HP to raise ad spending

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Hewlett-packard co. expects a double-digit increase in advertising for the fiscal year that began Nov. 1, staying on course with its ad plan despite its fiscal fourth-quarter earnings disappointment.

Earnings of 41¢ a share for the quarter ended Oct. 31 came in a dime below analysts' estimates and marked the first major stumble in Chairman-CEO Carly Fiorina's HP comeback story.

The disappointing earnings won't deter the tech titan from continuing high-profile global brand efforts that began more than a year ago, according to Peter Van Naarden, director of advertising and brand management.

"This [lackluster earnings] is a short-term thing that we are correcting and it's only [fiscal] Q4 that's been impacted," Mr. Van Naarden said, adding, "We see our investments in the brand, clearly, as a long-term thing and they have the full support of our board of directors and CEO."

The earnings shortfall was attributed to tight margins, currency pressures and other issues rippling through the volatile tech space.

Some Wall Street analysts have said the honeymoon's over for Ms. Fiorina, who took the reins at HP in July 1999, though others said the situation is a temporary blip.


HP plans to continue evolving its "Invent" global brand positioning, created by Goodby, Silverstein & Partners, San Francisco, which also handles the company's consumer products advertising. HP's global media buying account was recently consolidated at Publicis Groupe's Optimedia, London and San Francisco.

While Mr. Van Naarden declined to specify the amount of the rise, he said it would be "more than a 10% increase." He said HP carefully examined spending across all marketing disciplines more than a year ago, taking a long-range view of its needs.

HP reported spending about $1.2 billion on global advertising in the year ended Oct. 1999. While the company hasn't disclosed spending for the year just ended, it has said increased spending on branding initiatives was a key reason for a rise in sales, general and administrative expenses, which jumped 13%.

Assuming ad spending in the most recent fiscal year was on par with the percentage of overhead spending in the past three years, global ad spending for the latest year would be about $1.35 billion. That figure might be considered conservative, however, given HP's growing emphasis on advertising; a 10% increase on that would boost spending to about $1.5 billion.


Last year, HP spent more than $200 million on global brand advertising, according to Advertising Age estimates, not including other ad and marketing expenditures. In fact, the company ranked No. 27 on Advertising Age's 1999 Leading National Advertisers Report, up from No. 55 the previous year. The gain gave HP the biggest increase of all the top 100 marketers on the list.

HP will launch a wave of brand advertising in February via Goodby. Meanwhile, a print campaign promoting HP's digital photography solutions broke recently targeting retirees, Asian- and African-Americans, women and gay and lesbian consumers.

Separately, a campaign targeting Hispanic consumers will make its debut in coming weeks.

Other recent ad efforts seek to extend HP's brand beyond printers include an estimated $25 million TV campaign showcasing HP's alliance with Amazon.com, and a brand spot celebrating the freedom to create personalized digital music recordings. Goodby did both.


Meanwhile, HP and Publicis continue managing the transition into a consolidated account. Mr. Van Naarden said HP has retained key Saatchi & Saatchi account people who have worked on its account for several years; Publicis acquired Saatchi this year.

Harry Corsham, formerly the European account director at Saatchi on HP, will relocate to San Francisco in January to become worldwide account director heading HP's global team at Publicis. HP is reaping savings in the double-digit millions from consolidating its media, according to Mr. Van Naarden, though he declined to specify a figure.

Copyright November 2000, Crain Communications Inc.

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