August 18, 2011, 4:43 PM — HP announced that it’s ending the road for its TouchPad and WebOS/Palm phone product line. As interesting is that HP “will consider a broad range of options that may include, among others, a full or partial separation of PSG (Personal Systems Group) from HP through a spin-off or other transaction.”
Each of these are low-margin products, but HP is used to cranking out low-margin products. They’ve become addicted to the margins on printer ink and toner, but HP has an enormous world-wide distribution infrastructure and a strong reputation in the marketplace.
Ok, some of that reputation isn’t so fine. My own anecdotal experiences are that I have three dead HP notebooks sitting on the shelf behind me. But my servers are lovely, still hum along with glee, and are notoriously nice to work on when I’m in the NOC. So what gives?
The next few years are going to be difficult markets for personal systems makers. Notebooks, which lead desktop machines for a while, are cannibalized in the market by the success of alternate devices, both tablets and smartphones.
But wait! You say. What about the TouchPad and the entire line of Palm IP and products?? I believe they’ve been dashed against the rocks of Googlrola. Perhaps there was one bad Apple too many. Yet it’s unlike HP to just give up and walk on. HP doesn’t fight—it’s not litigious as others in the industry (Oracle, Microsoft, and the long list). HP likes to make money proudly based on engineering expertise, sometimes over-engineered expertise, but quality where quality counts.
The WebOS Linux variant will live on, but it remains to be seen how. HP has now bought UK software search/Business Intelligence software maker Autonomy, it will be to appeal to corporate and governmental clientele at an astounding high acquisition cost—US$10billion. That’s almost as much as Google aid for Motorola.
Were these seemingly drastic measures to insulate HP’s balance sheet from economic whimsies of the consumer marketplace? Were the reduced earnings reported by HP in conjunction with these decisions motivation to cut bait? Most people’s exposure to HP came through its visible PSG products. HP didn’t tie the Palm acquisition very well from a branding perspective, and was late to market during a very noisy CEO departure and recruiting effort.
Perhaps HP now changes its focus from battling Google to battling IBM and Oracle. Oracle’s hardware business isn’t doing too well, although IBM’s is rolling along. Perhaps HP sees a weakness in Oracle and drools when it looks at Oracle’s balance sheet, now chained with the Sun hardware difficulties and sees an “in” to gaining marketshare across the corporate strata.
HP is about to flex its muscle. Let’s see who ducks.
