Picture this: A successful HP acquisition?

Posted by: Peter Burrows on May 26, 2005

Let’s face it, it can’t be good if your best acquisition ever is a controversy-fraught, morale-sapping, investor-rattling deal such as Hewlett-Packard’s 2001 mega-purchase of Compaq Computer. But at this point, that’s the dismal truth for HP. I’m certainly no fan of the Compaq deal, but at least it led to some big one-time cost savings and some temporary (now long since evaporated) market share gains. That’s far more than can be said for most of HP’s deals. Fact is, HP is where once-promising companies such as Verifone and Bluestone went to die.

Which brings us to today, when HP gave a promising indication that it won’t let the same thing happen to its latest acquisition, of the online photo-printing site Snapfish.

That's because HP announced a headline-grabbing price cut that makes Snapfish the clear price leader in this fast-growing market. By dropping the price of a 4x6 print to as low as 10 cents, Snapfish is now 60% or so cheaper than rival sites such as Kodak's Easyshare Gallery or Shutterfly.com. What's more, the move makes it cheaper, for the first time, for folks to order pics on-line rather than bring them to the local drug store or mass retailer--at least until those brick-and-mortar rivals respond, if they do. “This reaffirms HP’s commitement to make Snapfish the No. 1 photo-printing site," says Snapfish general manager Ben Nelson.

That may sound like marketing blather, but I think there's more to it than that. In recent months, the folks in HP's printer division have been moving at a faster clip to craft a more pragmatic, forward-looking strategy. After years of trying to boost short-term profits to keep Wall St. happy, the company has slashed printer prices in a margin-sapping crusade to take back market share. While painful, that should boost sales of its hugely profitable ink cartridges for years to come--including from shutterbugs who are willing to pay more to print a pic right now, rather than wait a few days for Fedex to deliver prints ordered online.

And the agressive posture with Snapfish suggests that HP is finally getting serious about serving the growing number of online shoppers as well--despite the fact that they do nothing to increase sales of that more-costly-than-crude printer ink (like most mass market photo-finishers, Snapfish currently uses a film-like process that is at least for now cheaper than HP's inkjet-based approach). Sure, HP has dabbled half-heartedly, and unsuccessfully, with various online ventures in recent years. But by finally stepping up to serve its customers however they want to be served, HP may still have a shot at becoming the digital photography powerhouse it should have been from the start.

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Bloomberg Businessweek writers Peter Burrows, Cliff Edwards, Olga Kharif, Aaron Ricadela, and Douglas MacMillan, dig behind the headlines to analyze what’s really happening throughout the world of technology. Tech Beat covers everything from tech bellwethers like Apple, Google, and Intel and emerging new leaders such as Facebook to new technologies, trends, and controversies.

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