Is the spying debacle actually good for HP?

October 2, 2006, 9:49 AM UTC


All of the intrigue surrounding Hewlett-Packard is titillating

stuff, sure, but investors mostly worry about three things: the effect

on HP’s focus, sales and stock price.

It’s a particularly important question now that it’s October, the

official start to the big fourth-quarter consumer buying season, with HP placing bets on a new line of laptops and desktops with built-in next-generation HD-DVD technology.

We might not know the spying scandal’s impact on HP’s focus for several more

quarters; it often takes that long to see whether executives took

their eyes off the ball at a crucial moment, allowing a competitor to

gain tactical advantage. But we do know that focus is an often

underestimated asset; it’s what allowed Apple Computer to innovate

through the tech downturn and emerge triumphant with the iPod, and

what allowed HP itself to invent and survive a diet and exercise

regimen that has given it a new air of vitality.

But what we will see a lot sooner – indeed, we’ll pick up hints of

it when retail sales reports start trickling in next month – is any impact on sales. If the scandal has sullied HP’s reputation with consumers, that could hurt badly; the company still pulls in a huge proportion of its profits from sales of printer ink, for example, and the holiday season is prime time for that and every other consumer category.

But what if the scandal doesn’t hurt HP at all? What if it actually helps?

I know, it’s crazy talk. But unlike the hot-battery fiascos that Dell and Apple recently weathered, this HP business might not give consumers that not-so-safe feeling. Consumers might actually hesitate to buy a laptop from Dell or Apple, remembering the battery recalls of a few months ago. But will they hesitate to buy HP gear because the company snooped on board members, employees and journalists (and their families) in the process of hunting a leaker? Heck, I’m gonna say probably not.

Those of us who are semi-geeky followers of tech news might be taken aback by the notion, but really, the American public lately has shown an amazing willingness to give investigating powers the benefit of the doubt. It’s unclear whether the public will extend HP the same goodwill it gives the Bush administration. But I wouldn’t be surprised.


How could the scandal help HP? It’s possible that the public will see the company as an aggressive and innovative company that has secrets others want to view. They might view the company as one that got just a little too carried away with its efforts to keep a lid on things. And folks might view the steady statesman Mark Hurd, who’s able to pacify irate lawmakers, as just the guy they’d trust to treat them right.

Who hasn’t had a tech problem and had to call a company to make things right? The image of HP CEO Hurd showing up on Capitol Hill to personally take responsibility and set things in order might be just the reassurance that holiday shoppers are looking for. And if that happens, that could even mean good things for HP stock.

That’s not a prediction, by any means. But it’s a possibility worth considering.