Just a week after sitting down with Acer CEO Gianfranco Lanci, Mark Spoonauer and I got to spend an hour picking Ted Clark‘s brain. He’s the SVP and general manager of HP’s notebook global business unit, which means he’s at the helm of the number one laptop business in the world. He’s also the man behind everything from HP’s design concepts to its netbook strategy to its business laptops. Among the highlights:
After the jump, Clark explains what you can expect from HP in the future. Q: When you spoke with Dana last year, you said you didn’t think netbooks would cannibalize much of the market, and that they were second and third PCs. Do you still believe that or have the economy and the popularity of netbooks changed the landscape ? A: The landscape has changed somewhat. The global economic situation does tend to drive people to purchase lower-priced products. That’s not just a netbook phenomenon; that’s an average selling price phenomenon across all of the product categories. But at the same time I think there’s a difference in value from netbooks with say 10-inch screens to larger screens, what I would call more full-functioned notebooks. We do believe that there’s not a huge amount of cannibalization. There is some, maybe a little more than we expected. But overall, we see people buying these products as the second or third PC in the home that they may not have bought prior to having this category to choose from. How many will be satisfied if they do buy these as their primary PC? Will they end up saying, “I would do that again” or will they move back up to a more, let’s say, human-engineered product? Q: Intel has been rating its own processors to clarify for consumers what processor is good for what tasks. What kinds of things could HP be doing to educate consumers about the differences between full PCs and netbooks? A: A smaller screen, smaller keyboard product is not a great way of creating information. But this is part of the evolution to more of a cloud-computing model where I don’t need everything, and at some point I don’t need anything on my client device. I need fast, available access, high security, and the ability to have a great screen and even, perhaps, a natural user interface that makes it simple and easy for me to get to my information, manipulate it, and allow my friends, family, or company to share or use that information. Over time, people will buy these, but I think they’ll be a little disappointed [with them] as their primary PC. More and more of the notebooks will be thin and light and less of a fat client, if you will, less of a full client, but more of a thin client or a virtualized client type device. The netbooks mean something in that broader context. Q: Where does the dv2 fit on the line between secondary and primary PCs? A: The dv2, we think, meets the threshold of full-function PC: a full-sized keyboard, a large enough screen, decent resolution, good performance. It really signals what customers are going to want as the minimum threshold for their primary notebook. They will tend, I think, to spend the extra couple hundred dollars and get a primary PC more like the dv2. Q: If there’s one area where the dv2 fell down it was battery life. Do you feel like consumers in that price category deserve more endurance, or do you think their priorities are different from customers buying other machines? A: [With] mobile computing it’s really three vectors: one axis is mobility, meaning size and weight and battery life. One axis is performance. And one axis is affordability. The evolution of this will mean more battery life in more affordable systems. It’s a question of paying for the technology that gets you there, all the way up to solid-state disks and the highest end Intel LV or ULV processors. Customers want all that. The question is what’s the price? That’s where the dv2 hits a nice compromise among all those vectors. Q: Where do you think CULV falls in the three vectors you talked about? Is it safe to assume it’ll offer better battery life than Neo? A: CULV is Intel’s acknowledgment that thinner, lighter, longer battery life is becoming more of a consumer care-about. In reality, most of that roadmap is not new technology. They’re adding a processor or two over time into a more affordable part of the market. I think it fits in as that same profile as the AMD Neo; certainly it’s a step above the Atom processor. And it will have a place, there’s no question about it. It’s a consumer adoption of technology that Intel has had for a long time. It’s the evolution of consumers following business customers over many years. Realizing, “Maybe I do want to carry this out to the pool or to grandma’s house or use it in a classroom. And that battery life is important and I might make a little bit of a compromise with performance.” Q: So, Is CULV just a re-branding of a processor they already had? A: To some degree. Again, I think they’ve announced they’re bringing in one new processor at a little bit lower price point. That’s not to take anything away from CULV or their technology. They’re clearly the leaders in battery life in terms of what you get for performance and battery life. But affordability has always been the question and I think that’s the real message with CULV: mobile computing that’s affordable for mainstream consumers. Q: Where would you say HP is concentrating most of its efforts? Are you placing more of an effort into mainstream thin-and-light computers as opposed to the netbooks? A: HP worldwide ships more than one notebook every second. And our job is to provide the broadest product line in the industry all the way from high-fashion, high-design, high-end, to mainstream workhorse to the corporate customer, to the latest and greatest thin-and-light consumer notebooks. We will continue to attack the market in essentially every channel and every country in every segment with the broadest product line in the industry. Q: Although HP is the overall leader in mobility, ASUS and Acer dominate the netbook market, while everyone else has market share in the single digits. Where does HP need to be in the netbook market to stay number one in mobility overall? A: