HP Unruffled by Downturn in Its Consumer PC Sales

By Chris Preimesberger  |  Posted 2011-06-01

HP Unruffled by Downturn in Its Consumer PC Sales

Some observers of the IT world were taken aback by Hewlett-Packard's most recent quarterly earnings report, which plainly showed that the world's largest supplier of personal computers had slipped in the consumer laptop/notebook department.

People who follow the PC business closely, however, were not surprised. These folks already knew that Apple's iPad and iPad 2, as well as a flock of Google Android-based tablets, had cut deeply into all mobile PC sales during 2010 and early 2011.

The numbers were stark. Along with all the major PC makers, HP's consumer PC sales fell sharply in the quarter compared to a year ago, before Apple's iPad and numerous other tablets hit the marketplace. Analysts have projected worldwide sales of between 30 million and 50 million iPads in 2011, not to mention the other Android- and Windows-based tablets now on the market.

"HP experienced uneven consumer performance across its product categories during the quarter with continued softness in consumer PCs across all geographies," was the soft way CFO Cathy Lesjack positioned the company's consumer PC cliff dive in the quarterly report.

HP's consumer PC sales fell a whopping 23 percent in the quarter compared to one year ago. Overall, the worldwide PC market shrank by 3.2 percent in the first quarter of 2011 compared with 2010, researcher IDC reported. IDC actually had predicted growth of 1.5 percent in the quarter.

Another industry researcher, IHS iSuppli, reported that portable PC sales slumped by more than 11 million units during Q1 2011, attributing it directly to increased interest in tablets. IHS iSuppli expressed surprise at a slight quarter-on-quarter decrease (to 81.3 million units), because PC shipments had reached a quarterly high at the end of 2010 on strong corporate demand.

Acer's PC sales were down 20.4 percent, Dell's were also down. In fact, five of the world's top seven notebook producers are all in the same boat.

HP Unruffled by Downturn in Its Consumer PC Sales

title=Too Soon for HP to Worry?}

Too Soon for HP to Worry?

Tablets have only been out for a bit more than a year. Laptops have been around for a generation and are a proven device. Is it too soon to ask if HP is beginning to worry? Its own tablet PC, the TouchPad, won't be out until this summer.

"This is what our industry does-we evolve," HP executive Stephen DeWitt told eWEEK. DeWitt serves as the company's senior vice president and general manager of the Personal Systems Group in the Americas, thus he is about as close to this market change as anybody.

"If you look at the rate of innovation over a number of years, it's truly accelerated. I would push back a little; I don't want to sound like Mark Twain, but the demise of the PC category ... [you can fill in the rest]."

DeWitt (pictured) is among those who believe that with the overwhelming desire for people to get connected using devices of all kinds, that the personal notebook PC will continue to maintain its place indefinitely for use in both personal and business communication.

"Look, we expect that by the end of the decade, more than 4 billion people will be online, and the number of devices that are hung off the cloud will dwarf the number of devices that are out there today," DeWitt said. "IDC has estimated that by 2020, there will be 30 billion devices hung off the network."

'Universe' of 30 Billion Devices to Come

"Inside of that universe of 30 billion devices, the estimate is that there will be between 400 billion and 500 billion e-commerce transactions every day. Also inside of that, there is going to be a massive proliferation of data. Think of every sensor, every trellis in a vineyard, every corn row, every boxcar, every packaged good, every car-everything is going to be connected to the Net," DeWitt said.

Processing this is going to continue to require solid, dependable devices for software and hardware developers that can do the heavy-duty jobs that need to be done. In other words, there's plenty of room for all kinds of personal and business computers in the future, whether they look like notebooks, tablets, or some other form factor that hasn't yet surfaced.

Tablets are fun to use, lightweight, handy to carry around and getting more functional all the time. But there are weaknesses: Touch-screen keypads are more difficult to use, on-board storage is limited, security has been an ongoing concern and overall horsepower isn't nearly there yet.

