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MBA/PGDM (2012-2014) NEW DELHI INSTITUTE OF MANAGEMENT
Submitted in partial fulfillment for the award for Post Graduate Diploma in Management
Submitted to: MADAM GAURI MODWEL Prof. Economics
Submitted by: THOKCHOM RAJESH KUMAR SINGH SECTION M2 ROLL No. : 98
HEWLETT PACKARD COMPANY ANALYSIS 2013 TABLE OF CONTENTS: History Fast Facts Technology Leadership Growth Products and Services Industry and Competitive Analysis Dominant Economic Characteristics Driving Forces SWOT Analysis Diversification Efforts Financial Analysis Strategic Issues Identifications and Recommendations Reference Macro Economics.No: 98 Page 2 . SEC: M2 R.
Possibly one of the most damaging events hits HP in 1996 when Dave Packard one of the original founders dies. This division was thought to help keep employees nimble while fostering motivation and creativity. They also enter into creating printers for use with their personal computers. In 1957 HP had its initial public offering of stock and wrote their first set of corporate objectives which set the tone for their management style as a company. In 1993 Dave Packard relinquishes his chair of the board of director’s position to Lew Platt. One of the most important milestones for the company was reached in 1947 as HP became a true Corporation. Following the invention of their first product. In 1958 HP made its first sizeable acquisition when they purchased F. The first true purchase of HP’s products came when Walt Disney ordered 8 of the audio oscillators for use in production of its movies. his son Walter Hewlett and David W Packard (son of Dave Packard) step up to take his place. the printers HP manufactured during this time set the standard for the direction in which printers would evolve. as it quickly turned into a production bonus and soon helped to shape the company wide profit sharing plan that HP adapts. In 1999 Carly Fiorina becomes President and CEO of HP. It was also during the 60’s that HP created its first computer. when Bill and Dave created the first HP product – the Audio Oscillator HP200A. In 2002 HP merged with Compaq Computer. They also had their stock listed on the New York and Pacific Stock exchanges and were listed in Fortune 500’s top companies at 460. which was used in house to control company tests.HEWLETT PACKARD COMPANY ANALYSIS 2013 History Hewlett-Packard was started in 1939 by Dave Packard and Bill Hewlett in a small one car garage behind Packard’s house. In 1992 Lew Platt became HP president and CEO who was the first president and CEO of HP to not be a member of the Hewlett or Packard family. HP also caught attention for their Management by Walking Around and Open Door Policy programs. In 1987 Bill Hewlett retired as vice chairman of the board of directors. In 1942 HP builds its first ever company owned building. The late 50’s and 60’s were an extremely important time for HP as a company as it was during this time that they became a global company by building a manufacturing plant in Germany. This Christmas bonus set the tone for all bonuses to come. Another milestone was reached in 1940 when HP sent out its first ever Christmas bonus in the amount of $5. It was also during this time that they created their Division Separation structure where they separated profit and loss accountability between divisions. SEC: M2 R. the pair moved into a small building down the road from their famed garage and hired their first employees. build it so that it can be easily converted to a convenience store should the electronics industry fail. At the time it was started HP had $538 in working capital and little more than a couple hundred dollars worth of assets.L. Moseley Company which further expanded their product line. It was in this garage that HP’s legacy was born.No: 98 Page 3 . This merger created an $87 billion entity which operates in more than Macro Economics. and in order to protect themselves. In the early 80’s HP took much more interest in the personal computing industry as it was during this time that they create the first mass marketed personal computer. HP also creates their first scientific calculator around this time which gains critical success.
