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Hewlett-Packard creates e-commerce unit

The creation of HPdirect is in line with the company's strategy of taking advantage of the Internet economy.

Hewlett-Packard turned its online shopping operations into a wholly owned subsidiary, saying it wants to do business at "Internet speed."

Hewlett-Packard said the subsidiary, HPdirect, will do business in the United States as HP Shopping Village.

The company also plans to expand the channel to overseas markets. It is aiming initially at Europe. The company is targeting the United Kingdom first, having scheduled a June launch, and a site for Sweden will come online in the third quarter. More regional sites will go online in 2000, HP said.

The creation of the HPdirect subsidiary is in line with the company's desire to move with greater agility in the Internet economy. About two months ago, the company split itself into two parts in order to better address changes in the PC industry marketplace.

Shen Li, general manager of the new e-commerce subsidiary, said today that as of April 1999, revenue at the online site had grown 600 percent, and that for the site to continue to do well, HPdirect needs to operate at "Internet speed."

A major challenge: even as it takes to the Net as a sales channel, the company can't risk raising the ire of traditional bricks-and-mortar retailers, still a big source of revenues.

Compaq, for instance, has had a hard time increasing its direct sales to customers while not losing sales from traditional resellers.

HP's online shopping site, which has been operational since January 1998, will mostly sell HP computers and printers to consumers at price levels "at parity" with retailers, at least in Europe. Later this year, HP will offer configure-to-order customized PCs in a fashion similar to that of direct-sales king Dell Computer.

The company plans to later offer its calculators, and could eventually add products from companies other than HP, said Shen Li, general manager of the new subsidiary, in a conference call. Also, the site will add live auctions by the third quarter to "encourage customers to visit us more frequently and generate excitement in the buying process," Li said.

HPdirect's store will be co-located on Yahoo Shopping. HP said it will gain access to millions of users with the arrangement.

HP wants to offer products through whatever channel people prefer, said Antonio Perez, chief executive of HP Imaging Solutions. First-time buyers, for instance, will still continue to go to retail stores, while a growing portion of PC buyers will go online and either buy direct from HP or from other online storefronts.

HP cited research data from International Data Corporation showing that online sales in Europe are expected to grow to $30 billion by 2001; HP's own U.S. and European e-commerce revenues are projected to grow to $1.5 billion by 2002.