Bradley Turns PCs to Gold for Hewlett-Packard

The tireless head of HP's personal computer division is vanquishing rivals Dell and Lenovo and making Wall Street happy. His secret? Innovation

By Cliff Edwards

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Under Bradley, the PC division has seen sharp gains Thomas Broening

On a rainy day in Cupertino, Calif., Todd Bradley picks through products that his division at Hewlett-Packard (HPQ) has recently introduced. There's a sleek laptop called the Voodoo Envy for hard-core gamers, a tiny pink-and-red computer created with fashion designer Vivienne Tam, and the industry's first touchscreen notebook. Impressive offerings perhaps, but Bradley looks more pained than pleased. "All I see when I look at these things is that our cost [of production] is never low enough and our customer service is never good enough," he says.

The head of HP's personal-computer division has helped the company become the top PC maker in the world and has fattened profits at the same time. But he can't stop worrying about what could go wrong, from competitive threats to the global economy's meltdown. "We'll never be done," Bradley says.

BEATING DELL

As the deepening recession hits companies around the globe, HP is navigating through the crisis relatively smoothly. On Nov. 25, CEO Mark V. Hurd reported fourth-quarter earnings that handily beat Wall Street expectations and predicted the company will emerge from the downturn even stronger. While there are many reasons for that, including HP's expanding services business and lucrative printer franchise, a big factor is Bradley's division, which brings in $42 billion annually from the sale of PCs, handhelds, and workstation computers. Even as rivals such as Dell (DELL) and Lenovo (LNVGY) have seen a sales slowdown recently, Bradley's group reported double-digit revenue gains. "The market is terrible, [but] they've done a good job," says David M. Klaskin, chief investment officer at Oak Ridge Investments, which holds the company's stock.

Three years ago, when Bradley was brought in, investors wanted HP to jettison the PC business. IBM (IBM) had just sold its unit to Lenovo, and it looked like Dell would dominate the industry with its low-cost, no-frills, direct-sales model. With remarkable speed, however, HP has knocked Dell on its heels and shown it's not just Apple that can innovate in the computer business.

The man behind this turnaround is a tall 50-year-old, described by colleagues as an unapologetic workaholic. Before HP, he had a tumultuous tenure as chief executive of handheld pioneer Palm. He tangled with the company's founders over strategy as Palm lost share in the handheld market, though it gained ground in smartphones.

Bradley's strategy at HP has been a blend of hard-nosed execution and practical innovation. The approach depends on creating fresh designs and eye-catching marketing campaigns. Behind the scenes, though, Bradley and his team use a bucketful of metrics to ensure the operation is tuned just so. They measure profit margins for every PC and how many R&D dollars go into each product line. They also revamped purchasing so costs are rock-bottom. HP used to buy parts such as memory chips and batteries on the spot market, getting prices close to those of its rivals. Now behavioral scientists from HP's research lab forecast demand for components. Supply chain boss Tony Prophet then uses those projections to negotiate long-term contracts at favorable prices. There's risk if the forecasts are wrong, but the savings can be 20% or more.

Bradley believed from the start that HP had to change its PC business. If it kept trying to sell boring boxes at the lowest cost, it would be locked in a brutal struggle with Dell. So with marketing lieutenant Satjiv S. Chahil, Bradley asked a local ad agency to create a video to convince the executive board that HP needed a new approach. The video argued that PCs had become a commodity because makers had ceded all innovation to chipmaker Intel (INTC) and Microsoft (MSFT). The clip then outlined how HP could get out of the commodity game. " 'Wow!' is what sells," says Bradley.