May 15, 2009

H-P Tries to Revive PC Sales With Touch Screens

HP decides to take another angle with the TouchSmart pc and try selling to corporate America. Consumer sales have lagged with only about 400,000 being sold. Wolcott with IBM weighs in with IBM response.


Hewlett-Packard Co., seeking to revive the sagging desktop-computer business, has tried to woo consumers with sleek personal computers with glossy, touch-sensitive screens.

But the touch-screen PCs, which can cost twice as much as typical machines, have been slow to catch on. H-P only sold about 400,000 of its TouchSmart desktops last year, compared with 54 million traditional desktops and laptops, estimates research firm IDC.

So H-P is embarking on a new strategy to find commercial uses for the technology. Last month, H-P installed 50 touch-screen PCs in Chicago's O'Hare International Airport for travelers to access online maps and restaurant listings.

Chicago Mayor Richard Daley, left, and H-P's Stephen DeWitt test a touch-screen PC at O'Hare Airport in March.
In Michigan, H-P's touch screens are being put into luxury boxes in the Detroit Pistons' arena, where basketball fans can use them to access player statistics and see instant replays.

The commercial touch-screen effort is key to generating growth, since companies will "buy 10 TouchSmarts at a time" and not just one like an individual would, said Phil McKinney, an H-P chief technology officer overseeing the touch-screen project.

H-P's PC business will be closely watched when the Palo Alto, Calif., giant reports quarterly earnings on Tuesday. Desktop sales, which accounted for 38% of the $8.8 billion in revenue for H-P's PC division in the quarter ended Jan. 31, have been hit hard by the recession and a consumer shift towards laptops.

Desktop prices have also been falling. While it has fared better than rivals, H-P sold 15% fewer desktops last quarter than the same period a year earlier, and desktop revenue was down 25%.

The deteriorating desktop PC market is a problem for H-P Chief Executive Mark Hurd, who revived the company's once money-losing PC division and helped H-P solidify its spot as the world's largest PC maker in terms of shipments.

Still, H-P's PC division saw its operating margin, a measure of profitability, shrink to 5% in the January-ended quarter, down from 5.8% a year earlier.

Touch screens can help H-P combat that profit decline, analysts say. The average consumer desktop, excluding machines from Apple Inc., sold for $531 in March, down 6.7% from a year earlier, according to NPD Group, which tracks retail sales. In contrast, H-P's cheapest TouchSmart model has a list price of $1,200.

Uniguest Inc., a Nashville-based company that provides PCs with Internet access to hotels, began in January installing TouchSmart PCs in about two dozen hotels like the Nashville Airport Marriott.

"We're really pushing the new touch-screen technology," said Shawn Thomas, Uniguest's CEO. He said his company is paying between $1,200 and $1,600 per TouchSmart, but is in talks with H-P to place a large order and hopes to get a discount.

H-P isn't the only PC maker trying to boost falling desktop sales. Dell Inc. has introduced desktops in compact cases made of materials like bamboo and clear plastic, and earlier this year it also released a touch-screen desktop. Taiwan's Asustek Computer Inc. also entered the touch-screen market last year.

H-P is offering the assistance of hardware and software consultants from its services division to help customers come up with new uses for touch technology.

The strategy pits H-P against rivals like International Business Machines Corp., which has long sold touch-screen computers to do things like print out airline boarding passes. IBM is also putting public computer kiosks into restaurants and retail stores.

Norma Wolcott, vice president of IBM's kiosk business, said IBM has tailored its touch screens, software and services for business use, arguing H-P's TouchSmart is more suited to consumers.

"It's what you want in your kitchen" and not in a high-traffic place like an airport, she said of the TouchSmart.

Bob Ducey, an H-P executive who is leading the TouchSmart's commercial marketing, said competitors like IBM are selling computers that do a single task -- such as printing out movie tickets -- rather than access a range of information over the Web. In contrast, Mr. Ducey said, the TouchSmart can be used to access information much like a home PC.

At the Palace in Auburn Hills arena near Detroit, a small company called Konsyerzh LLC plans to install 35 new TouchSmart machines by June. Gregory Nasto, the company's CEO, said Konsyerzh has developed programs that let fans access instant replays and order food and merchandise.

Mr. Nasto said he could end up spending up to $1,200 per machine but he's trying to negotiate additional discounts. He expects touch-screen PC prices to drop further in the next year as more competitors enter the field.

Recently, he said, Dell salespeople made a pitch for him to buy a competing touch-screen PC.

Write to Justin Scheck at [email protected]

Posted by staff at May 15, 2009 01:50 PM