Tablet Turnaround: Too Much or Too Late?

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Meg Whitman is a Silicon Valley legend. She grew eBay  (NASDAQ: EBAY) from a start up to an $8 billion behemoth. Two years ago she entered into an expensive but unsuccessful political campaign. Today, she is back in the Silicon Valley at one of the world’s largest technology companies, Hewlett-Packard (NYSE: HPQ), trying to revive it and her own reputation.

Since the year 2002, the company has struggled to find its way, after the debacle between the board members and then CEO, Carly Fiorina. The company changed many CEOs, a sign of how management is struggling to control the company. Meg Whitman was appointed CEO with a hope that she can bring an end to this declining era. Today, HP is sitting on debt of around $29 billion with a market cap hovering around $30 billion (i.e., a debt to equity ratio of around .95). The implication is that HP has limited options. It is no longer in a position to acquire its way to health.

The recent activities and press announcements made by Meg has injected hopes of revival. The main problem is that the PC business itself is declining at a rapid rate; this had been the bread and butter for HP for over a decade. They finally decided to shift to the tablet war with the announcement of two exciting products.

Envy X2 – After its catastrophic display in touchpad in 2011, they possibly have a device with the best display in the market. It’s an ultra-thin laptop-cum-tablet device. It has a detachable screen that docks with the keyboard through a magnetic latch, thus allowing you to easily convert between the two form factors, somewhat similar to Apple's Smart Cover. It is scheduled to arrive at the market somewhere close to mid-December.

<img src="/media/images/user_13211/hp-envy-x2-iloilo-philippines_large.jpg" />

This is going to give Apple’s iPad a tough fight in the coming days. Predominantly Apple has been the market leader in tablets. The only thing is that the pricing backed by a huge fan following might play a huge factor in favor of the iPad.  They are also launching their mini iPad very soon (as per sources). Apple has become one of the most valuable companies with their share prices climbing to $700 at one point.

Elite Pad 900 – This is an Elite pad, which means it has been designed specifically to meet the requirements of businesses. Powered by Windows 8 and Intel’s Atom processor Z2760, it combines productivity features along with IT-level security and system management (as claimed by the HP officials). This is an untapped sector and should yield high volumes if it is able to meet business requirements along with the price factor.

<img src="/media/images/user_13211/hp-elitepad-900-center-640x544_large.jpg" />

Ink Advantage Campaign – A program initiated targeting price-sensitive customers in emerging markets that has expanded to 82 countries, and the Ink in the Office initiative, which is targeting business customers. This means that ink cartridges would cost less. In the United States, an ink subscription program will bring in more dollars for HP, but cost consumers less per-page. Additionally, HP will differentiate its ink and toner from its competitors.  This has been one of their core strengths and by understanding the need of the segment they should be able to drive higher profits by increasing volumes.

ENVY Phoenix h9 - HP’s most powerful desktop tower to date with top-of-the-line third-generation Intel processors and a choice of NVIDIA discrete graphics or AMD ultra-high-performance graphics, coupled with powerful options such as ExpressCache, SSDs and liquid cooling. An updated cable dressing improves airflow and cooling in the chassis for enhanced longevity. A perfect unit for the current business needs.

<img src="/media/images/user_13211/hp-envy-phoenix-h9_front_large.jpg" />

Spectre-One - HP announced, a 23.6-inch all-in-one desktop with a skinny design and features like NFC** (Near Field Communication). The Spectre-One ships with a keyboard, Magic Trackpad-style wireless touchpad and two NFC tags, which can be assigned to our favorite websites. This should hit the market by around November and is expected to cost somewhere around $1,299. The only problem with this desktop is that in pursuit of getting it stylish they have not added certain features like - a TV tuner, touch screen, and even an optical drive.

<img src="/media/images/user_13211/hp-spectre-one_large.jpg" />

**Near field communication (NFC) is a set of standards for smartphones and similar devices to establish radio communication with each other by touching them together or bringing them into close proximity, usually no more than a few centimeters. (Source – http://www.wikipedia.org)

Isn’t is too much or is it actually too late?

HP’s stock has fallen 28-30 percent over the last one year, they have announced job cuts with figures going as high as 29000, and the annual reports aren’t looking so good. The problem with HP was that it could not define what it has to offer as a company with so many divisions and also it could not live up to its tag line of “HP:Invent”. But these devices are something for us to look forward to in terms of features and looks. Not only that a job cut of 29000 would mean a saving of around $3.5 billion which will help it to sustain two quarters before these devices hit the marker.

Meg makes decisions understanding the need of the future. This is evident from her reign in eBay. She had made a call to purchase Skype for $4.1 billion in 2005 (When Skype was not that famous comparatively). This was recently bought by Microsoft for a mammoth $8.5 billion (But after Meg left eBay they had sold Skype only for $2.75 billion). eBay’s share has grown more than 90 percent since she has left the company, a sign  that the strategies implemented by her were certainly for a long term.

HP is a bit late in coming up with these devices as one would have expected them to enter the tablet market much early. But it’s never too late if you can invent and come up with better technology to improve customer service. The question in the reckoning is - Can these devices and strategies help them in a much needed turnaround? 

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Umang27 has no positions in the stocks mentioned above. The Motley Fool owns shares of Apple. Motley Fool newsletter services recommend Apple and eBay. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.

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