managed services and software. digital photography and entertainment The Technology Solutions Group: business products including storage and servers.650 billion (2012) Total assets US$ 108.HEWLETT PACKARD COMPANY ANALYSIS 2013 160 countries and has almost 150. Meg Whitman is president and CEO. Services.No: 98 Page 4 .357 billion (2012) Operating US$ -11. Revenue US$ 120. and the acquisition of EDS in 2008. Corporate headquarters are in Palo Alto. Calif. SEC: M2 R.610 (2012) Divisions Financing.057 billion (2012) income Net income US$ -12. Software Technology Leadership HP's three business groups drive industry leadership in core technology areas: The Personal Systems Group: business and consumer PCs. always connected mobile computing Ubiquitous printing and imaging. mobile computing devices and workstations The Imaging and Printing Group: inkjet. Its merger with Compaq in 2002. Macro Economics. Hardware.768 billion (2012) Total equity US$ 22. Next-generation data center Always on. LaserJet and commercial printing. Growth HP is focused on three technology shifts that have the power to transform our customers' lives and businesses. printing supplies.000 employees! Quite a change from a company which 70 years ago started in a 1 car garage shack with 2 college kids who had $500 to work with! Fast Facts HP was incorporated in 1939.4 billion in 2008 and a Fortune 500 ranking of 9 in 2009. which led to combined revenues of $118.436 billion (2012) Employees 311.
HEWLETT PACKARD COMPANY ANALYSIS 2013 Products and Services HP Laptops. Toner. Notebook Computers & Tablet PCs HP Printers & Multifunction ePrint HP Technology & Industry Solutions Technology and Enterprise Services Data Storage from HP HP Software HP Servers HP Networking Products & Services HP EcoSolutions HP Managed Print Services HP Ink.No: 98 Page 5 . and Paper HP Support & Drivers HP Scanners & Fax HP Monitors & Accessories HP Workstations HP Desktops & All-in-One PCs HP Smartphones & Handhelds Macro Economics. SEC: M2 R.
but they are still doing extremely well as they do not rely on as many different product lines as Dell and HP to create these sales.HEWLETT PACKARD COMPANY ANALYSIS 2013 Industry and Competitive Analysis This strategic map shows that at this time Hewlett-Packard holds the highest market share worldwide in their industry due mostly to the fact that they are the most diversified firm. but they base their company on a slightly higher price. Apple Inc. They are quickly followed by Dell who isn’t as diversified. They focus on having extremely low prices with their eMachine line. Macro Economics. IBM is basically solely based upon servers for businesses so they do not have as much diversification. or HP. but at the end of 2007 hadn’t quite reached the amount of Dell. but they are not seeing the market share of the other businesses due to past problems with their computers. but offer excellent quality in their products as well as service. Apple’s new campaigns against PC’s is proving to be working as their market share is rising. holds the highest price as they are firm believers in providing the best quality even if it costs them more since they are a fully differentiated firm. Gateway is the lowest on all accounts being based fully on computers.No: 98 Page 6 . but who base most of their sales on computers and like HP hold a relatively lower price with the plan of offering a lower cost for a higher quality product. SEC: M2 R.
software. In many cases picking a computer that is brand specific isn’t as important as picking a computer based on its specifications in order to provide the best ability for running the software that the consumers wish to use. which affect its nature as a hardware market. price and consumer demand also plays a large role in the growth of the industry. the estimated outlook shows a 10-year compounded growth rate of nearly 9% in dollar value and roughly 10% in expected unit growth. The replacement cycle is also no surprise as a top mention due to the fact that the industry is continually changing. This is a challenging aspect for computer makers as they must ensure that the computers they design are capable of producing the same quality of performance as competitors in order to run the applications that most consumers look to use. Due to the ever changing technology and rapid replacement. The industry is expecting a market of nearly $17. Many people are driven to buy computers because of the software and connectors that they can use with the computer.HEWLETT PACKARD COMPANY ANALYSIS 2013 Dominant Economic Characteristics The market for computers and peripherals is extensive with many competing companies jockeying for sales of a wide variety of products and services.01 billion dollars in connectors in 2014. Though the market is experiencing a slight down turn at the present time. with demand driving higher it is without a doubt that growth of the industry would continue to move forward. its connector content. The computer industry is characterized by several very significant business and technology forces. and new ―killer applications‖ have driven the market The replacement cycle is of great significance to the computer and peripheral market.‖ with business cycles amplified by inventory overhangs Consumer demand drives the PC segment Market is transitioning toward adulthood if not maturity Significant outsourcing Future growth many depend heavily on emerging markets such as China. Due to the extreme innovation over the years it is of no surprise that many analysts consider the industry to be in its adulthood or maturity phase. It is becoming harder for companies to make new and innovative products for the industry as there is already so much out there Macro Economics. SEC: M2 R. India and South America Market segments include specialty areas where customization is key The fact that computer peripherals and software are driving the market should be of no surprise. and is helping to drive growth Prices are among the most deflationary with unit growth higher than dollars This markets nature is ―growth/cyclical.No: 98 Page 7 . market growth and business attractiveness. Consumers consistently demand more from their computers and applications in daily life. Computers and peripherals have been among the fastest growing markets in the electronics sector Interconnect technology.
