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HP's PC group spends 0.7% of sales on R&D

The research and development budget used to be 9 percent of revenue, Mr. House told me; now it was closer to 2 percent. “In the personal computer group, it is seven-tenths of 1 percent,” he added. “That’s why H.P. had no response to the iPad.”

via Talking Business – The Real Reason for Ousting H.P.’s Chief – NYTimes.com.

HP, by sales, the largest technology company in the world, can’t be bothered to spend money on R&D for its PC division. This is a surprise?  Since when does any PC company spend any money on R&D? Put another way, even if they did spend the money, what would they be researching and developing? PCs are commodity products where any improvements would neither be valued nor used.  On the measures of performance that everyone has for the PC, the product has been more than good enough for a decade.

They did not have a response to the iPad because they did not think anybody needed an iPad.  And that is mostly because Microsoft did not think anybody needed an iPad.

None of this has anything to do with Mr. Hurd. His peer group all agree on these fundamentals.

  • Moe

    I wrote the exact same thing but then I decided: why impart wisdom on fools at New York Times? You almost wonder who does their technology editing.
    Aside:
    I think .7 percent is a bit too much. that’s 100k out 14 billion revuene, right? It’s a tad low. The only way to do that is to outsource some inhouse work. Like buying Voodoo and Palm.

    What they really make money on are their printers. They totally own the medium market in boxstores. It’s more because of their snazzy designs and all in ones that grab the market than any technological feat.

    HP used to create patents to gain a technological advantage that would make their products sell better. As the technologies mature, the returns on these products diminish. Hurd would rather buy the innovation from smaller companies and focus all the research on printers. Personally I think they should focus on imaging technology like high grade dslrs so their high end printers can benefit from the association ala Canon.

    I still think the Palm purchase was brilliant, if they had kept the talent. Imagine if HP could compete against HTC for the premier manufacturer of Android Phones using Palm to create a Sense-like UI for Android.

    HP could gain another core strength while PCs/Laptops and Printers peak. While I dont like CEOs using mergers and acquisitions to boost up their stock portfolio, I don’t see Hurd as bad for HP. Transforming HP drastically, but not stupidly. Sure it’s not the HP way. But it’s not a Bad Way. It’s just dependent on being able to buy good acquisitions at a price that isnt exorbitant(which is great in a recession). Although, it hurts to see R and D outsourced so much. It strikes me as wrong.

    But like Milton Friedman said, “One of the great mistakes is to judge policies and programs by their intentions rather than their results.”

    It’s great to be a technological disrupter, if you can. But the inkjet was a long time ago. Apple spends (not HP’s 9%) 4% on research. I think HP should look at the results and plan their budget accordingly, rather than have an High Minded Good Intention of Being “The HP Way”.

    • FalKirk

      "Imagine if HP could compete against HTC for the premier manufacturer of Android Phones using Palm to create a Sense-like UI for Android."-Moe

      You are probably a lot smarter than I am, but that makes absolutely zero sense to me. Pay 1.2 Billion dollars for what amounts to a skin?

      I don't know why HP bought Palm. It seems to make sense if they want to build and phone and a tablet and escape from reliance on Microsoft OS's. But, like Microsoft's Windows Phone 7, they are so, so late to the game. I think we'll look back in about two years and we'll be talking about the Billion dollar Palm purchase fiasco. Unless there is something that I'm utterly missing. (Which is a distinct possibility.)

  • yet another steve

    0.7% of $14 billion is about $100 MILLION not thousand.

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