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HP Rides Design To Higher Profits

Tom Bradley, executive vice president of Hewlett-Packard's personal systems group, is regarded as a savvy strategist. He noticed a shift in consumer preferences to notebook PCs from desktops and realized that design could increase sales. Apple long ago proved that design could be translated into higher margins, but the strategy was not obvious for a mass-market vendor like HP.

"In a commoditized world you wouldn't do it, because it just adds costs," explains Satjiv Chahil, the company's head of PC marketing. But HP analyzed a number of other consumer-product categories and found that in each case, a company could make money selling low-price products and premium products, but that no one selling in the middle survived very long.

The new PC strategy has become a major driver of growth for HP. Overall revenue increased 12.7% from a year earlier, and revenue from notebook PCs rose 45%. The strong growth in the PC division is remarkable because after HP's merger with Compaq in 2002, many analysts did not think that doubling down on personal computers was going to pay off.

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