HP strategy reversal a refreshing dose of honesty

23 Aug

Last week certainly wasn’t wanting for bombshell tech news, what with Google’s acquisition of Motorola and HP announcing it was effectively exiting the consumer business in favour of concentrating on business customers.

HP chief Leo Apotheker said he was discontinuing the TouchPad tablet, launched just last month, as well as other products based on the webOS software, including the Pre line of phones. More to the point, he also said the company was looking to sell off its computer business and spend $10 billion on business software maker Autonomy.

HP stock took a drubbing, which is why things appeared to get muddier over the weekend. Not only did the company itself say that webOS isn’t necessarily dead, the TouchPad was also sold off at the fire sale price of $99. According to reports, the device sold out everywhere, which probably makes it the second-best selling tablet, next to the iPad.

Despite the hit to its share price, Apotheker’s decision is the sort of incredibly bold and honest move that is rarely seen in the world of technology – and it should be applauded.

As numerous observers have pointed out, HP’s decision on a new direction is a clear sign of surrender to Apple, not just in tablets and phones but in computers as well. Apple has been amassing mega-momentum in all of those categories, despite selling devices at a relative premium to similar offerings from HP. When customers are opting to spend twice as much to buy an Apple laptop than an HP, it’s time to massively shake up that business or get out of it entirely (by the way, I’m not sure if anybody has pointed out the obvious yet, but it sure seems like Microsoft Windows is at the core of HP’s problem in this area).

In that vein, deciding to get out of computers – like IBM did in 2004 – is probably a very smart idea. Computers and printers, the two things HP is known for, are commoditized with little promising growth left.

But HP is also deciding against getting involved in the fierce battle for the quickly growing markets of smartphones and tablets, and that too is smart. Despite what many may say, this too is a battle that has already been decided – and the victors are Apple and Google, the two companies that have cultivated an army of app developers. Anyone else who tries to play in this field is going to face an incredibly tough uphill battle because, as is obviously the case, apps are everything. As HP learned, if you can’t even get Twitter to create an app for your platform, nobody is going to buy it.

There is perhaps room for a distant number three competitor in smartphones and tablets, but that less-than-prestigious title is likely to go to Microsoft, which has never-ending mountains of cash that will allow it to literally buy its spot.

What Microsoft doesn’t have – yet – is the honesty to admit defeat in the face of insurmountable odds in phones and tablets. Same goes for BlackBerry maker Research In Motion. Both companies will keep trying but ultimately it won’t be a surprise at all if they end up taking the same route as HP and reorient their focus on business customers. HP at least had the good sense to save a lot of cash before giving up, something its shareholders should be thankful for.


Posted by on August 23, 2011 in apple, Google, HP


4 responses to “HP strategy reversal a refreshing dose of honesty

  1. Jean-François Mezei

    August 23, 2011 at 12:53 am

    Announcing an exit from consumer products is OK. But one must not forget that Leo Apotheker has yet to announce what his strategy will be for enterprise servers and HP’s proprietary oeprating systems (HP-UX, NSK, VMS) which run on proprietary IA64/Itanium CPUs.

    So HP needs to really outline what its strategy will be for the enterprise market, especially after Oracle threw a huge bomb across HP,s bow when it announced withdrawal of Oracle’s products from HP’s proprietary platforms.

    Right now, widthdrawing from the consumer markets leaves HP with very little.

  2. Marc Venot

    August 23, 2011 at 3:30 am

    Maybe you can draw a parallel between the price slash by HP of its tablet and the one by Nintendo of the 3DS? Both were judged by the professionals making review as promising but too expensive and lacking the proper programs.

    Apple has certainly the starting advantage (and a super boss) but many people are not pleased that those gizmos are jailed.

    Google has proposed to buy Motorola Mobility shares with a 60% bonus but I have still to read an article explaining that it can justify with margins an offer that seem generous.

    Actually the market seems fragmented between smartphones, tablets and game pads but how long will it takes that consumers or gouvernments to impose a more rational all in one?

  3. DeeMack

    August 23, 2011 at 10:35 am

    Why would Microsoft Windows be the core of HP’s problem?

  4. Parallax Abstraction

    August 25, 2011 at 8:50 am

    Peter, I’ve got a lot of journalistic respect but you but with all said due respect, this article is so much Apple gushing it’s ridiculous. Surrendering to Apple not only in phones and tablets but in PCs? Please. Macs barely have a double digit share of the market and the VAST majority of new computers sold are PCs. Anyone who knows anything about HP knows that they are normally a long-form company like Microsoft and that they never intended the first generation TouchPad to be a massive hit. The first gen is when you get your foot in the door with consumers and developers and over time, you refine it until it becomes a success. That’s what Microsoft is doing with Windows Phone 7. The reason for this move is because HP’s current CEO is formerly of SAP. He has no idea how to grow a hardware business and doesn’t want to bother trying. Hardware makes HP the huge majority of their money (and by the way is still very profitable for them) and as JF said, he announced a shift to services with no plan and just said “We’re dumping hardware and we bought this huge British software firm you’ve never heard of. Stay tuned.” That’s why their stock got punched in the stomach. This move could be huge for HP or it could kill them but it reeks of a new CEO trying to appear innovative by going in a huge new direction just because he can.

    IBM got out of the hardware business in 2004 because they were unable to adapt to the rapid fall in prices that began around then. Lenovo took over and though it took a while, now makes money. HP actually weathered that very well and except for a brief period when Dell overtook them, was never dethroned as the world’s biggest PC maker. They have a massive enterprise business (both in workstations and especially servers) where there is still very healthy margins to be made. The CEO says hardware isn’t a huge growth opportunity but why does every segment have to grow? If it’s still making them billions of dollars a year, why dump it simply because it’s not growing as fast? You don’t get rid of successful operations, you get rid of failing ones and this is not failing. not by a long shot. And keep in mind, I hate consumer HP PCs. They’re poorly built and horribly supported and when I worked for Geek Squad for 2 years, I had to install hundreds of them. I’ve also installed a number of MacBooks for clients, most of which started having failures long before their cheaper PCs did. Funny that.

    It’s getting very tiresome to see the Apple reality distortion field that has taken over the tech press. Everything has to be compared to them and that if any other company doesn’t report massive growth or makes a change to their business, it’s a sign of failure or surrender. HP has no reason to surrender PCs to Apple and looking at it objectively, that’s not what they’re doing. Apple’s meteoric growth over the last couple of years is amazing but that’s primarily because the iPhone and iPad are fashion trends right now, something rarely seen in technology. They will always be hugely successful platforms that will play a big part in the landscape but the current rate of growth is unsustainable and it’s going to level off soon. I sincerely hope when it does, some normalcy will return to the tech press and it won’t continue to be all about Apple and how no one else is apparently as good as they are.

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