HP Covering the Bases

Is Fiorina's two-pronged approach the formula for the company's success?

Hewlett-Packard Co. Chairman and CEO Carly Fiorina paced the stage of a New York loft early this month in front of a backdrop of shelves that held almost 160 new products, the largest product rollout in HP history.

But the company that has been compared most often with IBM as one of the premier providers of information technology to global businesses was making a splash with digital cameras, printers, large-screen notebooks and other consumer wares. As a follow-up to the event, the company will spend $300 million this fall marketing the consumer gear.

The next day, Fiorina was in Atlanta, pitching HPs Adaptive Enterprise strategy to more than 3,000 of its commercial users at the week-long HP World show. Everything the Palo Alto, Calif., company does on the enterprise side, she said, will feed into the initiative, which is designed to make a customers IT infrastructure more responsive to changes in its business processes and demand. The goal is to make data center resources easier to manage and provision.

The week illustrated the two-front battle that HP is waging, thanks in large part to its $19 billion acquisition of Compaq Computer Corp. last year. HP offers arguably the widest breadth of products in the industry, everything from personal digital assistants to massive Superdome servers, pitting the company against consumer and commercial high-tech companies from Sony Corp. to Dell Inc. and IBM.

"There is a question of whether a company can pull off this kind of dual strategy," said Erik Brynjolfsson, a professor at Massachusetts Institute of Technologys Sloan School of Management, in Cambridge, Mass. "For most companies, [the broad offerings to disparate customers] would be a disadvantage, but HP is one of the few companies that it could be a competitive advantage for."

According to Fiorina, HPs enterprise push comes down to a simple formula: high tech plus low cost equals total customer experience. Users are asking for better technology at a lower cost, and they want all the services necessary to support the infrastructure.

"We are a technology company. Innovation is our lifes blood," Fiorina said at HP World. In contrast, Dell, despite its continued gains in revenues and server market share, produces little innovation, she claimed.

"I think there is a reason they took the word computer out of their name," Fiorina said. "Theyre not a technology company. I think theyre a distribution company." IBM, Fiorina said, also offers innovative technology but at a high cost.

To manage such a diverse company, Fiorina has divided it into four business groups: Enterprise Systems, Personal Systems, Services, and Imaging and Printing. According to Peter Blackmore, executive vice president of the Enterprise Systems Group, the units have a strict discipline in development and sales but at the same time can share ideas and products.

"When you talk to a large-enterprise customer, often youre not just selling to them. The discussion is how you can work together in the market," said Blackmore (see interview, Page 16). "Theyre very captivated and intrigued by the fact that we can offer a go-to-market potential to [small and midsize businesses], a go-to-market potential to enterprise customers and also to consumer customers."

Lovina McMurchy, director of Wi-Fi Business and Alliances at Starbucks Coffee Co., said HPs consumer knowledge has been a key to the two companies relationship.

"We have very large enterprise needs, and HP is a very strong enterprise partner," said McMurchy, in Seattle. "But we also rely on HP to help us with our customer-facing needs as we look to offer new programs and services as well. We advocate a mobile lifestyle, and HP offers the relevant technology for that lifestyle."

However, not everyones convinced.

When furniture retailer W.S. Badcock Corp. last winter went looking for a vendor to help consolidate its IT infrastructure, one of the concerns about HP was that the product lines between HP and Compaq were "fractured," said Leo Hurtado, CIO and vice president of IT for the Mulberry, Fla., company.

Badcock chose to consolidate 46 HP, Compaq and Dell servers onto about 15 IBM systems. Hurtado said the decision was more pro-IBM than anti-HP, but he added that HP didnt have the enterprise depth of IBM.

"I think theyve got the capability to be broad and deep," said Cal Braunstein, chairman and CEO of research company Robert Frances Group Inc., in Westport, Conn. "Whether they can execute is the real issue."

Additional reporting by Evan Koblentz