices are becoming more situationally specific," and that the company will add "incremental products to our line-up over the next five months." HP is not considering consolidating its models, as it plods along adding new models to its portfolio.
I asked in a follow-up question the company's level of product redundancy, and whether or not it was wise to pursue a strategy whereby it would target every user possible, rather than designing fewer but more user-specific models. I was talking about Apple, but I didn't mention its name — considering the awkward avoidance of its products earlier in the first briefing.
"Do we have a clearly defined target user?" the executive asked rhetorically. "Are we serving the same customer with two different products?" He confirmed that HP works "very hard not to do that," adding that each product line-up is targeted at a portion of the business.
Meanwhile, Apple receives approximately 19 percent profit margin on each Mac it sells, compared to Dell and HP's mere four percent. While its sales are about three-times lower than its PC manufacturing rivals, proportionally Apple makes more money on selling far fewer Macs each quarter, than Dell and HP make each quarter selling far greater numbers of lower-profit devices.
Next up, tablets. HP has notably struggled to dent the market, thanks to Apple and Samsung, among others. IDC figures released in August did not include HP in the top five tablet makers, indicating it had shipped less than fifth-place Asus, which shipped 1.4 million tablets during the quarter. The two executives confirmed that on the business and enterprise side: "We're focusing on only Windows-specific tablets because they offer the maximum compatibility with existing infrastructures in the enterprise," citing a mix of compatibility and security in the tablet market. Its Android-powered Slate tablets are designed for the consumer market, they told me.
"We're obviously not happy. We'd like to do better [in BRIC nations]."
But on the crucial BRIC (Brazil, Russia, India, and China; the main emerging markets in the world today) nations and how HP is hoping to expand its 19 percent share, I was deferred to IDC figures. "It's an important market for us," one of the executives told me, but refused to be pressed on why, or even how the company was moving forward with its BRIC-targeting strategy.
A lengthy silence later, the other executive said: "We're obviously not happy. We'd like to do better [in those markets.] We are investing into the space and we're not stepping away at all," he said. In the business and enterprise space, he noted they were first or second place in the overall commercial PC space in "every region" they operated.
The executives remained mum on its strategy ahead for BRIC nations. While it says it has an "individual, catered strategy for each region," they would not be pushed on exactly what sets them apart from their rivals and competitors.
It was clear that though it remains an important market for HP, the executives would not talk about — above all else — why it was important.
Windows 8 has also slowed sales of PCs, according to recent analyst figures. Many are stuck on Windows XP and Windows 7, reluctant to upgrade their operating system until the long-awaited Windows 8.1 arrives later this year. Describing the push as a "huge opportunity" for the company, HP said Windows 8 had seen a slow adoption but declined to be pressed on any customer trends it had experienced — such as rates of adoption.
Will HP revive Windows RT with a tablet of its own? "Were not going to comment on future products," one of the executives told me. And with that, my time was up.
It was like squeezing blood out of a stone, except there would have likely been more success there.
It was clear that, notably in emerging markets, HP isn't willing to talk. It's not willing to let on how it is pushing ahead in a market that still has vast potential. Executives were on the verge of drinking the Kool-Aid to avoid any talk of the competitor in such a way that may detract away from the forced conversation in hand about Product X and Product Y. For the fact that one executive couldn't refer to the iPhone when mentioned as "an iPhone," but instead called it a "AirPlay-enabled solution," one has to seriously question whether or not these executives were in fact talking to someone from this earth.
I was there for one reason, agreed upon in advance. But executives weren't willing to deviate from their script. Either the executives weren't prepared, or they weren't willing to budge. The nature of these executives led me to question if they even knew anything at all.
While you can buy the new products and reap the IT infrastructure benefits — if that floats your boat — you'll have to keep guessing on whether the company is even looking to keep its PC or printing unit in future — or whether HP will look towards improving its position in mobile technology, emerging markets or services.
HP needs to explain how it's pushing forward, at least of all to silence the naysayers and the "PC is dead" proclaimers. Instead, I found an alarmingly ambiguous, vague, and unclear company, unwilling to share what it has up its sleeve to realign its business ahead of an expected holiday quarter tanking.