Hewlett Packard aims for iconic status

HP's hopes to join the exclusive club of brand leaders will depend largely on how well the company caters to consumers.

We all know the iconic brands, those small words that sell consumer products in vast quantities round the globe: Coca-Cola, Nike, Disney.

Now HP is spending $300m (£210m) to join this exclusive club. Many IT companies have tried to move into the consumer area, notably Microsoft, but their inability to transform their products from advanced tools for the technology-obsessed to objects of desire for ordinary people has led to many an expensive flop.

Apple has done it, although its iconic status is still limited largely to the media world.

So how will HP make the leap from engineering whizz to the kind of brand power of a Harley Davidson or a Rolex, which can be used to sell everything from rock concerts to leather jackets?

A massive ad push will kick-start the process, and it will be difficult to escape the YOU + HP slogan for a few years.

But the really difficult step will be to forget about the technology and concentrate on what people really want.

At the HP Consumer Business Summit last month, senior executives showed a refreshing lack of interest in breaking new engineering records.

For example, HP will not be joining the race for speed and power in the home PC market. Emilio Ghilardi, head of consumer computing in Europe, indicated that the power struggle is now over.

"We believe PC power is now far in excess of what consumers need," he said. "What is inside is already powerful enough to do whatever you want to do."

This has focused attention on other parts of the PC, according to Ghilardi, notably on cost, with notebook prices dropping 25 per cent.

Consumers are also spending the money on other areas of the PC, instead of the latest processor.

"Flat screens have become mainstream and will represent more than 50 per cent of PC monitor sales in 2004," predicted Ghilardi.

DVD writers are also becoming a must-have item in the home, with sales growing by an astonishing 610 per cent in the past year.

The end of the computing power struggle is also evident in digital photography, another area on which HP is focusing in its push into the consumer arena.

Until now, every new generation of digital camera has featured an extra million pixels on the imaging sensor.

But now the output from a three megapixel camera is perfectly acceptable for holiday snaps, and the latest five megapixel cameras give professional quality.

"At a certain point the extra power does not give more consumer value," explained Michael Diehl, head of HP's consumer imaging group.

"The lens makers are struggling to catch up. They need to provide smaller, better zooms and are scrabbling to produce wide-angle lenses."

Several markets are emerging as a result: one megapixel fun cameras for about £100; two or three megapixel compact cameras at £200; serious cameras with five megapixels or more; long zoom lenses; and lots of special effects at the £600-plus level.

In the longer term, however, the 'fun' and 'compact' categories are doomed. "They will disappear within five years as cameras in phones become commonplace," said Diehl.

So HP is going upmarket, with cameras sporting five megapixel sensors and long zoom lenses.

On the printer side, the essential figure for consumers is dots per inch (dpi). HP scientists were already complaining that the race was forcing them to concentrate on increasing dpi at the expense of more productive work on image quality, such as software manipulation to improve colour balance and contrast.

Luckily, resolution has now peaked at about 4,800 dpi, allowing other areas to be addressed.

HP has just announced 'digital flash', for example, that uses software to 'relight' the scene shown in the image and adjust the highlights and shadows in a similar way to the human eye.

The result is the equivalent of a fill-in flash: it is rather impressive.