globalization impact on pc sprie april 07
TRANSCRIPT
© 2007 Hewlett-Packard Development Company, L.P.The information contained herein is subject to change without notice
Richard WalkerVice President& General ManagerConsumer PC BusinessUnit
Discussion
• A little HP history• A changing world• PC market characteristics• HP position• HP operating model• Conclusions• Q&A
A little HP history
• Incorporated in 1939• Established European HQ 1959,
Germany as center for Europeanmanufacturing operations
• By 1969 international business was30% of total sales
• 1980 signed MOU with China govt.led to JV in 1985
• Significant investments in China,India and Brazil
• 2006 $92B revenue, internationalsales account for 56% revenue
Jack Welch 1987
“The winners in these global games(business) will be those who can puttogether the world’s best in design,manufacturing, research, execution,and marketing on the largest scale.Rarely are all of these elements foundin one country or on one continent.”
”Evolving Industrial Alliances”, The Bridge,1987Source: W.F.Miller professor emeritus Stanford University
An interesting world
“The world has arrived at a rarestrategic inflection point where nearlyhalf its population living in China, India,Russia and Brazil have been integratedinto the global market economy, manyof them highly educated workers, whocan do just about any job in the world.”
Craig Barrett, IntelJanuary 2004
Source: Tom Peters
Asia to dominate global population
Population in 2005: 6.5BForecast for 2010: 6.8BForecast for 2015: 7.2B
Global population (millions)
© canalys.com ltd.Source: CIA World Factbook and UN world population prospects
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
Africa
Asia
Europe
Latin A
meric
a
North A
meric
a
2005 2010 2015
2005 20152010
HP investment drivers
• Market access• Competitiveness• Global footprint and
sources of supply to getthe best value for HP’sbusinesses
• Capitalizing on highgrowth / emergingmarkets
PC market characteristics• Aggressive competition
• Global and local• Speed really does matter
• Time to market with new products• Meeting market cycles• Rapid new designs• Inventory turns
• Unrelenting cost pressure• Lower and lower ASP’s• Material and non material costs
• Partner choice is critical• Must be world class in execution• Must be low cost producer• Must meet commitments
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
HP Acer Dell FSC Toshiba Lenovo Packard
Bell
Apple Medion Sony
Q4 2005 Q4 2006
Top 10 vendors by unitsshipped
#1worldwide
Unit market share
Note: NEC consumer PC shipments shown as “Packard Bell” for comparisonSource: Canalys estimates, PC Analysis EMEA, January 2007
Our journey to date
($800)
($700)
($600)
($500)
($400)
($300)
($200)
($100)
$0
$100
$200
$300
$400
$500
$600
$700
$800
FY01 FY02 FY03 FY04 FY05
(dolla
rs
in
mill
ions)
(8.0%)
(7.0%)
(6.0%)
(5.0%)
(4.0%)
(3.0%)
(2.0%)
(1.0%)
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
OP
% o
f Rev
enue
FY06
• $30B revenue
• $1.2B operating profit
• 3.9% revenue
Q107
• $8.7B revenue
• $414M operating profit
• 4.7% revenue
$1.5B operatingprofit turnaroundsince FY02
Operating model
continuous operational transformation
Sources ofsupply
HP Managed
• processors
• operating systems
• graphics
• memory
• panels
Partner Managed
• commodities
• components
Manufacturing
Partners
• global factory footprint
• world class
logistics
• system design
• NPI engineering
• system integration
• system test
• QA
• OBA
logistics
Truck
Boat
Air
HP regionalhubs
customs
PartnerA
PartnerB
PartnerC
PartnerD
PartnerE
Retailers
Resellers
Distributors
forward &reverselogistics
Execution for distinct market/customer cycles : consumers,commercial
Supply base is global
Memory
Memory
Processors
GraphicsChipsets
Hard drives
Optical drives
LCD PanelsLCD Panels
OperatingSystems
SecuritySoftware
Manufacturing
Hard drives
HP Managed
Partner Managed
Managing costs is critical
$30B
Revenue $1.2BOperating
Profit
$28.8B
Cost
• direct labor
• material costs, manufacturing / supply chain costs
• logistics costs (forward & reverse), warranty/support
• non material costs: channel costs, marketing / promotion costs etc
FY06
Operating modelinitiatives are
focused on this
….but it’s not about labor arbitrage
End to end value chain
$28.8B cost opportunity
Sources ofsupply
HP Managed
• processors
• operating systems
• graphics
• memory
• panels
Partner Managed
• commodities
• components
Manufacturing
Partners
• global factory footprint
• world class
logistics
• system design
• NPI engineering
• system integration
• system test
• QA
• OBA
logistics
Truck
Boat
Air
HP regionalhubs
customs
PartnerA
PartnerB
PartnerC
PartnerD
PartnerE
Retailers
Resellers
Distributors
forward &reverselogistics
Execution for distinct market/customer cycles : consumers,commercial
Emotions run high
“The White House supports off-shoring of jobs,saying that that’s good for our country. Well,
you tell that to the nine million Americans whoare out of work”.
ex-US SenatorTom Daschle
Competitiveness
“It’s vital for America that we maintain leadershipin the industries of the 21st century – computer
technology, space technology and biotechnology.To lead in those industries, we have to think
everyday about our competitiveness”
FormerFormer
HP CEO
Carly Fiorina
Our business reality…
It’s not…“out-sourcing”“off-shoring“near-shoring”“in-sourcing”
but…”best- sourcing”
Tom Peters
Conclusions• We face strong global and local
competitors
• Globalization has always been part ofHP’s DNA
• Constant need to assess operationalefficiency
• Partnerships and who we select arecritical
• The most efficient end to endecosystem wins
All this translates to customer advantage
Simple &easy to use
Availablewherecustomersexpect usto be
Broad productportfolio
Meaningfulinnovation
Q&A