HP Aims To Grow Market Share

Hewlett-Packard made great strides in the first six month of 2003, chairman and CEO Carly Fiorina told Wall Street analysts Tuesday. The company beat its cost-savings goals, earned a profit in its Personal Systems Group, and launched its Adaptive Enterprise initiative. As a result, she said HP is well-positioned to take market share from rivals on a number of fronts.

While HP can't control the overall economy, Fiorina said HP will use the R&D and technology it gained in the Compaq merger, as well as the operating efficiencies developed over the past year, to grow its share of the markets for PCs, servers, and services. There's a lot of room for growth, Fiorina said, pointing out that HP takes in less than 20% of its customers' IT spending.

"There are some who would say our breadth is a distraction," Fiorina said. To the contrary, HP's ability to compete in a variety of markets is the company's "special sauce," she said.

Increasing market share is about the only way to grow in today's economy, but you have to be realistic about the amount of growth that can be gained that way, says Richard Chu, managing director of financial-services firm SG Cowen Securities Corp. "HP is well-positioned from the perspective that industry-standard platforms are poised to penetrate deeper into the enterprise."

HP continues to cut losses in its Enterprise Systems Group, where it competes most closely with IBM and Sun Microsystems. HP is making two bets in the data center--one on Itanium and the other on utility computing. The company has forsaken its Alpha product line in favor of 64-bit Intel-based servers in a bid to show a profit in its Enterprise Systems Group by its fourth fiscal 2003 quarter.

HP also is hoping that its utility computing strategy, manifested in its Adaptive Enterprise hardware, software, and services offerings, will find acceptance. The challenge will be convincing companies that they can consume IT resources the same way they get use of electricity or water service. But HP isn't just selling its Adaptive Enterprise strategy, it's also using it. Fiorina says HP already is using utility data center hardware and infrastructure assessment software. A lot of the technology needed to make an adaptive infrastructure possible is already available, she says. "We're 80% there."

HP plans to capitalize on the demand for notebooks and other mobile-computing devices as it fights Dell for share in the personal-systems market. Although Dell holds the edge in worldwide PC shipments, HP last quarter sold more notebooks than its competitors, according to IDC. HP's Personal Systems Group reported operating profits for the first two quarters of the year, an improvement on the losses of the two previous quarters.

When asked if HP was planning any new deals now that it says the Compaq acquisition has been successfully completed, Fiorina smiled and said HP was ready if there's a company out there that could help HP in the areas of software or services. "You don't do deals because they're big, you do them when they accomplish a particular objective."