August 27, 2004 10:32 AM PDT
HP to tempt shoppers with digital lifestyle
The computer hardware giant, best known for products such as PCs and printers, on Friday laid out its plan to become a brand-name in consumer electronics products such as flat-screen TVs, music players and the devices that move content between them.
As expected, HP's CEO Carly Fiorina used a Friday morning press conference in Miami to introduce a torrent of new products, including HP's first televisions, its HP-brand version of the Apple iPod music player, a new HP Digital Entertainment Center PC, which looks like a stereo component but comes with a digital video recorder and also stores content such as movies and photos. HP also added a series of new cameras and launched several new printers, along with a new brand name, Vivera, for its printer ink.
Together, HP says, its new products will cater to consumers embracing a new era--Fiorina called the digital age--in which digital content such as music and photos is becoming more mobile and also more personal thanks to steps forward in technology.
"There used to be a limit to what technology could help you do," she said. "With the digital age, the only limits we face are the limits of our own imagination."
The company, which disappointed in its latest quarterly earnings, also sees opportunity in consumer electronics.
"We think the total addressable market for all digital products is probably $360 billion by 2007," she said. "We think we have a unique opportunity because we have leadership positions and intellectual property at every stage. It's a growth opportunity for HP for many years to come."
With a much smaller product line than the likes of Sony, Panasonic or Samsung, HP isn't going head-to-head with the consumer electronics giants. But it does want to use its new product lineup, and tactics like offering Apple's iTunes music service and branding its printer ink, to edge out competitors such as Gateway and Dell. Those rivals are also hoping to populate the home with "convergence" consumer electronics goods, which share files and other resources such as Internet connections with PCs.
Indeed, HP's vision of the digital age seems to reflect its existing PC sales strategy, in which it packages desktop computers, monitors, printers and cameras. In the living room, the company also wants people using its products--digital TVs, iPods, PCs and printers. It hopes consumers will buy entire lines of products to enable them to view, store and share TV programs, movies, music and photos.
The Apple iPod by HP will come in two versions, offering 20GB and 40GB of storage capacity, good for as many as 5,000 or 10,000 songs, HP said. The music players will be priced the same as Apple's version, at $299 and $399.
Today the home office...tomorrow the home
HP's partnership with Apple will play an important role in HP's strategy in other ways as well. The HP iPod and Digital Entertainment Center PCs will be able to tap Apple's iTunes online music service to allow consumers to purchase and archive their music, which can then be shared between the HP devices. HP has also formed an advertising partnership with MTV and will install "Immersion Centers" at retail stores like Best Buy. The centers will help demonstrate to consumers how all the products work together.
HP is doing the work to create the new products and partnerships to both extend its presence into new markets and protect its traditional strongholds, such as printing, one analyst said.
"If you look at it as a whole series of unified announcements, what it really does is burrow HP more deeply into the consumer market, and it begins to move it past the PC aspect of the (consumer electronics) market and into an opportunity to sell to a broader consumer market," said Steve Baker, an analyst with NPD Techworld. "It's strategically important for HP to extend the brand beyond a PC."
HP's TV line will include two 42-inch plasma models, one with extended definition and one with high definition, and two LCD TV models in 26-inch and 30-inch sizes. The plasma TVs will cost $2,999 and $4,999 respectively, while the LCD TVs will sell for $2,499 and $2,999. But who's going to buy a TV from HP, which is better-known for printers and PC hardware?
"That's a good question," Baker said. "The rationale is all about convergence...the TV becomes part of your electronics inventory. It's a logical space for HP to be in. But the real question isn't whether it should be in TVs or who's going to buy one; rather, how they are going to be sold?"
Indeed, it could be difficult to show exactly how all the products may work together if they're sold individually within stores. Thus, HP will turn to the Immersion Centers to show how those products work together. It is also selling the products online via its HPShopping Web site and using ads on channels such as MTV to promote the products and show how they work together as well. HP is also sponsoring MTV's Video Music Awards, which air on Sunday, and will include HP cameras in goody bags given out to some attendees, Fiorina said.
But it also expects some of the products to help sell themselves. HP Printable Tattoos will allow people who purchase its printers and Apple iPod by HP, to customize the music player with a special stick-on skin printed on an HP printer, for example.
These iPod skins will allow people to put their photos or download artwork to splash across their music players.
Indeed, making a splash in what's expected to be a consumer electronic frenzy this holiday season is what it might take for HP to come out ahead--especially since competitor Dell is also expected to beef up its consumer electronics line for the holidays with TV models as an updated Dell DJ music player.
"We see this year's holiday season as a big digital entertainment Christmas, which is why our products are hitting the market just in time for back-to-school and the holiday season," Fiorina said.