HP rewrites purchasing rules

A $US350 million program that swaps Hewlett-Packard hardware for a slice of its customer's action is poised to benefit a number of Australian companies.

They are likely to include several cash-strapped internet startups as well as large, established bricks and mortar customers.

HP's financing group general manager Craig White will fly back to the US next week with a list of candidate company names locked in his laptop following a six-day Australian visit.

Over the next few months, he expects to select three to five as the first Australian companies to take part in the program. A former investment banker, White masterminded the scheme which radically rewrites the rule book governing how computer system purchases are financed.

One element of the program allows internet startups to finance HP hardware purchases with venture debt. They pay only interest charges on the hardware until they can achieve an IPO and pay off their debt to HP with stock in their newly floated company.

Since launching the program earlier this year as part of its E-services web strategy, HP has committed $US150 million to it, more than half of which has gone to about 15 US-based companies. That included the web portal ViaLink which has since gone public with a share price rise that delivered HP a 300 per cent profit.

White's budget calls for an equal investment in similar companies for the financial year, starting this month.

In addition, it has earmarked $US200 million for established companies with proven revenue streams who want to get involved with e-business.

Instead of traditional off-balance sheet leasing, HP recovers the computer purchase price by sharing in the extra revenues generated by the internet initiative.

"We can get paid per transaction or we can base it on a percentage of the new revenues coming in," White said.

One Australian candidate for this side of HP's program is Telstra, which has been talking to White about some of the internet-based service businesses it is considering.

"What we are doing in these cases is looking to share in the risk and reward of a company that is transforming part of its business over to the internet."

HP's innovative approach has thrown down the gauntlet to competing manufacturers such as IBM and Sun Microsystems to follow suit. So far, however, neither has taken up the challenge.

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