HP completing its purchase of competitor Compaq is a good example of the ease in which a company can ―exit‖ the industry.No: 98 Page 8 . Competition is cut throat in the industry as product differentiation is relatively nonexistent at this point. depending in which segment you plan to partake in. IBM and Sun are competitors also included in this industry. GPS Smart Phones Notebook/Tablet computers Desktop computers Workstations Entry level.HEWLETT PACKARD COMPANY ANALYSIS 2013 Within the computer industry there are many sectors that are important for companies to know about. These smaller companies may also be able to use economies of scale as they may be able to purchase a larger quantity of a particular part for their products as they may not cost as much capital. . Competitive forces within the industry are remarkably strong as many companies look to overpower their competitors. All companies offer customizable products. mice. The industry also includes products such as: Handheld devices – PDAs. Major competitors in the market include HP and Dell who at the present time are conquering much of the industry and also Gateway. however the customization options between companies are all relatively the same. Companies who wish to compete on a global scale with Hewlett-Packard and Dell are going to find that it is impossible to get started and get their name out. The larger companies have not only the name brand recognition but they can also partake in economies of scale purchases as they may be able to buy a million motherboards whereas a smaller company may only be able to buy ten thousand. E-Machine and Apple. Activities such as a standard drivers. Depending upon the segment. it is easy to remove yourself from the industry. SEC: M2 R. However the industry is much larger than just those things that are typically thought about. and keyboards. and connectors have enabled companies to create peripherals which are usable across the industry in most types of computer systems. Companies who are looking to enter into the peripheral market and compete against companies such as SanDisk on the other hand have a much easier time as the capital requirements are far less and consumers are more easily swayed to buy non name brand products for purchases. While it is relatively hard to enter the market. Companies who are looking to enter into the industry are typically unable to do so as large capital requirements are needed. It is safe to say that products are rather weakly differentiated. Typically competitors are more than willing to buy each other out as that will mean less competition in the industry. Sony. Macro Economics. notebooks. mid-range. enterprise servers and mainframes Scientific/technical and super computers Computer peripherals Storage systems and Networking equipments The peripheral portion of the industry has depended on standardization for its continued growth. sockets. motherboards. Many people think of the computer and peripherals industry as an industry for things such as desktops.
Macro Economics. Large corporations who are one of the greatest consumers of computers and peripherals are experiencing large setbacks due to the current market situation. These small drives allow for ease of mobility between computers. Customers are always looking for the next big product to hit the market that they can take advantage of in their everyday lives. Manufacturers must keep in mind that at some point the computers and peripherals that they produce will need to be disposed of. Another aspect that tends to drive much of society in today’s day and age is the ―greening‖ of many products. Price is also a very significant force in the industry as consumers are constantly looking for the best possible machines at the lowest possible price. Computer makers must also be mindful of the electric energy that is needed to run their computers—though this is not a factor in all consumer purchases. Computer manufacturers don’t escape the pressure of environmentally minded people. Those from the baby boom era are typically less inclined to be able to use computers to their full potential because of the computers complicated nature. SEC: M2 R.HEWLETT PACKARD COMPANY ANALYSIS 2013 Driving Forces There are many driving forces in the Computer & Peripherals industry that a company pursuing profits must acknowledge.No: 98 Page 9 . this is causing those large corporations to be tighter with their expenditures and reducing the amount of product that they can and will buy. it is still a factor that does play a part in purchase habits of some consumers. The continual replacement factor of products in this industry also drives and shapes the industry. allowing users to transport their all important files between their machines. and they must be ready for the disposal of those products. Price is an important driving force especially at the current time due to a weak economy and people spending more money than ever on necessitates which leaves them with less money for buying extra goods. Products such as wireless keyboards and small ―flash drives‖ or ―jump drives‖ as they are called have had a significant impact on the way consumers conduct their lives in relation to their use of computers. The main products—desktops. notebooks and other hardware—are continually evolving and as a result consumers and companies are continually upgrading and changing their systems. This continual evolution of the products has consumers pushing for easier upgrade methods and some standardization. One of the main driving forces is innovation. With the majority of the population being of an age where they have had little to no contact with computers it is also extremely important that computers be simple and easy to use.
