HP Wants To Be All Things To All People

Last Updated Sep 29, 2010 3:26 PM EDT

Hewlett-Packard (HPQ) tried to make the day of financial analysts by noting that next fiscal year's projections would be ahead of expectations. At $131.5 billion to $133.5 billion, revenue would be up between 5 percent and 7 percent over fiscal year 2010, which ends in October. That growth is in core business, according to the company, and did not include the Palm acquisition.

Frankly, that's not great growth for the company, which saw 13.8 percent revenue gain from 2006 to 2007 and 13.5 percent between 2007 and 2008. (Things fell into a ditch over the next year, but given the recession, it's unsurprising.) However, other news was far more interesting and continues to show the industry trend of large vendors moving toward vertical integration, being all things to all customers, and away from partnerships.

For example, even though R&D spending has trended downward at the company, a far bigger portion of the pot today (58 percent) supposedly goes to new developments instead of maintaining old product lines, than in the past (35 percent). It's impossible to tell from the outside at this point, but it could mean that HP will try to become known for innovation again. Whether executives -- and investors -- are putting enough money into that effort, given the company's overall size, has yet to be seen.

Why the push to new products? Aside from the obvious answers, this becomes clearer as you consider other emerging news. Devices based on Google (GOOG) Android are out of the picture, according to former Palm CEO Jon Rubinestein. No Android smartphone, as was planned, and forget a tablet. Instead, look for a "PalmPad" to release in 2011. There may be still a Windows 7-based tablet, but HP is clearly looking to move away from Microsoft (MSFT).

That's just part of the overall trend you can see in the industry. Google tried for its own brand phone, but failed. Microsoft buys a license to design its own chips, which strongly suggests doing more with its own devices or even components, not less. Apple develops its own chips. Oracle (ORCL) will consider buying semiconductor companies and already owns a big hardware business, with the Sun acquisition. HP and Dell (DELL) vie for a relatively minor storage player. Cisco (CSCO) markets its own servers.

All of them want to grow. The market is mature and can't support high growth for everyone. The only choice left to every sizeable company is to buy additional revenue streams and to take lines of business from its former partners. Everyone gets into everyone else's business, at least until they realize that, even then, real growth is limited and that already alert U.S. and EU regulators might begin to take a dim view of too much centralized control.

Related: Image: RGBStock.com user crisderaud, site standard license.
  • Erik Sherman On Twitter»

    Erik Sherman is a widely published writer and editor who also does select ghosting and corporate work. The views expressed in this column belong to Sherman and do not represent the views of CBS Interactive. Follow him on Twitter at @ErikSherman or on Facebook.

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