In order for Hewlett-Packard Company (NYSE:HPQ) to be a force in the brutally competitive horizontal computer industry, the company must adapt to industrywide changes. While the likes of Apple Inc (NASDAQ:AAPL) and Google Inc (NASDAQ:GOOG) have been the first movers into the mobile and tablet industries, computer companies like Hewlett-Packard are beginning to show up on the scene late.
At first glance, it’s obvious that the combination of phones, tablets, increased competition, and poor economic conditions are affecting PC sales. The industry’s transition from PCs, to tablets and smartphones has had a major affect on PC companies (Click here to see a sales breakdown of PCs, Smartphones, and Tablets). Even though tablets and smartphones have had an impact on PC sales, we believe that PCs are not going anywhere anytime soon. They are more efficient to use for business purposes and allow customers to have more screen space at their fingertips. Looking at PC market share, we see that HP still ranks among the best in the business at number two, behind only Apple.
In the technology sector, time is often a company’s largest advantage over competitors. Failing to grab swift hold of the technological and fundamental changes that are taking place has already beaten down Hewlett’s stock price and earnings. HP can make up for their lost time with a successful products launch in the niche business class market. If they can penetrate this market as planned, they would be the first company in, and would gain a timely advantage over their competitors. In the fast-paced tech sector, this is one of the best methods to gain market share.
Consequently, Hewlett-Packard is planning to release the Envy x2, a hybrid between a laptop and a tablet, by the end of the year. The Envy x2 comes with a fully detachable keyboard, a trackpad, and has a touch screen that is roughly the size of the iPad. HP did not disclose the product’s price points in their entirety, but did state the most expensive model will cost about $1,400.
To excel in the business class niche, HP has to develop a product that gives business professionals an advantage over using Apple’s iPad and the Amazon.com, Inc (NASDAQ:AMZN) Kindle. Todd Bradley, executive vice president of HP’s Printing and Personal Systems Group, said that the company’s new business-class tablet will give users the ability to utilize features for vertically-managed operations, as well as the option to service the tablet itself.
HP’s Printing and Personal Systems Group is planning a 20-city U.S. road show starting next month, inviting their customers and partners to see first-hand the benefits of the tablet and HP’s full PPS product portfolio. HP has a wide audience with over 1,100 channel partners, and with a good business product, we may see the company’s stock price regain at least a fraction of its early-2000s highs.
In the hedge fund industry, though, the sentiment surrounding Hewlett-Packard is predominantly bearish. Hedge fund manager Philippe Laffont, and infamous short seller Jim Chanos have criticized HP in the past for its strategic flounderings, and David Einhorn believes that computer companies like Dell Inc (NASDAQ:DELL) and HP have the earnings valuations typical of collapsing businesses. Although established hedge fund managers in the industry don’t like HP, if investors are overlooking one of history’s most resilient tech companies, there may be a buying opportunity. If HP can fill an unmet need for tablets and laptops in the business niche, it can continue to be a major player in the tech sector.