We are number one, as you said, and we’re proud of that. But that’s really not the objective; that’s the reward for doing things the right way. Part of, if not our only real, role in this is to deliver the business results that our shareholders expect. Go look at revenue share and see how HP is doing versus Acer or ASUS, and I think the numbers will look quite a bit different. From our perspective, yes, unit share is important, but unit share is not the ultimate test; it can you drive profitable growth in your business in a way that is additive and is positive as opposed to “let’s go only for share”? Q: What are your thoughts on Nvidia Ion in the netbook space? A: It’s very interesting technology. The whole notion of graphics performance and application processing is a broader thing than just Ion. Especially as almost everything you do these days, especially for the younger generation, is about streaming video and photos and movies and Internet TV and all of these things that are highly graphics-intensive. As an industry, we can do better and Nvidia’s out front. Q: Would HP embrace Ion? A: We continue to look at lots and lots of technologies, hardware and software, and our job is to be out front. Kind of like we did with the dv2 and the Neo processor. If we see something that is exciting for customers and allows us to make a bit of a breakthrough in those three vectors I described, maybe good performance, good mobility, and a lot more affordable, we’re going to be all over it. Q: What do you think of subsidized netbooks with mobile broadband? A: Long-term this is probably more of a small-to-medium business play. “I’ve got to be connected all the time. I want some computing power that’s highly mobile, that helps me run my business.” But when it comes to the consumers in mature markets where broadband and Wi-Fi are broadly available it’ll be interesting to see the penetration of monthly service relative to what you can get in terms of free access. I think the jury’s still out on that. We’re interested, [and] we’re working with a number of operators. The greater test will be in the emerging markets where broadband is not so prevalent and this becomes your only high-speed connection to the Internet. That’s where the penetration rates may be very, very high. It’s a natural migration to go after consumers and I think it’s great; we’ll see if the value proposition holds up. HP will be right there to take advantage of that. Q: What are your thoughts so far on Windows 7? A: Windows 7, from everything we’ve seen, looks very, very solid. I think the hardest thing about Vista for the ecosystem was that it was this new driver model. And as mundane as that sounds, almost everything had to change. Almost everything had to be rewritten or recompiled or rethought, from the smallest attached piece of hardware to the thousands and thousands of printer drivers. That was such a huge change for the ecosystem, whereas that’s the baseline for Windows 7. Now, we can go innovate on top of that driver model and thank goodness, most of that work is behind us. That in and of itself will catapult Windows 7 as much more stable, much more compatible than Vista. One example is HP has been out there with a leadership position in touch for a year and a half. And bringing some of the touch capabilities from Windows 7 into the mix will help that natural user interface be even better and even more exciting and something that customers and consumers can really latch onto. Q: We were disappointed that tx2z didn’t have the full MediaSmart software. Do you feel you’ll be able to do more with touch now that you’re building on Windows 7? A: Absolutely. Windows 7 is a great platform to build better capabilities and more robust capabilities for touch on notebook PCs. We are committed to bringing the full desktop experience to our touch mobile products in the future. Q: People talk about Android as touch-friendly. We even ran a column suggesting Palm’s Web OS might work on netbooks. Then there’s Intel’s Moblin. Can you say what platforms you’re looking at and what your thoughts are? A: We’re investigating Android along with lots of other mobile software for all kinds of form factors. And obviously, some take more heavy lifting than others and we certainly believe we have the capability to do the heavy lifting if we think it’s of value. And we’re going to continue to push forward in those areas and have something to deliver when it’s ready. But right now, we’re not there yet. Q: Windows 7 Starter Edition, of course, will have a three-app-at-a-time limit. What are your thoughts on that limit? A: We’re still investigating the right operating system strategy for our Mini category. We do believe that Windows 7 has got some compelling things for us. But there are a lot of choices out there and we’re going to continue to evaluate all of our choices, especially for that category where you want pretty good performance at an affordable price. Q: Would you say there’s a blurring going on between the smart phone, notebook, and netbook space, especially with the rise of MIDs? A: There’s no doubt there’s blurring going on. This goes back to this notion of cloud computing and thin client computing. We’ve always had form factors that go from a feature phone all the way to a mobile workstation. There’s been this gap in there. This no man’s land. Tweener land. Most of the reason for that is you can’t tackle the compute power that you need for a full function PC into a smaller form factor to make it interesting. But when you can offload some of that compute power and storage into the cloud, now you’ve got the potential for thin, sleek, larger-screen products that give you a full computing experience but aren’t burdened with a high performance processor and lots of heat and memory. That blurring is going to be driven by the broader trend of cloud computing or thin client computing. Q: How aggressive is HP getting with cloud computing when it comes to making it more palatable to consumers? Will HP get involved in the infrastructure and services side, or are you already? A: Notebooks started with the business need to travel. Then [with] tablet computing