Hewlett Packard Heads For The Home

As if Compaq Computer Corp. didn't have enough headaches, it now can count $25 billion Hewlett-Packard Co. among its rivals in the home PC market. The computer and scientific-instruments giant, which has already made a stunning comeback in office PCs, announced plans in mid-April to go after con-

sumers, too.

HP's first consumer PCs, with prices ranging from $1,699 to $2,299, not only undercut Compaq's Presario offerings but very nearly match those made by consumer-PC leader Packard Bell Electronics Inc. The machines are available only in Circuit City stores now, but come summer, HP plans to roll out a whole new series of home PCs through virtually every major consumer-electronics chain. "I really want to get into the top three in retail as fast as we can," says Harry W. McKinney, general manager of the company's Home Products Div.

Already, HP has become a PC force to be reckoned with. Riding the popularity of its laser and ink-jet printer lines, it sailed into computer stores last year. Thanks to four price cuts since August--the last two leading the industry for the first time--HP is growing faster than any other personal computer maker, nearly doubling worldwide sales last year, to 1.2 million units. In North America alone, HP has seen unit sales jump to nearly five times 1992 levels (chart). Selling chiefly to corporate customers, it has become the ninth-largest supplier in just two years. Says International Data Corp. analyst Bruce Stephen: "They're on a roll."

The push into the home-PC market should keep the momentum going. To appeal to consumers who are expected to buy 10 million PCs this year, HP will field machines that sport sleek profiles, bright colors, and fast set-up times--HP's motto is "Fun in Fifteen Minutes." But more than anything else, HP will be counting on its name. "HP has a strong reputation for quality, reliability, and technology leadership," says Kenneth W. Beaver, Circuit City Stores Inc.'s national merchandising manager.

ROUGH MARKET. Brand name is one thing, but consumer marketing is quite another. Heavyweights such as IBM have spent billions of dollars to win over the consumer-electronics crowd. And even though HP has sold calculators to consumers for decades, it has never been known for mounting stellar consumer marketing campaigns.

Still, HP has been quietly working to prepare for the rough-and-tumble home-PC market. For one thing, it no longer has any religious feelings about in-house manufacturing. The company uses SCI Systems Inc. in Huntsville, Ala., to build basic "subsystems" to which HP simply adds disk drives and other components. Moreover, HP is nearly finished with creating a "build-to-order" program that keeps inventory costs down and gives retailers the machines that they want, even on short notice.

HP has also managed the tricky process of pleasing dealers. Its direct-sales force lets resellers fulfill large corporate orders. And, so far, HP has avoided the typical retailing faux pas--leaving dealers with an excess of slow-selling products or, worse yet, a short supply of hot products. That should give retailers a reason to provide HP prominent shelf space. Indeed, Computer City President Alan C. Bush thinks a year from now, HP will join Compaq and Packard Bell as the top three home-PC sellers at retail. "The only question," Bush pointedly adds, "is what order they'll be in."