Adding dimensions to HP

HP used to be known for its innovation in printing and computing. But over the past few years, it seems to have lost its way. It has gotten so big and awkward and into so many different businesses that management has finally decided to split the company (something I recommended HP do nearly 3 years ago in a company newsletter).

HP’s printing business, once a way for it to essentially “print money” through its supplies business, has been lackluster of late. Its latest quarter showed a decline in revenues of 5%. And its place in a PC market where margins are rare and truly innovative products are rarer still has been better of late, but not up to where it once was — its revenues were essentially flat in the latest quarter. Can HP reinvigorate its PC and printer business so that when it spins off into a new company, it has a fighting chance of being a true competitor?

Recently HP signaled a new direction with a series of announcements that put it ahead of the pack in some respects. Indeed, two primary products reinforcing its vision of “blended reality” are the innovative Sprout PC and the MultiJetFusion 3D high end printer.

Some reviews signaled Sprout may not be quite ready for commodity users, and it’s not priced attractively for high volume business oriented markets where it’s initially targeted. It nevertheless indicates that HP is thinking ahead of the pack. Its ability to interact in 3D space with a projection display, 3D camera and novel 3D user interface means that HP is setting the stage for future products that will offer similar functionality in mainstream products at a reasonable cost.

3D and perceptual computing are the next phase of personal computing systems, and Sprout gives HP a venue to experiment and refine the technology. I expect to see much of the technology currently in Sprout trickle down into more volume-centric products over the next 1-2 years, and especially in enterprise-class offerings, thus leveraging the move to perceptual computing. This will further drive an app ecosystem that makes the hardware attractive to more users for more functions. Finally, couple that with an output capability to create real world printed objects affordably that will be available in the next 3-5 years, and we’ll wonder how we ever got along in two dimensions.

Which brings us to the second announcement. HP plans to take 3D printing from the hobbyist phase into the serious user phase and make it a volume business. Its first foray, the MultiJetFusion (part of its OpenJetFusion platform strategy), which it won’t ship until 2016, is targeted at and will priced for the high end (HP declined to announce pricing). With new high definition printing techniques (think ink jets on steroids), it’s a massive machine meant for serious production and not for desk side printing. But like so many other technologies, starting with a premium product and water-falling down into lower cost products will allow HP to establish itself as a leader in the space, and presumably create a position that will give it the same level of market ownership it once had in ink jet and laser printers.

In a related announcement, HP also recently said it will concentrate on building business-centric and mission critical tablets. This is a logical extension of its current strategy, which is to stay competitive in the business market. Reinforcing the targeted positing in 3D mentioned above with this move gives HP an opportunity to become more than just a commodity supplier of tablets, which is where much of the market is headed.

Many enterprises won’t invest in tablets until they find a compelling reason to do so. And HP offering specialized devices geared to specific markets could be the catalyst for those companies eying tablets, but still cautious about the expense and management risks, as well as the less-than-optimum designs in general purpose devices.

In a market where differentiation can mean the difference between profits and losses, this is a smart approach. HP can’t hope to win against the low cost Far East suppliers almost giving products away. They can win in a market where functional requirements are supported by increased spending on the most productive devices – as the market for enterprise is (and actually always has been).

HP can achieve differentiation and margins, and that is a good place to be. That is the strategy HP is going after. And add the enterprise services many of their customers already get, and you have a complete package that others (including Apple) can’t provide (although Apple is trying with its IBM partnership). HP’s real competition for business users is Lenovo and Dell, and that is who they are targeting with these announcements.

The bottom line for me is that HP, once it spins off the PC and printers into its own entity, is positioning itself to become more than just a commodity supplier of me-too systems. It’s not yet clear if it can succeed in differentiating itself significantly from Dell, Lenovo, etc., but this glimpse of its new technology direction makes me optimistic it can. And its focus on empowering business and enterprise with these first set of products is a move that adds to my optimism, since that is where the profits are to be made.

HP’s ability to innovate and differentiate is critical to its long term success.