Bradley Turns PCs to Gold for Hewlett-

Packard
The tireless head of HP's personal computer division is
vanquishing rivals ell and !enovo and making
"all #treet happy$ His secret% &nnovation
By Cliff Edwards
On a rainy day in Cupertino, Calif., Todd Bradley picks through products that his
division at Hewlett-Packard HP!" has recently introduced. There#s a sleek laptop called
the $oodoo Envy for hard-core ga%ers, a tiny pink-and-red co%puter created with
fashion designer $ivienne Ta%, and the industry#s first touchscreen note&ook.
'%pressive offerings perhaps, &ut Bradley looks %ore pained than pleased. ()ll ' see
when ' look at these things is that our cost *of production+ is never low enough and our
custo%er service is never good enough,( he says.
The head of HP#s personal-co%puter division has helped the co%pany &eco%e the top
PC %aker in the world and has fattened profits at the sa%e ti%e. But he can#t stop
worrying a&out what could go wrong, fro% co%petitive threats to the glo&al econo%y#s
%eltdown. (,e#ll never &e done,( Bradley says.
BEATING DELL
)s the deepening recession hits co%panies around the glo&e, HP is navigating through
the crisis relatively s%oothly. On -ov. ./, CEO 0ark $. Hurd reported fourth-1uarter
earnings that handily &eat ,all 2treet e3pectations and predicted the co%pany will
e%erge fro% the downturn even stronger. ,hile there are %any reasons for that,
including HP#s e3panding services &usiness and lucrative printer franchise, a &ig factor
is Bradley#s division, which &rings in 45. &illion annually fro% the sale of PCs,
handhelds, and workstation co%puters. Even as rivals such as 6ell 6E77" and 7enovo
7-$89" have seen a sales slowdown recently, Bradley#s group reported dou&le-digit
revenue gains. (The %arket is terri&le, *&ut+ they#ve done a good :o&,( says 6avid 0.
;laskin, chief invest%ent officer at Oak <idge 'nvest%ents, which holds the co%pany#s
stock.
Three years ago, when Bradley was &rought in, investors wanted HP to :ettison the PC
&usiness. 'B0 'B0" had :ust sold its unit to 7enovo, and it looked like 6ell would
do%inate the industry with its low-cost, no-frills, direct-sales %odel. ,ith re%arka&le
speed, however, HP has knocked 6ell on its heels and shown it#s not :ust )pple that can
innovate in the co%puter &usiness.
The %an &ehind this turnaround is a tall /=-year-old, descri&ed &y colleagues as an
unapologetic workaholic. Before HP, he had a tu%ultuous tenure as chief e3ecutive of
handheld pioneer Pal%. He tangled with the co%pany#s founders over strategy as Pal%
lost share in the handheld %arket, though it gained ground in s%artphones.
Bradley#s strategy at HP has &een a &lend of hard-nosed e3ecution and practical
innovation. The approach depends on creating fresh designs and eye-catching %arketing
ca%paigns. Behind the scenes, though, Bradley and his tea% use a &ucketful of %etrics
to ensure the operation is tuned :ust so. They %easure profit %argins for every PC and
how %any <>6 dollars go into each product line. They also reva%ped purchasing so
costs are rock-&otto%. HP used to &uy parts such as %e%ory chips and &atteries on the
spot %arket, getting prices close to those of its rivals. -ow &ehavioral scientists fro%
HP#s research la& forecast de%and for co%ponents. 2upply chain &oss Tony Prophet
then uses those pro:ections to negotiate long-ter% contracts at favora&le prices. There#s
risk if the forecasts are wrong, &ut the savings can &e .=? or %ore.
Bradley &elieved fro% the start that HP had to change its PC &usiness. 'f it kept trying to
sell &oring &o3es at the lowest cost, it would &e locked in a &rutal struggle with 6ell. 2o
with %arketing lieutenant 2at:iv 2. Chahil, Bradley asked a local ad agency to create a
video to convince the e3ecutive &oard that HP needed a new approach. The video
argued that PCs had &eco%e a co%%odity &ecause %akers had ceded all innovation to
chip%aker 'ntel '-TC" and 0icrosoft 02@T". The clip then outlined how HP could
get out of the co%%odity ga%e. ( #,owA# is what sells,( says Bradley.
Hurd was convinced. The resultB a %arketing ca%paign stressing how HP co%puters are
different fro% others. Hip-hop %ogul Cay-D and tennis star 2erena ,illia%s talked
a&out using HP PCs to watch %ovies without first waiting for ,indows to launch as
well as to look at photos and edit %usic. The T$ spots wrapped with a sloganB (The
co%puter is personal again.(
leadinETHE <'8HT B)7)-CEThe ti%ing was fortunate. ,hen the ca%paign &egan in
.==F, consu%ers were looking for laptops that could easily navigate the ,e&, play
ga%es, and store digital content. They also were &uying %ore fro% retailers such as
Best Buy BB9", where they could try out the latest technology. The trends gave
Bradley an edge over 6ell, which had no presence in retail stores at the ti%e and
stressed low costs. HP 1uickly surpassed 6ell to &eco%e the world#s top PC seller.
Bradley#s key challenge has &een striking the right &alance &etween innovation and
price. To hit the %ark, he uses a %etric that HP insiders call (<>6 productivity.( 't
%easures <>6 spending as a percentage of gross %argin for each product line. )
standard desktop co%puter with low %argins %ay get one or two innovative features,
while a high-end laptop with fat %argins would get enough flash to %ake it stand out.
To deter%ine the appropriate <>6 level, HP does three-year pro:ections of e3pected
gross %argins.
7ast year, for e3a%ple, HP introduced the first touchscreen, all-in-one desktop. ,hile
few other PC %akers were putting %oney into desktops, HP saw an opportunity for a
pre%iu%-priced product if the touch technology would %ake it easier for fa%ilies with
kids, a%ong others, to use. The Touch2%art PC, which can go for %ore than 4.,===, has
helped &oost profits and sales, says Phil 0c;inney, the division#s chief technology
officer.
Today, Bradley frets a&out %aintaining HP#s %o%entu%. His concerns are evident in
%andatory conference calls he has with his top GF e3ecutives every Thursday at H a.%.
Pacific ti%e. This year he led the call on Thanksgiving %orning as the 0acy#s 0"
parade played silently on his T$. )%ong other things, Bradley wanted to %ake sure
none of HP#s suppliers would co%e up short for the holidays. (,e did get a little holiday
gift,( says 0c;inney. (He ended the call a few %inutes early.(