DELL Dell Inc. (MM)

The leading PC manufacturer Hewlett Packard Company (HPQ) is set to roll out its TouchPad tablet, which is touted to be the company’s answer to Apple Inc’s (AAPL) iPad.  TouchPad will debut in the United States on July 1 in two versions, with price tags of $500 and $600, respectively.

After the news of the product launch broke, Hewlett-Packard shares moved up by 10 cents to $35.46 during the evening trading session in the New York Stock Exchange composite trading. The shares have dropped 16.0% this year.

The company is offering the product at a competitive price, which matches the price of iPad. The two versions come with 16 and 32 gigabytes of memory and connect to the Internet only through Wi-Fi. Moreover, this is the first tablet, which will run on the webOS operating system, which HP acquired along with Palm Inc for $1.8 billion last year.

The PC major had previously introduced tablets based on Windows, but the new TouchPad is powered by webOS, which is basically a mobile phone operating system, giving the new device a level playing field with iPad.

The company announced that the introductory version of the TouchPad will come with Wi-Fi technology for accessing the Internet through wireless hotspots. Moreover, the upcoming versions of the device will connect through AT&T Inc.’s (T) wireless network.

There is desperation among PC makers to get on the tablet bandwagon as consumers are interested in buying the smaller touch screen devices, thereby hurting the demand for traditional PCs. This is evident from the fact that the research firm IDC lowered its estimate for growth in PC shipments this year to 4.2% from 7.1% in February, citing competition from tablets and smartphones as well as a sluggish economy.

Hewlett-Packard is the market leader in the PC business with 19.4% market share, ahead of Dell and Acer. It also holds the #1 position in the Server segment with 39.0% market share. The company is also the largest seller of printers. Moreover, the company has deployed additional sales resources to capture incremental opportunities in the enterprise and mid-markets, which has resulted in a diverse global customer base.

HP’s broad product portfolio is aligned with growth areas of the market, so its sales efforts have proved highly effective. Presently, the company is targeting the tablet PC segment in a big way, where Apple has a strong foothold. We have seen this kind of strategic moves earlier as well, when HP had challenged other tech majors in their respective domains.

Despite the company’s market position and compelling product line, we remain cautious about future growth, especially as competition from other big technology players, such as Apple, Acer, Microsoft Corp (MSFT), and Dell Inc (DELL) heats up. The increasing competition is expected to impact pricing in the market, thus moderating profitability to some extent.

 
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