Other Companies) Gaining Market Share Integrated Bid Desk Technology is a strong market Gaming industry Weaknesses Account Management Software Complacency No real specialization Threats Self Destruction Intense Competition Poor Economy Specialization Macro Economics.HEWLETT PACKARD COMPANY ANALYSIS 2013 SWOT Analysis Strengths Brand Name Identification Largest in Industry Fortune 500 Company Diversified Economies of Scale Technology Global Market Share Strong Imaging & Printing background Marketing Selling online/in store Integrated Bid Desk Opportunities Expansion in Emerging Markets Innovation/R&D Partnerships (Celebrities. SEC: M2 R.No: 98 Page 10 .
and a lack of coherent strategy. Investors have voiced concerns about dropping margins in hardware products . costly acquisitions such as Autonomy. SEC: M2 R.HP’s bread and butter. The stock price has taken a hit accordingly: HP is down 30% over the last 5 years.No: 98 Page 11 . Macro Economics. leadership churning. compared with the market which is only down 5%. HP significantly underperformed the S&P 500 benchmark in 2011.HEWLETT PACKARD COMPANY ANALYSIS 2013 Financial Analysis Overview Chart 1: Stock Performance Over 5 Years After a strong financial performance from 2005 to 2010.
HEWLETT PACKARD COMPANY ANALYSIS 2013 Chart 2: Basic Financial Information In 2011. and nonoperating expenses to understand the true costs of obtaining these revenues.32 compared with a stock price of $26.61. Macro Economics. SG&A expenses. SEC: M2 R. income. HP could be seen as either undervalued or underperforming. Revenue. Compared with an industry median of 17. amortization. HP saw its net income shrink by 19. depreciation. Income.12. Revenue is a good indicator of demand for HP’s products and services across product lines Net income takes into account COGS. giving HP a price to earnings ratio of 8.26%. and cash flow are three of the most important metrics to analyzing the health of a tech powerhouse like HP.02 at the end of the fiscal year.No: 98 Page 12 . Earnings per share were $3. and Cash Flow Revenue. The distinction lies in one’s outlook on HP’s future growth prospects. despite a modest 1% increase in sales over the same period.
or HP is a weak company that is appropriately discounted for its weak performance in 2011.03.89 versus the industry median of 12. Its price to book ratio. but a 20% drop in net income from 2010 and no change from net income in 2007. however.2B. and increased about 20% over a five year period. Comparison to Industry and Market HP’s low P/E ratio indicates one of two things: either HP is a strong company and is therefore undervalued by investors in comparison to its industry competitors. HP had overall revenues of $130B and net income of $7.29. but doesn’t give a true picture of HP’s lackluster performance in the last year. is quite low at 1. Cash flow actually increased from $12B to $13B from 2010 to 2011.HEWLETT PACKARD COMPANY ANALYSIS 2013 Chart 3: Revenue vs. This Macro Economics.No: 98 Page 13 . The downward trend in net income must be reversed in the upcoming quarters or HP’s stock price will suffer. and its price to cash flow ratio is a measly 4. Net Income In 2011. SEC: M2 R.61 and a market median of 10.49 compared to the industry median of 5. This represents a 1% increase in revenue from 2010 and a 30% increase over 2007.