you could probably say the same thing. And 3G or wireless broadband. All those things started on the business side, and I think thin client computing is the same way. HP is the leader in thin client computing for business and we will take that knowledge and that understanding and the technologies and put them into the consumer side when the infrastructure and services are ready, and we’ll do that by partnering with the right companies who are experts in that field. Q: Do you think Apple is a notable exception to the rule that a lot of the innovation comes from the business side and migrates to consumers? Take the iPhone and App store, for example. Now, Windows Mobile has an app store, too. A: I’m not suggesting that we’re not aggressive on the consumer side. I think it’s more a question of where does the trend start and where is the value for the customers, and how we migrate that value into something that’s meaningful for the broad consumer base. I would match our notebook roadmap versus Apple’s anytime, anywhere. Q: In Microsoft’s latest ad campaign some of the so-called laptop hunters wind up getting an HP. What’s your reaction to that campaign? How do you think HP is being portrayed? A: I would give Microsoft some real credit for, for the first time, showing the complete picture. HP wouldn’t just go out and talk about this as a piece of hardware without the software as part of it. Microsoft, in this campaign, has shown that customers want affordable and cool hardware with Windows and what the Windows ecosystem brings. I think it’s what makes the campaign work. They’re not just talking about Windows. Certainly, we’re pleased that some of those customers shopping picked HP. We know that they had a choice and they’re not always going to pick HP, but having the first two out of the box is pretty good. Q: Do you feel like you’re not only the best Windows PC, but that you have the best PCs overall? A: I can tell you without question in terms of value for the money and design and capability, hands down, HP is the leader. Q: We’ve heard that Office Depot sometimes turns away customers who don’t buy extended service plans. And Best Buy was accused of not honoring price matching. How do stories like that make HP feel as a notebook-maker? A: We have this very strong extended team of people all the way from the supply chain group to our region retail teams to our marketing guys, and I’m sure that they’re working hand in hand with our retail partners to provide the very best experience possible. HP is interested in raising the bar in terms of the experience that customers have in a retail shopping environment. If there have been missteps along the way I’m sure those will get corrected and we’ll do everything possible to improve with our retail partners. To your point, five years ago we would’ve been with some people who were talking about, “It’s game over and everything ‘s going direct to the Web.” What people missed was this desire to go and see and look and touch and experience the product. Not only are you putting your life on this thing; it’s something that’s part of your personality. We watch customers shop. We carefully observe what gets them excited. It’s whether or not you have rounded corners versus square, it’s whether you have a metallic finish or matte. And all of those things lend themselves to a retail buying experience. Q: Do you see HP setting a limit for netbooks at the 10-inch screen size or will you experiment with larger screens? A: I don’t get too caught up in whether it’s a netbook or what that definition is. We took a look at the first ASUS product– whatever that crazy name is—how many “e”—PC at 7 inches and said, “There’s no way this is sustainable in terms of a reasonable customer value proposition.” We came out at 9 inches and that’s the hairy edge of acceptable. After that anything 10 inches or above we we’ll look at. We’ll have the right price point and the right screen size from 10 inch all the way to 20 inch notebooks and everything in between. We tend to focus a lot on consumers, but our DreamColor workstation product is the kind of display technology performance that once you see that there’s just no going back. I mention that because the display aspect of this, whether it’s 10 or 12 or anywhere on up, it’s something we spend a tremendous amount of time on in terms of our own technology and working with all of the key display manufacturers to get the right technology out there. Whether it’s called a mini or not isn’t so important if can we deliver value at these different screen sizes. Q: So we should expect a DreamColor notebook with capacitive touch for consumers by Christmas? A: That sounds great. And that is the kind of thinking that we’re doing. Let’s just give somebody an absolutely blow-them-away, maybe virtualized client cloud computing, great display, touch-enabled product that when you need it you add a keyboard and you can do all the productivity stuff you want to do. We would certainly love to deliver that kind of product by holiday. Q: Given the economy and drop in average selling prices, do you think there’s still a market for high-end systems, whether for gaming, multimedia, or business? A: Without question, there is certainly a category of customer, both a business customer and consumer, who want the premium product. They want great design but underneath that great design they want screaming performance and a great feature set with an outstanding display. Is it tough out there with the overall economic climate? Yes. But has the need gone away? Absolutely not. Q: Voodoo’s bread and butter is gaming, but it tried something different with the Envy. It had a great design, but the performance wasn’t up to its price. Does this force HP to recalibrate what comes to market from Voodoo? A: Going forward you will see products that bring the best of both worlds together. You’ll think, “I see why Voodoo and HP came together.” We will deliver on the promise and the vision of that in the future. It’s really not about selling massive volume, obviously. It is about making statements in the marketplace in terms of cool designs and high-performance products.