HP KO'd in Digital Camera Business

Hewlett-Packard Company (HP) is seeking to change its business model by getting rid of its digital camera manufacturing branch, which has been an integral part of the company since the early 1990s. The decision reflects the company's poor performance in this sector and a subsequent revision of its business strategy.

In a recent announcement HP stated that it will dump responsibility for design, source and distribute digital cameras to an OEM partner, providing instead only HP branding on the devices manufactured by its partner. HP is seeking to accelerate its investment in the 'Print 2.0' initiative, designed to further its leadership position in home photo printing and online photo services, while accelerating the company's retail photo-finishing business. (Source: Hewlett Packard)

Key observers in the digital camera industry have been expecting this announcement. Tim Bajarin of Creative Strategies explained that, "Now you look at all the new cameras coming out and the aggressive pricing, I think it's too difficult for HP to continue on its own in something that's not core to its business." (Source: InternetNews.com)

By HP's own estimates 'Print 2.0' is a $300 billion opportunity which can potentially lead to the development of branching applications in the mass consumer market. This announcement however reverses the company's stated strategy announced in 2004 to revamp its digital camera lineup and invest $1 billion in research and development over 18 months to become a leading vendor. (Source: betanews)

This decision is in response to the infusion of lower-priced Chinese brands into the North American market, plus the growing market share of industry leaders such as Canon, Sony and Kodak. The company is not the first to make this decision; earlier this year General Electric began licensing its brand to an OEM, the General Imaging Company. (Source: dpreview)

The overall change in business model will result in HP taking a $30 million hit for the 4th fiscal quarter of this year. HP intends to continue sell its own digital cameras throughout the holiday season, with the expectation of concluding the transfer by July 2008. (Source: channelregister)