February 10, 1999 12:15 PM PST

HP jump-starts PC business

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Hewlett-Packard will jump-start its PC division next week by releasing a new line of compact, design-intensive Vectra and Brio PCs and unveiling a $100 million branding campaign aimed at business buyers.

The new PCs and the branding campaign are aimed at energizing one of the largest major PC manufacturers. HP currently is growing at a slower rate than both Dell and Gateway.

The company is enjoying faster growth than both Compaq and IBM, but analysts don't see HP overtaking either of these companies anytime soon for a variety of factors.

"They are pretty much in fourth place," said Stephen Baker, an analyst with PC Data. "There's a pretty big gap after that, but there's also not much chance of moving up either."

But, as the new PCs demonstrate, the company is definitely not standing still. The new Vectras, aimed at corporate America, and Brio computers, targeted at small business, will be released on Tuesday, according to sources. The computers will use both Intel Celeron and Pentium II processors, depending upon the model, and will come with Pentium III processors when the chip becomes available at the end of the month. Prices start at $750. The company also recently shuffled its PC management team.

HP CEO Lew Platt and other sources have also indicated that HP will start to shift into the emerging market for Internet appliances. Last year, HP also made gains by rolling out the first PC line dedicated to small business and expanding its consumer computer effort.

Design will be a key element of the new models. All of the PCs will share a common motherboard and "tool-less" chassis, which makes repairing and upgrading easier. A common motherboard design will also likely ease the qualification process for corporate IT buyers because common parts reduce the lengthy and expensive qualification, or pre-testing, phase, said sources.

The Vectras will come in three different "form factors," or designs--in a standard desktop form, as a mini-tower, and in a new type of desktop design that will be smaller than standard desktops. The Brio, meanwhile, will be available as a desktop and a micro-tower, which is a smaller version of a mini-tower, said sources.

Complementing these machines will be the "Engineered at a Human Level" campaign which gets kicked off on the Monday.

Regardless of the new systems, the company faces hurdles on the sales side, especially in the large business arena, said Roger Kay. Most of HP's large business sales go to a few massive corporate customers. Expanding market share in this arena is difficult, because corporate customers are loath to change vendors. Additionally, HP does not have a strong presence in notebooks, which makes it even harder to steal clients.

HP was able to grow its market share last year by introducing the Brio line and expanding its consumer effort. Nonetheless, "Vectra is their main revenue source," he said.

Baker agreed. "There is a lot of comfort out there with Compaq and IBM," he said. "HP was the first one to go after small business with a specially designed computer. They have come up with some good ideas to compensate with the fact that they aren't as strong in big business."

Late last month, HP also shifted around its PC executive team. Under the new organization, Webb McKinney now heads up the Business PC Organization, which oversees the HP Vectra, Brio, OmniBook notebooks, and Kayak workstations. McKinney formerly headed up HP's home products division.

Jacques Clay, who used to head up many of the groups overseen by McKinney, now manages the consumer product effort.

 

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