Hp Merced

Case: Hewlett-Packards Merced Division

1. In Summer 1998, what is the position of the Enterprise Server Group (ESG) in its industry? How has it evolved? Why?

HP was not quite in a good position in summer 1998. As mentioned in the case, that the company had been put in the pressure for the past 7 quarters consecutively. HP had to come up with new product in order to sustain its position as an industry leader. Moreover, HP believed that their flagship product, UNIX-based Performance architecture (PA) based on proprietary HP RISC microprocessor had almost come to an end of its life cycle. HP was struggling and desperate to jump the technology S-Curves to develop the new product, code named Merced.

The ESG had been formed in 1997 in order to gain competitive advantages over others in the market. However, the challenges for ESG in summer 1998 were whether to continue to keep spending its resources to the current product or spending its resources to the new product, Merced. There was also another pressure from its main competitor, Sun Microsystems. Sun just launched a new campaign to convert second-tier UNIX based workstation to their proprietary operating system and ever since, its market share had been increased as well. With all these factors together, HP was in the edge and had to come up with a new strategy whether to fully committed in UNIX market or moving forward to another market.

2. Why did HP get involved in developing the IA-64 architecture? Analyze the strategy.

HP was having the concern about when and how to change from its proprietary PA to IA-64. HP was also worried about the technology S- curves at that time. Davis believed that RISC architecture was about to reach its limits of performance and the cost to produce the RISC was increased. The economies of scale to produce RISC chips were not good. HP thought that they were about to lose its competitive advantages to stay in UNIX market with RISC technology. With all these factors, it...