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HP to Unveil Home Lineup

Analysts expect PC and printer updates as well as consumer electronics to meld technology and home entertainment.

August 11, 2003|Terril Yue Jones and Alex Pham | Times Staff Writers

Hewlett-Packard Co. plans to unveil a slew of computing, printing and digital photography products in New York today as part of a major push to expand its lineup and boost the profitability of its personal technology business.

HP is tight-lipped about the new offerings, but analysts who have been briefed on them said they were aimed at unlocking entertainment and other media -- family photos, videos and music -- that are stored on a PC so that they can be played on the go or around the home.

The announcement will offer the first public glimpse of how Palo Alto-based HP plans to tackle average consumers following its acquisition last year of Compaq Computer Corp. in the largest technology merger ever. The new products were jointly developed by business units in Silicon Valley and in Houston, where the Compaq PC group is based.

HP's core PC and server computer business is under assault from archrival Dell Inc. To make matters worse, Dell in March began selling printers, taking full aim at HP's primary source of profit.

For The Record
Los Angeles Times Tuesday August 12, 2003 Home Edition Main News Part A Page 2 National Desk 1 inches; 46 words Type of Material: Correction
Computer sales -- A photo caption accompanying an article in Monday's Business section on Hewlett-Packard Co.'s new product lineup described a shopper at a CompUSA store as viewing computers from HP and rivals including Dell Inc. Dell sells PCs directly to customers, not through other retailers.

Gateway Inc. and Apple Computer Inc. are also trying to offset flagging computer sales by offering a wider array of high-tech gadgets. Gateway is stocking its stores with an ever-increasing amount of gadgetry, including digital cameras and portable miniature memory devices. Apple is pushing its iPod digital music player and the online iTunes Music Store.

"Many companies that have been reliant on the PC -- such as Apple, Microsoft and Gateway -- have been expanding into consumer electronics to grow their revenue opportunity," said Rob Enderle, a technology consultant in San Jose who was briefed by HP but declined to provide any details. "HP is no different."

While some of HP's new products are upgrades of its bread-and-butter PC and printer offerings, some will mark the company's debut into consumer electronics, an area dominated by the likes of Sony Corp. and Thomson, which makes RCA products.

Many of HP's new devices will address what the company sees as a promising market for melding technology and entertainment in the home, said one industry analyst who is familiar with the planned introductions. For instance, the company expects more consumers to watch television on their computers and to turn home movies into DVDs, the analyst said.

Analysts who received a briefing hinted that some of the offerings were designed to work with HP's line of Media Center PCs, introduced last fall to blend traditional desktop computers with CD players, televisions and DVD players.

One analyst, however, didn't expect HP to pull the wraps off any revolutionary products. Those briefed said the items being introduced today included a faster generation of desktop and laptop computers with more memory and larger screens.

"It's a general product refresh, which we're seeing from all the major vendors," the analyst said.

HP is aiming to kick-start its sales and profit by improving the performance of its Personal Systems Group, which includes desktop, notebook and hand-held computers. In its February-April quarter, the group produced a $21-million operating profit on $5.1 billion in revenue, a margin of only 0.4%. By comparison, HP's Imaging and Printing Group had an operating profit of $918 million on revenue of $5.5 billion, for a margin of 17%.

Overall, HP had net income of $659 million on revenue of $17.98 billion in the quarter.

HP shares, which closed Friday at $20.08 on the New York Stock Exchange, have been sliding since hitting a 2003 high of $23.52 in mid-July. For the year, they are up about 15%.

HP isn't the only computer company counting on new products to boost sales. Even Dell, which traditionally has grown by capturing share from its rivals, is broadening its consumer electronics offerings. The top PC maker's move into printers is particularly ominous for HP.

Market researchers say HP had at least 50% of the ink-jet and laser printer markets last year, but some analysts expect Dell to be vying for the No. 2 spot by 2006. The ink business could be threatened even sooner.

Later this year, Dell is expected to launch even more devices.

"Before the Thanksgiving and holiday decorations come up, Dell will make its own consumer electronics play," said Rick Doherty, research director of the technology consulting firm Envisioneering Group. "This is a direction that all PC makers are going."

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