Getting Personal

By Michael Moritz

Hewlett-Packard's new look

The current business bestseller In Search of Excellence hails Hewlett-Packard as one of the best-managed companies in America. In 45 years the firm has grown from a garage in Palo Alto, Calif., to a giant whose $4.7 billion in sales embraces a wide range of high-technology products, which include minicomputers and electronic test and measuring instruments. Hewlett-Packard now ranks 75th on the FORTUNE list of the largest U.S. industrial companies, and its pocket calculators have made HP household initials among scientists and engineers.

Despite such a string of successes, Hewlett-Packard has stumbled badly in personal computers. In 1976 one of its engineers, Stephen Wozniak, designed an early personal computer, but managers were scornful about its prospects. Wozniak thereupon left to help start Apple Computer. Finally, in 1980, Hewlett-Packard introduced its own personal computer, the HP 85, and followed it up with nine other models. But the products were aimed primarily at engineers, and since they were produced by five separate HP divisions, they ran different software, used three different keyboards, and were marketed in an uncoordinated manner. Result: they sold poorly. In 1983, according to Dataquest, a San Jose, Calif, research firm, Hewlett-Packard had 2.5% of the $4.7 billion market for personal computers.

Now Hewlett-Packard may finally be finding its touch with personal computers. Next month it will introduce a battery-operated portable computer, code-named Nomad, that will weigh 8.5 Ibs. and sell for $3,000. Industry insiders are excited about the machine, which has a tilt-up flat screen and built-in software including the industry's current hit, Lotus 1-2-3, a business planning program that also produces graphs. The computer has twice the memory of Apple's hot-selling Macintosh, and is designed to connect to the IBM Personal Computer as well as to Hewlett-Packard machines.

In its drive for success in personal computers, Hewlett-Packard had to develop a totally different kind of marketing. While previously the company had sold products mainly to sophisticated industrial users, it was now going after the mass market. First Hewlett-Packard hired the McKinsey consulting company to do a yearlong product-planning study. Then it consolidated its personal-computer operations into a new group headed by Cyril Yansouni, 41, a 17-year company veteran. Admits Yansouni: "We were dabbling in the business but not pushing really hard." Yansouni has tried to eliminate product overlaps and jazz up the company's stodgy image. He hired the J. Walter Thompson advertising agency, gave larger profit margins to dealers, and recruited six marketing executives from companies like General Foods and Lego, a toymaker.

Hewlett-Packard's first major move after the reorganization came last September with the introduction of the HP 150, a computer originally code-named Magic. But the machine, which has a touch screen on which users can give commands, has been a slow seller despite a $10 million advertising campaign. The company has sold fewer than 40,000 of the machines, about two-thirds the number originally projected. Complains John Levy, president of General Micro, a chain of 23 computer stores based in South Bend, Ind.: "People just don't know the company." Though Hewlett-Packard now has 750 dealers, compared with 350 in November 1983, it has signed up only one-quarter of the 481 Computerland outlets in the U.S.

The second product from Hewlett-Packard's new group is doing much better. Last month the firm introduced a $495 portable computer printer called the ThinkJet. The machine is an ink-jet printer that forms characters by shooting thousands of tiny ink dots onto a piece of paper. Says Dataquest President David Crockett: "It could be one of the biggest hits they've ever produced." Both the Nomad and the ThinkJet may be signs that Hewlett-Packard's venture into personal computers is at long last going in the right direction.

--By Michael Moritz