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Lew Platt eyes HP's future
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January 6, 1999: 1:45 p.m. ET
With the launch of a new line of sub-$100 printers, CEO looks for growth
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NEW YORK (CNNfn) - Hewlett Packard is hoping to continue its industry dominance in the desktop printer market with plans announced Wednesday to sell sub-$100 inkjets through newly formed subsidiary APOLLO, Inc.
CNNfn spoke with HP's (HWP) chief executive officer and chairman Lewis Platt about plans to capture the so-called "ultra-low-end" printer market, how the financial crisis in Asia has affected the company's bottom line, and where the San Jose-based computer hardware manufacturer is heading in the new year and beyond.
Here is his "Trading Places" interview:
BRUCE FRANCIS, CNNfn ANCHOR: First of all, this sounds like a new idea, but you're using an old name that HP acquired back I think in the '80s, is it? Is this the same Apollo name that you got from buying that workstation company?
LEWIS PLATT, CHAIRMAN AND CEO, HEWLETT PACKARD: Well, it is the same name, obviously. We bought Apollo you said in the late 1980s. But obviously it's a totally new set of products that will come out under this brand name. It was a name we owned. We like the name. We think the name stands for some really positive things, sort of advanced space-age things, and that's very consistent with the kind of product that we will be bringing out in this new subsidiary.
FRANCIS: Now, obviously, setting up a brand name would seem... hedge any dilution to the Hewlett-Packard name, but what kind of effect do you think this will have on margins? After all, printers are a major source of revenue for you folks.
PLATT: We expect it'll have a very positive effect on margins. As you know, we stayed out of the what's now called the ultra-low end of the inkjet printer business for a while because we were concerned about margins.
We think with this new subsidiary -- which has a somewhat different way of going to market, has very few people, it does a lot of outsourcing -- that we've conquered the margin problem at the ultra-low end. And so we actually expect that it will add to the overall margins of HP rather than detract from them.
FRANCIS: Now a number of PC companies in the mid 1990s experimented with low-end brand names to avoid that kind of dilution, IBM's (IBM) Aptiva brand comes to mind. Are you concerned that this is just going to be too much to manage? After all, HP does have a very diverse product line and corporate makeup to manage.
PLATT: Well, we don't think so. We have a separate team managing this subsidiary. They're free to pursue business in some different ways, so we feel like it's not going to be a management burden at all. After all, this sort of thing is done in the consumer-products world every day.
So while its perhaps breakthrough for HP and breakthrough in the high tech world, it's a concept that's very well proven. So we feel very good about it.
FRANCIS: We just closed out the holiday season here, really, around the world. Consumer PCs, a big part of that. How did you guys do?
PLATT: Well, obviously, since we're in the final month our quarter, I'm not going give you a detailed report, but we feel good about the way things are going. You've heard reports from some of our major distributors. People like Best Buy (BBY) this morning that their business was good and so we're very happy with the way the season went.
FRANCIS: Also, you've got a close eye on Asia right now and wondering how the business there is doing?
PLATT: Well, what we look for in Asia is that hopefully things won't get my worse. We don't think we're going to see a rapid recovery in the major economies in Asia, places like Japan and Korea, but if they would stop getting worse that would be a big help to us.
Right now we think we see signs that that's exactly what's going happen, that perhaps we have finally found the bottom and that will be very good news.
FRANCIS: So you're looking forward to finding the bottom, but you don't see it yet.
PLATT: It's frankly too early to tell, but if you look at the last few months, we don't seem to be on the same kind of rapid slide that we were in previous months. So hopefully that's an indication that we are beginning to find the bottom.
FRANCIS: I know controlling cost was has been a big project over the past couple of quarters and a big contributor there to your results. Can you tell us what the progress is there, will we see when you report next quarter about what we will see on the cost front?
PLATT: We feel really good about what we did with costs, sort of in the second part of the third quarter and in the fourth quarter which we've already reported where we really got costs under very good control.
And obviously, we're not going to let up and sort of revert back to where we were at the beginning of last year until we have very clear signals that there's a very robust market developing. So, if you were here today, you would see cost controls are still in place.
We're definitely going to keep them in place until we have strong signals that things are changing. So I expect expenses will be in very good shape for the quarter.
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Hewlett Packard
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