HP to cut WebOS, mobile business losses, hightail it to safer (enterprise) ground
HP hoped to slip in behind Apple, claiming the number two tablet market share position. Unable to "achieve its target," it has decided to get out of the mobile and PC markets, marking the end of an era.
Hewlett-Packard's $1.2 billion acquisition of Palm, motivated by the brand's highly acclaimed WebOS mobile platform, didn't pan out as planned, the PC maker announced yesterday, during an earnings call that was about as exciting as they come (MDP: HP Kills WebOS, will Sell Off PC Business).
The world's largest PC company announced it is getting out of the PC business. It plans to look at the options available to it, including lobbing off its Personal Systems Group (PSG) "through a spin-off or other transaction," it said in a statement separate from its earnings announcement, which included net revenue that was up just 1% from a year earlier.
The PC market has of course suffered in recent quarters, losing dollars and eyeballs to tablets and smartphones. So still more shocking was the news that HP planned to get out of these businesses as well. It's buying Automony — an enterprise infrastructure company — and plans to focus instead on cloud-based solutions for its enterprise customers.
Knee-deep in a super-competitive mobile space in which Apple can apparently do no wrong, HP essentially decided to admit defeat, cut its losses and hightail it to more revenue-assured territories.
Regarding admitting defeat in the mobile space, EndPoint Technology Analyst Roger Kay told Connected Planet, "No one ever does that. But, yes, the move indicates a rout."
HP CFO Catherine Lesjak, during the Aug. 18 call with media and analysts, described HP's April 2010 decision to go after what it described at the time as the "more than $100 billion connected mobile device market."
About a year ago, we made a bet on WebOS and the opportunity to launch our own ecosystem around devices, applications and new markets," At that time, we set clear metrics and milestones to monitor the success of WebOS. We launched the flagship product, the TouchPad, on July 1. And frankly, the software was met by strong reviews but the sell-through of the product was not what we expected. Our intention was to solidify WebOS as the clear number two platform for tablets. But with such a young ecosystem and poorly received hardware, we were unable to achieve our target.
HP's WebOS-based smartphones have put up similarly poor numbers in a highly competitive market (evidenced by the patent suits being traded in recent months). According to July data from Nielsen, WebOS accounted for just 2% of the market during the second quarter — the same share as the Nokia-abandoned Symbian — while Apple commanded 28% and Android climbed its way to 39%.
Shortly after the TouchPad's launch, which proved low on consumer fanfare, HP was forced to lower its price, which "added incremental near-term cost to [HP's] model," said Lesjak. The TouchPad showed HP to be as out-of-its-depth in the tablet space as it was in smartphones, making recent decisions seem arguably not unwise.
"HP just abdicated playing a role in the mobility revolution except from the air-conditioned comfort of the cloud data center,” Yankee Group Research Director Carl Howe said in a statement responding to the news. “This move makes Google’s acquisition of Motorola look prescient. We are witnessing the final collapse of the Silicon Valley PC era.”
As for webOS — a "respected platform" that developers consider "elegantly designed" HP CEO Leo Apotheker said during the call — HP said it is exploring options for best optimizing the platform's value.
"We will be looking at all of the options from our own devices to third-party devices to other hardware manufacturers to other manufacturers, to other people who need this kind of software, and we will be looking at all possible business models from licensing to any other possibility in order to evaluate how we can best extract value out of WebOS," Apotheker added.
"I'm thinking HP will try to license WebOS to other hardware makers, many of whom are seeking an alternative to Android in the fight against Apple," said Endpoint Technology's Kay. "Android isn't all that well supported by Google. It has version issues. It's rough in some places. WebOS is a lot smoother and better integrated."
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