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Itanium dependency augurs "world of hurt" - report

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A report by an analyst company casts a shadow on the sincerity of HP's corporate logo: Invent.

The R&D tradition represented by the "Invent" is precious to HP - it appears on all product packaging and promotional material.

But in a damning note, Illuminata concludes that HP is risking its reputation on some big gambles, in which it isn't fully in control.

It's no secret that Hewlett and Packard were first-rate engineers whose innovative spirit helped shape HP into a model technology company that pushed beyond oscilloscopes and into microprocessor design, printing and imaging.

But is Invent still apt for the new HP? Illuminata's Jonathan Eunice asks the question in an analyst note issued this week titled "HP: Don't Invent."

Buy, don't build

The new HP has decided to take a much more pragmatic approach to R&D. Invest in selected areas, and only when you can lead.

"At HP, the word's gone out to buy, don't build, wherever possible," Eunice writes.

"Leverage partnerships and market standards if at all possible. Get to market quickly and inexpensively with good technology, but not the "best" imaginable from whatever engineering or abstract Goodness standpoint might previously have been the measure."

Fiorina has accelerated this shift within HP, as she is convinced that products are just a vehicle for the revenue-making services teams to stay busy. Innovative ink cartridges aside, of course.

She often says that some cherished names in the IT world may not make it out of this protracted economic slump. It's quite clear she identifies Sun and its cash-guzzling UltraSPARCs, as a potential victim.

HP pours billions into research and development, but as Eunice points out, there are few places for the technology to go anymore. And HP's competitors may actually end up being the beneficiaries.

"HP actively touts its advances in molecular and quantum computing, but has aggressively distanced itself from the microprocessor design and semiconductor fabrication businesses where such advances would be relevant," Eunice cites as an example.

"Indeed, HP Labs could very well become the next Xerox PARC - place where genius flourishes, largely for the benefit of other companies, which can the productize the inventions."

HP has picked simplicity in favor of invention. Commoditize everything you can and pick whatever resembles an industry standard at every opportunity. This strategy makes HP a favorite with Microsoft, BEA, Intel and Oracle. It's a less threatening company, almost neutered as compared to Sun and IBM.

Alphacide

The true depths of both HP and Compaq's focus on being conveyor belts for Microsoft and Intel products was made clear when Michael Capellas said he realized it was impossible for a rival to design a better chip than Intel.

This kind of amnesiac slip can only come from a man in a terrible state of denial. How could he have forgotten about the Alpha chip? He couldn't; Don Capellas was the man who sent Alpha to its grave.

Capellas really should have said that he found it impossible to compete with Intel economically, not that it was impossible to outperform them technically. Dying breed that it is, Alpha still flies.

Eunice finds an important flaw with HP's alternative 64-bit chip plan: Itanium.

Intel does not depend on Itanium's future. Pentiums and Xeons pay the bills at Chipzilla. Itanium's success would just be icing on the cake. HP's lawyers surely have Intel locked into Itanium for a long time to come, but should the product flop, Intel's Itanium comittment may come into question.

"If Intel were to lower the priority of IPF - or, heaven forbid, even back away from it - HP would be in a world of hurt, especially since none of its major competitors (and few of its minor ones, for that matter), would be negatively affected."

Eunice does praise HP for its choices in some areas - HP has made strong allies on the hardware and software sides of the house, and Fiorina does have a clear vision in mind - Eunice says.

HP may be right. Pushing standards may be a noble and cost-effective way not to compete.

Maybe it's just time for the marketing team to find a moment of inspiration and invent a new slogan? ®

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