Hewlett-Packard will launch effort for major PC market share this week

April 03, 1995|By San Francisco Chronicle

Hewlett-Packard is making its long-awaited entry into the home computer market this week, announcing a line of aggressively priced multimedia machines that could vault the company into the front ranks of PC manufacturers.

Although Palo Alto, Calif.-based HP is a latecomer to the home market, analysts say it is well-positioned to become a major force. The computer and electronics giant already is the ninth-largest and second-fastest growing PC company, even though it has focused exclusively on the business market. HP's goal is to become one of the top five PC companies in overall shipments within a few years.

Webb McKinney, head of HP's Home Products Division, planned to announce today new desktop models for the home that will be based on Intel's flagship Pentium processor. The machines are expected to be widely available by the end of April.

In an effort to hit the ground running, HP reportedly has priced the machines to undercut Compaq, the No. 1 PC company, and be competitive with Packard Bell, which has made a killing in the home market.

One analyst said that when he saw HP's prices -- which are expected to start around $1,700 for a fully loaded Pentium model with monitor and CD-ROM -- "my eyes just about popped out of my head. They were amazing."

Initially, HP is expected to sell its home PCs through one major retail chain, still unidentified.

Eventually, the company plans to market its personal computers through many of the same stores -- such as Sears -- that carry its popular computer printers.

"HP is becoming much more of a household name because of its printers," said Philip Rueppel, an analyst in Baltimore-based Alex. Brown Inc.'s San Francisco office. "Their PC folks will be able to leverage the strength of channel relations that the printer group has developed over the years."

The consensus among many industry observers is that the company should make a strong showing in the home market, which is expected to continue its headlong growth as prices keep falling and powerful multimedia machines come within the economic grasp of the average consumer.

"Yes, HP is behind all the other major manufacturers coming in, but I think it's still a ripe growth opportunity," Mr. Rueppel said.

Tim Bajarin, president of Creative Strategies in San Jose, Calif., said HP "believes it must be a player in home consumer products because of the basic impact of technology on the home."

"While they have had calculators and palmtops, this is their first serious effort at the actual home computer market. And these guys are dead serious about trying to be a top-five player."

HP actually has been making PCs for almost as long as PCs have been around. But the division languished for nearly a decade before Robert Frankenberg took over in 1991. He instituted a strategy of bringing to market low-cost PCs that could easily be linked together in networks.

By the time he left to become chief executive of Novell last April, HP's PC unit had quadrupled its revenues to $2.5 billion.

The success has been attributed partly to HP's aggressive pricing. Three times in the last six months, it has whacked prices of its PC line, forcing the other companies to play catch-up.

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