Hewlett-Packard to focus on fewer, bigger research bets

The world's largest maker of personal computers and printers, Hewlett-Packard Co., is setting out to harvest more commercial products and services from the crop of ideas cultivated in its research laboratories.

As part of an overhaul announced Thursday, the Palo Alto, Calif.-based company said it is reassigning its worldwide research team of about 600 employees to focus on a total of 20 to 30 major projects, down from roughly 150 different ventures the labs typically have in the works.

"We are going to make fewer, bigger bets," Mark Hurd, HP's chief executive said. "This is a big deal for us."

The 23 HP labs in seven countries also will work more closely with universities, venture capitalists, government agencies and customers to identify promising projects and figure out quicker ways to make moneyfrom their inventions.

HP executives declined to answer a question about which research areas will be phased out.

Since HP hired him nearly three years ago, Hurd has been relentlessly cutting costs in an austerity drive that has helped boost the company's profits and stock price.

Diminishing returns on research

But the reorganization of HP's 42-year-old laboratory division won't reduce research and development funding, said Shane Robison, the company's chief strategy and technology officer.

HP has spent $3.6 billion US on research and development in each of the last two years.

As a percentage of its total revenue, though, the company's financial commitment to research and development has dwindled through most of this decade.

Last year's research-and-development spending represented 3.5 per cent of the company's $104 US billion in revenue. In 2002, research and development consumedsix per cent of HP's revenue.

Although they're backed by the world's largest technology company, HP's labs haven't been as productive as some rivals.

The 1,470 U.S. patents granted to HP last yearrepresented the 10th largest number granted to any single entity, according to an analysis by IFI Patent Intelligence. IBM Corp. ranked first for the 15th consecutive year with 3,148 U.S. patents in 2007.

IBM spent $6.2 billion US last year on research development and engineering, aboutsix per cent of its annual revenue. The Armonk, N.Y.-based company employs 3,200 researchers at eight labs in six countries.

Research to focus on digital content management

Robison said the HP labs shakeup shouldn't be interpreted as a sign of dissatisfaction with past performance. Breakthroughs at the labs include the pocket-sized scientific calculator and the ink-jet printers that have become one of the company's biggest profit centres.

"We are not interested in killing our research," Robison said. "We are interested in killing projects that won't succeed."

Under the new emphasis, the labs will focus on information and digital content management as well as developing more tools to help deliver products and services over high-speed internet connections a concept frequently called "cloud computing." HP also wants the labs to come up with more ideas for creating efficient computer networks that require less power to run.

HP's labs won't become totally commercial, said Prith Banerjee, who became the division's director eight months ago. He said one-third of the labs' resources will be earmarked for exploratory projects that may take years to pay off, if they ever do. Recently, less than 10 per cent of lab funding has gone for exploratory projects.

Besides Palo Alto, HP's labs are located in India, China, England, Israel, Russia and Japan. Most of the research is done in Palo Alto.