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After years of lackluster performance, Hewlett-Packard (HPW) is trying to light a fire under

its notebook computer division.

HP has set a course to invest more in its notebook division and expand its product line,
according to company representatives, resellers, and analysts.

"There is a conscious effort to invest in notebooks," said Tuan Tran, HP's product line
manager for mobile computing.

The notebook market has become intensely competitive in the last year or so with the entry of
additional Japanese companies, including Hitachi and Fujitsu. Moreover, increasingly
competitive strategies and offerings from notebook powerhouses such as IBM have also
made it difficult for HP. Even dark horses such as Gateway 2000 are doing well.

As part of the effort to galvanize the notebook operation, HP moved division headquarters
from Oregon to the San Francisco Bay Area in January. Results of this move include a cross-
pollination of its OmniBook notebook PC design with handheld device capabilities,
according to sources.

"Look for HP to move in a different direction," said Mike McGuire, senior industry analyst at
Dataquest, which ranks HP as 13th in U.S. market share. HP is also expected to include new
technologies with future products which make notebooks easier to manage in a networked
corporate environment, according to sources at HP.

Already, new models--including the OmniBook 2000, a 133-MHz Intel (INTC) Pentium
laptop released last month for the low end of the market--is a reflection of this new ethos. The
2000 was HP's first offering in this arena, the largest in the laptop market.

"Our sales have increased quite a bit," said Eric Walton, vice president of product
management at Entex Information Services, a $1 billion-plus integrator, as a result of the
2000. "One of our issues with them has been not having a full line."

Although the company's desktops, servers, workstations, and handheld devices perennially
command significant market share, HP's notebooks often come across as yesterday's
computers. Alternately too heavy, too small, or too expensive, the portables from the Palo
Alto, California-based giant have continually come up short in sales.

"We probably have sold less than five in the past year," said Kanan Hamzeh, general
manager of Tri-Pole MicroAge, a Fountain Valley, California-based corporate computer
dealer. "They have been slow to react" to price changes and other forces, he added.

HP maintains that its ultra-compact OmniBook 800 notebook is popular with many customers
because it offers a lot of power in a package of less than 4 pounds.

But lack of variety is cited more often than not as a problem with the line. Currently, the
company sells four models: the OmniBook 800, a 3.9 pound thin notebook with a 166 MHz
Pentium processor; and the OmniBooks 2000, 5500, and 5700.
Even with more models, designs don't change radically. The 2000, 5500, and 5500 all have
different processors and features but are physically almost identical, weighing in at 7 pounds
and measuring nearly 2 inches thick.

"It's not one of our best sellers. There have been gaps in the product lineup," said Doug
Weisberg, president of ComputerMart of New Hampshire. "We do a lot more with Toshiba
and NEC."

Chris Ferry, senior vice president at Graham MicroAge in Indianapolis, said inconsistent
product availability at crucial junctures have hurt HP and prevented it from gaining market
momentum.

"Consistency of product is difficult in the notebook arena. If you're caught at anytime with
the wrong product or not enough, you get a reputation for not being in the leadership
position," he said. "They probably are in need of revamping their products."

"They started out making a weird size," said Mike Boyle, chief executive officer at
ComputerLand of New Mexico, referring to the OmniBook 300, HP's first ultralight.
"Everyone else started out large and went smaller. HP started small and got bigger. I've sold
of lot of their printers and desktops, but almost none of their laptops. We sell tons of
ThinkPads, Compaq, NEC, Toshiba."

Improvements to this ultra-compact design occured in September 1996 with the release of the
OmniBook 800.

"To their credit, HP has had some fairly aggressive designs. They made a few errors, but the
800 gets good reviews," said Daniel Kunstler, technology analyst at J.P. Morgan Securities.