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Can Hewlett-Packard topple IBM to claim the title
of the world's biggest computer company?
In the battle of the giants Hewlett-Packard appears to
have the upper hand. By selling devices from digital cameras to high-end
servers, HP may be able to make the most of economies of scale, which
would be good news for IT users.
HP has just announced its latest quarterly results: turnover
has increased to £11.5bn. Assuming this was not a fluke, HP is now within
striking distance of IBM, which is currently reporting a turnover of £12.4bn
a quarter.
HP also unveiled its annual results: turnover reached £42.4bn, slightly
ahead of the £42bn that HP and Compaq achieved separately last year. Top
marks to HP's chief executive, Carly Fiorina. I would have thought eliminating
overlap between product lines would have led to a reduction.
On an annual basis, HP is still some way behind IBM. However, not only
has IBM fallen miles short of the £116bn or so that it should have achieved
just by growing with the industry, its annual sales have actually been
declining. It peaked at £50.8bn in fiscal 1999, fell to £49.4bn in 2000,
and to £47.1bn in 2002. I expect an increase in 2003 as the market recovers,
but overtaking IBM is no longer unimaginable.
IBM still has strengths in the traditional mainframe/server area, and
in software and services, including web services.
It works well with GNU/Linux, because that takes IBM back to its 1960s
business model: give away the operating system and make your profits from
hardware and support.
Thinkpads apart, IBM's problem is that it is not operating at the cutting
edge in areas such as handheld computers and mobile phones, those areas
where innovations are being generated.
HP knows both games. HP can play in servers, both on its own and with
the benefit of the companies that it has absorbed, including Digital and
Tandem, which were acquired by Compaq.
HP can also play in the mass-market PC and consumer electronics areas.
It has a big business in imaging such as printers, scanners and cameras,
and a profitable £3.4bn "personal systems" business that now
includes Compaq PCs, iPaqs and tablet PCs.
It is worth competing for these markets, because the basic technologies
are the ones which enterprises will need. This demand can generate volumes
and drive down prices, making these technologies profitable businesses
in their own right.
You have to be able to move quickly and innovate to compete. IBM used
to have these skills through its typewriter business, the huge success
of the IBM PC and its low-end printer business, which became Lexmark.
But it does not seem to have them now.
Jack
Schofield is
computer editor of the Guardian
This article, used with permission, was first printed in
www.computerweekly.com on
the 9th December 2003.
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