"Right now, our PC businesses around the globe are at all-time historical highs," DeWitt said. "Our U.S. share is north of 29 (percentage) points, which is as high as it's ever been. We've taken category leadership in areas like notebooks-we haven't had the No. 1 position in notebooks in the United States ever, until we took it away from Dell just recently. Dell had held it since 1999.

"We're now the top notebook seller in Brazil; two years ago we were No. 6. And so on."

Tablets Still in Their Earliest Days

'Tablets Still in Their Earliest Days'

The tablet market is only in its earliest days, DeWitt said. "Apple has done what it has done, there have been a lot of great lessons learned-good, bad and otherwise. We know we're at the beginning of a marathon," he said.

HP's consumer and business tablet, the TouchPad (announced last February), is being readied for distribution within the next 4-8 weeks. And not a moment too soon for the world's largest IT company (by sales volume).

"We're about to launch the TouchPad. We're very excited about that; it's a very elegant and sweet product," DeWitt said. "We will be rapidly maturing our tablet and smartphone market and extending the webOS footprint to our PCs and our printers.

"If you roll the clock forward a year or two, and when you think about the volumes that we've moved, we will have hundreds of millions of devices that will be webOS-enabled. That allows us to bring to the developer community a value proposition that's unique in the market."

As for Apple's astounding head start in the tablet business, DeWitt said that "we're an industry that leapfrogs constantly. Remember a handful of years ago when minis came out? Everybody was saying that those were the Second Coming."

Tablets Fit into 'Human Equation'

"The fact of the matter is that tablets fit into the human equation. It's a great device from a form-factor perspective, for consumption on a million different levels. Where developers take this will ultimately define where this category will go. Will they replace PCs? Of course not. But PCs aren't going to replace tablets, either."

Tablets have been cannibalizing HP's PCs business to an extent "because we haven't been participating, but when we participate in the tablet market, we certainly anticipate we will take our rightful share for the value we deliver into the market," DeWitt said.

HP Unruffled by Downturn in Its Consumer PC Sales

title=Global Gravitas Will Play to Developer Community}

Global Gravitas Will Play to Developer Community

There's no question that HP's global gravitas will attract new outside development help when it comes to creating new and improved applications for webOS and cloud computing use cases. HP has never been particularly known for its creativeness in software, but this is, in fact, a key to the continued growth of the company. A key example is the company's new Application Lifecycle Management 11 platform. (See Darryl Taft's slide show on this topic.)

A new webOS app store is in the works, too. So look for increasing HP impact in software development as time goes on.

"We've been doing all of this [cloud applications] for some time, only it's been under other names," DeWitt said. "When you go back to the beginning of the decade to grid computing and adaptive infrastructure, the problem sets are not unique."

To access all that forthcoming cloud infrastructure, HP will continue to bank heavily on selling legions of different-size portable and desktop PCs for business and personal use. It also has invested a great deal in the soon-to-come TouchPad and the webOS Pre3 and Veer smartphones.

HP can't wait to get them into the marketplace. The company figures there is room for all sorts of devices-with keyboards and without-that will be needed for the huge demand it and the analysts expect to take place in the next decade.

"When we get these new devices into the market, when people see how well they work and how they interact together, and how our core applications and the new applications to come from [outside] developers will work, the story and the differentiation in the market is going to become very clear," DeWitt said.

DeWitt was citing how the TouchPad and the Palm Pre3 and Veer smartphones are designed to physically work together. For example, to sync one of the phones with a TouchPad, all a user needs to do is actually touch the two devices together, and voila, they can share email, video and other applications.

"This is the beginning of the race. We're going to see applications built in the next few years that are beyond anything any of us has comprehended," DeWitt said. "Developers have never had a set of services that they could write to, in order to manipulate tens of millions of devices.

"We haven't climbed up this hill yet, and it will be the hill that defines us through the remainder of the decade."

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