The Palo Alto, Calif.-based computer giant, which merged last year with Compaq Computer, plans to tweak its two-brand consumer PC strategy with the introduction of a wide range of new Compaq Presario and HP Pavilion PC models during the next few weeks.
HP will increase the differentiation between the two brands using appearance, features and even prices to some extent, but it will continue to avoid elevating one brand over the other. Instead, HP will intentionally overlap some products in the two brands in certain areas, a measure it says offers customers more choice when shopping at retail.
"What it really comes down to is: Can we provide two distinct products that, from a consumer standpoint, offer a good choice?" said Bruce Greenwood, director of product marketing for HP desktops in North America. "If we can no longer do that, then it's time to re-evaluate" the dual-brand strategy.
Where HP is keeping its basic strategy the same, the forthcoming PCs will differ by serving up more bang for the buck when it comes to features and performance for their asking prices.
One of its first new models, the HP Pavilion a250n, will incorporate a 2.66GHz Intel Pentium 4 processor with hyper-threading, 512MB of RAM, a 120GB hard drive, a DVD burner and an Nvidia graphics card with its own 64MB of RAM. It also incorporates a six-in-one card reader and USB ports behind a door located about halfway up its chassis. The new Pavilion will sell for $999 without a monitor, an aggressive price, considering its components.
While HP has offered DVD burner desktops at prices below $1,000, the new machine adds a graphics board and a bigger hard drive as part of an effort to take on Sony's, introduced earlier this week. The new Pavilion will cost $100 less than Sony's similarly outfitted PCV-RS320 DVD burner model, for example.
The Pavilion a250n's new looks will include a dark blue chassis with contrasting metallic blue accents that are designed to match HP's printers and Pavilion notebooks.
HP also began rolling out new Compaq Presario desktops this week with the launch of the Compaq Presario S4300NX on Wednesday. The new machine offers a 2.4GHz Pentium 4 with hyper-threading, 512MB of RAM, a 120GB hard drive, a CD burner and a DVD-ROM drive. It relies on graphics integrated into Intel's chipset. The Presario 4300NX will sell for $849 before rebates--a potentially more appealing price than that of the Pavilion a250n to a customer who might not want a DVD burner.
More models coming
HP plans to add new Compaq Presario S4000NX, S4100NX and S4200NX desktops priced at $399, $499 and $599, respectively, by the end of June. The machines offer Intel Celeron processors ranging from 2.4GHz to 2.6GHz, CD burners, a minimum hard drive of a 40GB and 128MB of RAM. A special S4210NX model will also come bundled with a 15-inch flat panel for $999, starting in early July, HP said.
Ultimately, HP's desktops will share many of the same basic components such as Intel Pentium 4 processors and similar price ranges. But by giving their various desktops different chassis and varying features such as the Pavilions' six-in-one card reader, HP will offer customers more choices and give itself more retail shelf space.
The new looks of the HP Pavilion line also tie it more closely to HP printers and other multimedia devices. It's an important move, as HP also plans to launch 100 new printing and imaging products by the end of the year, executives have said.
Compaq Presarios are aimed at customers who are interested in more basic productivity, such as word processing, e-mail and Web surfing. The Presario ranks include some very basic PCs, but HP includes a CD burner in even the least expensive of its new models. It also offers several models aimed at gaming as well, throwing off the low-price PC label.
While Pavilion desktops don't typically hit the lowest price points, HP offers Presarios up and down the line, some ranging up to $1,500 or more.
Keep on keeping on
While HP will probably go on tweaking its dual-brand strategy, analysts say it has served HP well.
HP has lost market share at retail, but the decline has had relatively minimal impact, ranging from between about nine points and 15 points of market share in January, February and March, when measured on a year-over-year basis, according to statistics compiled by NPD Techworld.
"I think HP could do more with integration of the two brands. But in general, I can't say that HP has not done a good job," said Steve Baker, analyst with NPD Techworld. "When you've got two brands like that, the retailers are going to try to give you a little bit of a haircut and try to keep you from being 70 (percent) or 80 percent of their business. That alone is a given."
One area in which HP must improve is the low end of the desktop market--that's where the sales volumes are, Baker said.
"While HP has done a great job with some of the premium stuff--Media Center PCs and DVD burners--right now there's not a lot of volume in those categories. It makes it tough for them to maintain share in the market," he said.
HP isn't just working on new desktops. The company is also brewing up several new notebook models that will feature new designs that incorporate larger displays. One possible new notebook that HP is testing has a 17-inch display, executives said.
Starting in the "back half of this year, we think there is going to be a lot more variety for customers to choose from on notebook displays," said Kevin Frost, vice president of market and business planning for notebooks in HP's Personal Systems Group.
HP has already begun shipping a Presario notebook with a 15.4-inch wide angle display. The notebook, which is based on Intel's Pentium M processor, starts at $2,599 after rebates, the company said. HP is expected to bring that price down over time.
HP will also continue to apply its dual-brand strategy in notebooks.
"Brand strategy is for both brands to be focused on unique customers and offer great values for different customers," Frost said. "If we could accomplish that by using a leveraged chassis, we will certainly do that."