AMD/Intel) causing companies to have to differentiate on customer service and image rather than on the specifications of computers. HP also needs to keep themselves aware of the economy in which they are operating. In the server and software segments. In the personal computing segment of the industry HP faces both stiff competition and have a hard time differentiating themselves from lead competitors due to the nature of the business. Personal computers typically use many of the same products (i. HP needs to concern themselves with catching up and surpassing IBM in these two segments if they wish to truly prosper.HEWLETT PACKARD COMPANY ANALYSIS 2013 means that HP is seen as hardly being worth the assets that compose it or the cash flow it generates: investors see very little growth in HP’s future and are moving their assets elsewhere. Having a problem with a certain product line is not the end of the world. By offering the Macro Economics. They cannot afford to keep having troubles such as they did with the wireless cards on certain models of their notebooks. but it’s how the problem is fixed that makes the difference. This is a huge segment in their industry and should be heavily considered when HP distributes out money for which segments they want to invest in most. SEC: M2 R.No: 98 Page 14 . HP faces stiff competition from rival IBM who is currently leading in this niche of the general industry. Windows. Chart 4: Top Competitors Strategic Issues Identifications and Recommendations There are many issues that face Hewlett-Packard in different segments of the industry in which they participate. They do not want to let this pass to the wayside because since they are already heavily involved in this industry if they focus more R&D they can easily catch up to IBM and possibly surpass them in next few years. That being said HP needs to make sure that they offer low price range products that will enable them to keep bringing in a profit during these slower times. HP must keep themselves aware of any problems with lines of their computers and work quickly to fix the problems. Their main strategy for doing this must include customer service and not becoming complacent after making large strides. all companies have this problem at some point. By far HP is a much larger firm and with proper focus they can really boost sales in this segment.e. Right now the economy is at a low point and consumers are having little to no money for buying products that HP offers.
Gateway is looking at strong gains at this time due to the low price of their eMachines and this should be a focus for HP as well because if they can cut into this niche even if it’s only for the short run to get past this time of economic turmoil they can easily boost their market share. Phone: (080) 2225 1554 Fax: (080) 2220 0196 Macro Economics. United States India Software Operations No. Cunningham Road Bangalore . This is where it becomes important for HP to evaluate all of their product lines and really make the tough decisions of which lines are not worth the money that is invested in them. A company such as IBM that is specializing in software or servers is going to have more capital to put toward a single product line than HP who is spreading capital over a range of different products. 29. loyalty. They need to ensure that their product quality is of the highest degree and that their image is of the same quality. Address: Corporate Office: Palo Alto.No: 98 Page 15 . If they can focus on the strong segments and cut out the poorly performing ones HP will see a huge gain for their company in sales. California. Furthermore being that HP operates across a wide industry of products they need to be aware of not just competitors across the board but also aware of competitors that are specializing in certain products. even if they specialize in certain segments.560 052. Through research and development opportunities they may be able to take the industry by storm as Dell seems to faltering in their day to day operations. but if HP takes advantage of this and properly invests their money they will surely beat out their competitors.HEWLETT PACKARD COMPANY ANALYSIS 2013 lower priced products they can ensure future business as people will undoubtedly be looking to upgrade to bigger and better things along the line. While HP has issues that it faces it also has many opportunities for expansion in both foreign markets and in its home market. and market share. Those same consumers will also be looking to buy peripherals to use in conjunction with their products. SEC: M2 R. That specializing company will also have more time to put research and development of that product line. It is important to take advantage of the failings of other companies. It may seem cut-throat.
hp. SEC: M2 R.com/company-profiles/hp.com/company/hewlett-packard/products?sort=&start=1 http://www.asp http://en.No: 98 Page 16 .com/us/en/hp-information/about-hp/history/history.org/wiki/Hewlett-Packard http://www8.html Macro Economics.linkedin.wikipedia.HEWLETT PACKARD COMPANY ANALYSIS 2013 Reference: http://www.vyoms.
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