HP Adds Office Networking Gear to Step Up Rivalry With Cisco

Hewlett-Packard Co. (HPQ), the world’s largest computer maker, unveiled a switch that helps companies route data over networks, aiming to charge less for the device than comparable products from Cisco Systems Inc. (CSCO)

The A 10500 switch, which companies can use to deliver high-definition video and other content, will go on sale in the second half of the year, starting at $38,000, Palo Alto, California-based Hewlett-Packard said today in a statement. The company also introduced new business laptops and a wireless broadband service earlier today.

Hewlett-Packard aims to charge 35 percent to 40 percent less for its switches, which connect computers to networks, than Cisco does, Hewlett-Packard executive vice president David Donatelli said in an interview. That may add to pressure on Cisco, which has lost share in switches amid price rivalry.

“Cisco has a business-model problem -- they’ve been overcharging,” Donatelli said. “You’ve seen a stunning change in the dynamics of the market. We’re now a strong No. 2.”

Hewlett-Packard gained 2.3 percentage points of switch revenue share in 2009 and 2010, while Cisco lost share, according to Hewlett-Packard. Cisco leads the market, deriving 30 percent of sales from switches.

The company also announced plans to release the HP ProBook 5330m and HP EliteBook 2560 this month. The computers will be able to use the new HP DataPass online connection, which lowers Internet costs for business travelers who only need occasional access, said Mike Hockey, a spokesman for Hewlett-Packard.

Business Travelers

“It’s for the business person who’s travelling occasionally who wants quick access to 3G without the hassle of being tied to a contract or finding a Wi-Fi hot spot,” Hockey said in an interview.

Hewlett-Packard is seeking fresh ways to make its PCs stand out from rival products, including Apple Inc. (AAPL)’s iPad and other mobile devices. The industry’s PC shipments declined 3.2 percent last quarter, hurt by sales of tablets, research firm IDC said last month. Hewlett-Packard plans to release its own tablet called the TouchPad in the next few months.

Hewlett-Packard shares rose 21 cents to $41.02 today in New York Stock Exchange composite trading. They have declined 2.6 percent this year.

DataPass pricing starts at $5 for 75 megabytes of data, or five hours of Web browsing, rising to $30 for 1 gigabyte, or 30 days, the company said. Consumers who sign up for U.S. wireless broadband plans typically pay $50 to $60 for 5 gigabytes, plus early termination and activation fees.

Staying Connected

“This might bring in some recurring revenue for HP, but what they’re really trying to do is give the customer the ability to be connected anytime, anywhere and give them the various options to buy their PCs over some other device,” said Tim Bajarin, president of technology consulting firm Creative Strategies Inc. in Campbell, California.

Hewlett-Packard, working with Peregrine Network Inc., is getting the wireless bandwidth from Sprint Nextel Corp. (S), similar to the way Amazon.com Inc. offers its Whispernet service to Kindle e-reader customers.

The ProBook 5330m, which starts at $799, measures less than 1 inch thick and is the company’s first business notebook to include enhanced audio from its partnership with Beats by Dr. Dre, a product line developed by the rapper and producer. The EliteBook 2560 starts at $1,099.

Hewlett-Packard and other makers of corporate laptops, including Dell Inc. (DELL) and Lenovo Group Ltd., are trying to entice buyers by adding more consumer-friendly features, such as better sound and screens and backlit keyboards.

Businesses have shown interest in computers with more consumer features, as long as they offer ways to secure important information, Hockey said.

“We think the wave is coming,” he said.

To contact the reporters on this story: Cliff Edwards in San Francisco at cedwards28@bloomberg.net; Aaron Ricadela in San Francisco at aricadela@bloomberg.net

To contact the editors responsible for this story: Thomas Giles at tgiles5@bloomberg.net; Anthony Palazzo at apalazzo@bloomberg.net

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