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HP to Sell Flat-Screen TVs, Links with Apple to Offer Digital Tunes

Posted on: Friday, 9 January 2004, 06:00 CST

Jan. 9--Hewlett-Packard yesterday added some beef to its plans to sell consumer electronics, announcing that it would offer flat-screen TVs and has teamed with Apple Computer to sell digital music.

The alliance of HP and Apple in particular establishes a major partnership within the computer industry. For the first time, Apple has stepped away from the self-enclosed Apple-only strategy that the company has pursued since Steve Jobs returned in 1997.

Meanwhile, HP has put its software partner, Microsoft, on notice that it will not necessarily follow its lead in every case.

HP, the world's second-largest computer maker, announced its Apple alliance and other consumer electronic initiatives at the Consumer Electronics Show in Las Vegas. It fleshes out a strategy that the Palo Alto company first announced last year.

It also further maps the competitive landscape for Poway's Gateway, which is staking its turnaround strategy on selling more consumer electronics.

Apple will manufacture its iPod digital music technology for HP, which will put its own brand name on the device. The iPod is the best selling digital music player, with about 2 million sold since it was launched a couple of years ago.

HP will also bundle Apple's iTunes software and online music store on its desktop and laptop computers.

The partnership is likely to pressure Dell, which began selling its own brand of MP3 player late last year. Gateway also sells an MP3 player.

Dell's music player and music service is run by software from San Diego's MusicMatch, a longtime HP partner. HP has shipped many of its computers preloaded with MusicMatch's software over the years. Now, HP machines will be shipped with Apple's music software.

For Gateway, HP presents a challenge because it sells its products at retailers such as Best Buy, which have far more stores than the 190 retail outlets owned by Gateway. In addition, Gateway faces pressure from Dell in selling consumer electronics directly to consumers online or over the phone.

Brad Williams, a Gateway spokesman, insisted that Gateway has a head start on its rivals. It was the first computer brand to branch into consumer electronics, introducing a plasma television in late 2002. It remains a leading seller of digital plasma televisions today.

"We believe that we've clearly established leadership," Williams said. "Look at the number of consumer electronics products that we sell today and the number HP sells today. That speaks for itself."

HP said it plans to introduce 30-inch, liquid crystal display TVs and 42-inch plasma TVs in June.

Bob O'Donnell, an analyst with industry research firm IDC, said computer makers are moving toward the television business because flat screens are reshaping the industry.

"It's like the Wild West; everybody's jumping in," he said. "At the end of the day, a lot of it is going to be about prices. Companies are going to have to get really aggressive, and that's going to change things dramatically."

Along with televisions, HP said it will sell a home networking device in the fall to link digital TVs, digital music and digital pictures.

Other HP consumer electronics devices include projection televisions, a LightScribe device that etches labels directly on CDs, and a new iPaq personal digital assistant.

Chris Morgan, HP's San Diego-based vice president of worldwide sales and marketing, declined to say how much the music players, networking devices, TVs and other devices would cost. They are expected to hit the market this summer and fall.

--The New York Times News Service contributed to this report.

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(c) 2004, The San Diego Union-Tribune. Distributed by Knight Ridder/Tribune Business News.

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