Key insights
- The article highlights significant challenges for HP Inc, including a chaotic decentralized strategy, increased negative online sentiment potentially amplified by geopolitical factors, and intense competition in the datacenter and AI personal systems markets. While HP's products are competitive on a price-adjusted basis, strategic decisions have led to customer dissatisfaction. The author suggests HP needs to embrace AI innovation to offset declining legacy businesses, particularly in printing, and consider strategic simplification of its brand structure to improve customer experience and repair services. The competitive landscape and potential for negative sentiment could weigh on HP's market performance.
We are in a world where a geopolitical adversary state can sponsor hate posts. HPQ’s multibrand, decentralized regional strategy is currently in chaos. To be clear, posts that rant about HP products aren’t necessarily all propaganda but hate posts are spreading faster than any form of appreciation. This phenomenon isn’t unique to HP. Similar pattern are with Apple, Intel, Nike, Starbucks, and others. So, precedent cases of various outcomes do exist.
Key competitors have server businesses that are gaining tailwinds now. Dell and Lenovo are likely to benefit from a large cash windfall from datacenter build-outs. HPQ is in a tougher position to match competitors’ R&D and marketing spending on AI personal systems in dollar term. It is important for HPQ to maintain a higher cash flow conversion
HPQ's actual products are no worse than competitors in price adjusted terms. However, some cost saving and customer group focusing strategies have led to inferior products, e.g. WiFi card that lack an aux antenna, or a SATA bay without a SATA connector. In general, it’s acceptable to offer reduced models, but customers should be happier if those models are upgradable to the full configuration.
It’s better to confront the cannibalization of aging businesses using AI innovation than to protect a narrow moat by squeezing customers. This is especially true in printing, where supplies are an important revenue stream. The long standing practice of "low content" cartridges and blocking third party supplies has been a source of significant customer hostility. In my opinion, AI software that helps users explore variations of printed work, leading to better outcomes for customers, seems like a more promising path.
Simplify to keep a decentralized style, or centralize. HP runs numerous sub-brands to target individual customer segments. But getting quality repair is often difficult. Perhaps a better approach is to merge some sub-brands and modularize the differences. For example, a “skin” module could eliminate the need for a dedicated gaming laptop chassis, while allowing the interior to remain similar to a ZBook. Apple runs its product lines mostly as mainstream and Pro.
The subscription model is the single biggest source of hate posts. HP needs to recognize that many users and reviewers dislike subscriptions. Some people may find them useful, but the brand damage caused by critics certainly needs to be managed.