Saturday, November 24, 2012

Hewlett Packard versus Apple advertising budget

People did not get my last post. This is more obvious.

From the last HP form 10K:

Advertising  
HP expenses advertising costs as incurred or when the advertising is first run. Such costs totaled approximately $1.2 billion in fiscal 2011, $1.0 billion in fiscal 2010 and $0.7 billion in fiscal 2009.

From the last Apple form 10K.

Advertising Costs 
Advertising costs are expensed as incurred. Advertising expense was $1.0 billion, $933 million and $691 million for 2012, 2011 and 2010, respectively.
Observation

Hewlett Packard spends more on advertising than Apple.





John


21 comments:

Eapen Chacko said...

Ah, So. Much less oblique prose, John.

Anonymous said...

John, I get it. I've worked for and closely with HP for about 5 years now. They are really 3 companies all struggling for an identity. Apple=best consumer electronics brand today; HP= giant IT company that almost nobody can articulate exactly what they do, as indicated by the responses to your last post...

Tom said...

I read the comments. It seems to me, John, that most of the commenters understood the point you were trying to make, and were explaining why it did not explain the whole picture.

Comparing to Apple does not tell you why HP's ad spend is so high. Apple is a best-of-class company that can leverage its spend like nobody else. And Apple does not sell to enterprise. Apple does not sell printers (anymore). Apple does not pay for AT&T's ads touting the ability to talk-and-surf on your iPhone on their network -- and not on Verizon. Apple only has to target the consumer -- which it can do in a few select channels. Apple also gets free advertising in the form of media mentions.

Heck, it's not even restricted to advertising. Google spends more on R&D than Apple, even though Google makes 1/4 the net income. Microsoft spends *far* more on R&D than Apple, even though Microsoft makes half the net income. Are they overspending on R&D, because they're not getting as much bang-for-the-buck as Apple? No! Because they *need* that R&D to be making as much as they are. If they cut to Apple's levels, they would be in trouble.

Wilfried said...

Small wonder. Have you ever seen a long queue of people wanting to buy the latest HP product?

In my view Apple does not need to pay for a lot of advertising because the internet community does it for them for free.

Conscience of a Conservative said...

I just googled H.P. ad spending and came up with a huge Russel Brand ad campaign pushing their unsuccessful touch pad. Honestly don't remember the product or the commercials. They also reported at the time that HP was discounting the divice to promote it. Could they have expensed the discount to advertising?

Don Marti said...

What about co-op money from Microsoft and Intel? Are these numbers before or after the "Intel inside" and "HP recommends Windows 8" payments that HP receives?

Eapen Chacko said...

Tom has helped me understand my struggle with the original comment. Paraphrasing Tom, comparing to Apple does not tell you whether HP's spend is appropriate for HP's business.

Does HP do a lousy job of advertising and marketing? Yes---they an engineering culture which has had to submit to a stream of incompetent CEO's without vision or a focus on execution.

When Lou Gerstner came to IBM, their tech culture made fun about coming from a food company and having no tech roots. Their sales culture, however, very much understood what he was trying to do. He was also a CEO worthy of his company.

If HP could flush its board and financial leadership, it might have a chance.

WellRed said...

I am going to weigh in on John's side here. When I turn on the TV, I see a lot more commercials for Apple than for HP (do I even see any for HP?).

Sales to enterprise would end up in SG&A would it not? If so, then that explanation for HP's large expenditures is bunk. Then again, I suppose there could be an odd treatment by HP with this line item..

Colin Docherty said...

Apple exploits the PR game; they spend a very small amount compared to the newsfeed coverage they get. I'd love for someone to come up with Apple's true marketing dollar, taking into account the insane amount of free press they get upon every product release.

Unknown said...

Well yes, this makes perfect sense. HP has a MUCH broader range of products and customer bases. HP's fastest growing division is Enterprise Software, a market Apple isn't even in. Their largest profit is off of imaging and printing, another market Apple isn't in. What is even the point of comparing their advertising spends in the first place?? Are we going to compare advertising spend between Apple and Exxon Mobil next?

Unknown said...

Well yes, this makes perfect sense. HP has a MUCH broader range of products and customer bases. HP's fastest growing division is Enterprise Software, a market Apple isn't even in. Their largest profit is off of imaging and printing, another market Apple isn't in. What is even the point of comparing their advertising spends in the first place?? Are we going to compare advertising spend between Apple and Exxon Mobil next?

Shira said...

For Apple, every item is an advertisement. For a B2C with a brand that strong, ad spend needs to be representative of the brand - well designed and exclusive.

Anonymous said...

Biggest difference between AAPL and HPQ---

Apple designs everything in-house in Cupertino. HPQ uses a motley crew of in-house and Asian ODM providers.

Asian ODMs can do a lot of things really well---but design ain't one of them yet.

Anonymous said...


It's early days yet but amongst the tech heads Apple is now seen as the enemy much as Microsoft was viewed a few years ago.

When development engineers pointed out holes in the software to Jobs the arrogant response was that he expected the telecoms co's to take the blame.

Microsoft is the underdog ; their new phone is superior to Apple.

Over time expect the add spend to increase to counter the Microsoft attack.

Tom said...

it's co-advertising, probably (HP pitches in for ads run by their distributors and retailers) -- not really advertising, more like slotting fee

Tom said...

it's probably co-advertising (HP sharing in the cost of ads run by its distributors and retailers) -- not really advertising, more like a slotting fee

Anonymous said...

I'm not an accounting guy but I would suspect that John's last three posts should be taken together.

John said...

How about Samsung's?

Anonymous said...

Hey John,

Was just reading the NYT article about HP and Autonomy and noticed the following:

"At least one high-level Hewlett-Packard executive, Catherine A. Lesjak, the former acting chief executive and currently the chief financial officer, was implacably opposed to the deal and spoke out internally. According to an account in Fortune magazine, which H.P. hasn’t disputed, Ms. Lesjak made an impassioned presentation to the board and argued that the deal wasn’t in the best interests of shareholders. One person who spoke to her the day the deal was announced said she was afraid she’d be fired for being so outspoken."

Given your prior comments on who bears responsible for the deal, what do you think?

SB

punit unisense said...

Good to know this comparison of HP and apple.. how about Dell?

razor wire manufacturers

James Ho said...

John, you raised a Great question on the advertising fees.

Apart from all the explanations in the comments above, relating to product range differences so on so forth. It has left me to ponder two things :

1) HP's laptops are definitely not the benchmark best when compared to other brands such as Lenovo, Asus.

2) In many corporates, people like to be purchasing managers because they can get an extra "fee" for supporting their suppliers. I wonder if that has anything to do with the high advertising fees. Since a lot of corporates buy PCs/Lappies in bulks anyway.

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