The Road Ahead for HP Is Not An Easy One

 
 
By Eric Lundquist  |  Posted 2001-09-10
 
 
 

Once there were lots of companies building personal computers. Now, there are still lots of companies building personal computers, except the gap between the really big international vendors and the guy down the street cobbling together systems has become large, indeed. The major news last week was, of course, HPs proposed acquisition of Compaq.

It is a story of the acquirer becoming the acquiree, an economic forced marriage, and the need to get big fast or retreat to a profitable niche until the technology downturn blows over.

Building personal computers has largely become a manufacturing game where the most direct line between the consumers deciding what they want and the manufacturer supplying that need is the best line. You can get a really nice system from your local dealer if that dealer uses quality parts and stands behind the system it is selling. Even a combined HP-Compaq will have a tough time finding some profitable ground between Dell on one side and the local dealers (which still account for the largest part of the market) on the other.

That equation, while true for the desktop system, is not true for other segments. I know this stance will bring me a few letters, but I really dont know of many local vendors building their own labeled laptops, handhelds or printers. On the upper end, as the system becomes more crucial to the enterprise, the greater the need to go with an established supplier with a local service component. And therein lies the opportunities for HP. On one end, the combined company could bring considerable muscle to tackle the highly profitable business of handhelds, the less profitable business of laptops and that obscenely profitable business of printer supplies. Now that the Department of Justice has time on its hands, maybe it should look at the lack of competition and pricing for those ink-jet cartridges.

That sudden freeing up of DOJ time as it decided to drop the Microsoft breakup demand and also trash the pursuit of a penalty for the companys browser-operating system tie-in was also cause for much speculation. Ive got to imagine the ever-exuberant Steve Ballmer did a victory dance over the DOJ decision. Microsoft had sworn to fight the possibility of a breakup as far as its extensive resources would allow. Now that the breakup cloud has lifted and the browser discussion has been tossed out, the question becomes, What is the correct penalty for a company found to abuse its monopoly position? Id say at this point, lets make Bill Gates write "I will not be a marauding monopolist" 2,000 times on the blackboard and be done with it. One caveat: Bill cannot use the cut-and-paste functions for his scribbles.

While the weeks news took the headlines, Id suggest a careful reading of Timothy Dycks story on Web services. Web services will indeed be the foundation for the next tide of business applications, and, downturn or not, you need to prepare for this big technological wave.

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