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7/29/2005
08:05 PM
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HP To Stop Selling Apple iPods

Hewlett-Packard says it has ended its high-profile deal with Apple to sell the popular iPod music player.

Hewlett-Packard Co. on Friday said it has ended its high-profile deal with Apple Computer Inc. to sell the popular iPod music player, saying the device doesn't "fit into HP's current entertainment strategy."

The Palo Alto, Calif., computer and printer maker said it plans to stop selling the portable device by the end of September, when current supplies are projected to be depleted. The company, however, said it would continue to honor warranties and provide support to all buyers.

HP declined to give details as to the reason for ending the deal, or to discuss the Apple contract, which was announced in January 2004 by then-chief executive Carly Fiorina.

"The reason to no longer resell the iPod is simply that it doesn't fit into HP's current entertainment strategy," Ross Camp, a spokesman for HP, said. "(And) one thing I do want to make clear is that HP remains firmly committed to digital entertainment that offers the ultimate experience to consumers."

Indeed, Camp said HP was committed to offering products that are "extremely innovative, simple and rewarding," which could also describe the iPod. The device dominates the market for digital music players.

Apple did not return a request for comment.

HP notified retail distribution partners this week that it would immediately begin phasing out the iPod, Camp said.

Earlier Friday, The Wall Street Journal Online, quoting sources familiar with the matter, said HP did not profit from iPod sales and Apple had more control over the financial terms. Terms of the partnership were never disclosed.

Camp declined comment, saying, "Apple iPods from HP have actually met or exceeded expectations." HP planned to continue bundling Apple's iTunes music software with HP desktops and notebooks.

"HP has enjoyed its relationship with Apple, and has actually had a very positive experience with the company," Camp said.

IPod sales from HP have accounted for an average of 5 percent of all iPod solds since the deal was announced, Camp said. Sales of the devices in total have amounted to 6.2 million players valued at $1.1 billion in revenue, according to the Journal.

In announcing the deal, Fiorina said it gave the company " the opportunity to add value by integrating the world's best digital music offering into HP's larger digital entertainment system strategy." Fiorina was ousted by the company board earlier this year, and later replaced with Mark Hurd, former chief executive and president of NCR Corp.

The decision to drop the iPod, however, "primarily came from senior leaders within the digital entertainment team," Camp said. He declined to discuss whether the decision reflected a change in HP's plans for offering digital music players, in general.

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