The Aesthetic Imperative
Hewlett-Packard's effort to transform its personal computers from low-margin commodities into more stylish devices has started to pay off.
As shown by the company's fiscal second-quarter earnings, announced Wednesday afternoon, a new PC strategy has become a major driver of growth. Revenue increased 12.7 percent from the period a year earlier, to $25.5 billion, and the PC division was an important factor.
Revenue from notebook PCs rose 45 percent, and the company was able to increase sales of desktop computers, which have been flat for the industry, by 9 percent.
Furthermore, H.P. is also making more money on each PC it sells. The division's operating profit margin increased to 4.8 percent last quarter from 3.6 percent in the period last year, and is more than double what it was two years ago....
Samir Bhavnani, research director of Current Analysis West, a market research firm based in San Diego, said Hewlett-Packard "was very wise in understanding that as the market shifts from desktops to notebooks, that style mattered."
He faulted Dell's thicker, chunkier notebooks for its weak sales. "H.P. is like the plain girl from high school that you see three years later and she is a bombshell, while Dell is the hot girl from high school who has gained 30 pounds," Mr. Bhavnani said.
Hewlett-Packard's design-focused strategy had a heightened impact at a time when corporate PC sales were flagging. Its efforts weakened Dell when Dell seemed ill prepared to react in any fashion other than by cutting prices. While PC prices continue to decline, H.P.'s average selling price--about $967, according to Current Analysis--is more than 17 percent above the industry average price of $822. It used to be at or slightly below the average. (Apple and Sony have much higher prices, and it is no coincidence that those two companies also emphasize design.)
As I always tell business audiences, there's no guarantee that better style will deliver higher profits. That depends on the competition. But these days, ignoring aesthetics is a good way to lose business.