Looking facts in the face
HP now seems to have concluded that the consumer device market - full stop - is a mug's game and wants no more of it. People spending their own money are irritatingly picky, and there's much easier money to be had from public companies and the public sector.
The tech giant's biggest failure of all in the consumer space in recent years has been the acquisition of smartphone outfit Palm a year and a quarter ago. The reasons behind the deal were sound - HP saw how much power and profit Apple was getting from owning its own platform, and thought it could not only emulate this, but better transfer these benefits into enterprise.
But then HP encountered the grim reality faced by anyone trying to compete with Apple in mobile devices: making competitive hardware is difficult, and attracting developers is even more so. It's the Catch 22 situation I spoke about in my earlier webOS analysis: no apps = no customers = no developers = no apps.
Just as at Nokia, a new CEO has been brought in to HP with the apparent aim of providing a complete rethink. Apotheker has had a few months to look things over and concluded HP needs to go all-in on B2B, and that means not only pulling out of mobile devices, but potentially PCs too.
Here are some transcripts of Apotheker on the corresponding conference call provided, as ever, by Seeking Alpha. A lot of what I've picked out doesn't directly address the webOS situation, but gives some insight into the broader strategic environment in which this decision was made. Furthermore I had yet to read this transcript when I wrote my earlier analysis. He started by detailing why a strategic overhaul is required.
First, secular trends impacting our PSG business as consumers are changing the use of the PC. The tablet effect is real and sales of the TouchPad are not meeting our expectations. We see the opportunity for PSG to compete and win in the PC marketplace, and our board has authorized us to explore strategic alternatives for PSG. We intend to evaluate a range of options that may include, among others, a separation of PSG from HP through a spinoff or other transaction.
The contemplated direction is an important component of our strategy to sharpen HP's focus on cloud, solutions and software, accessible to any type of device, while we continue to expand and leverage our strong technologies, including printing hardware, software and services.
Second, our Enterprise Service business needs to be reshaped as we have discussed the last 2 quarters. That effort is well underway, and today, we will announce a new dealer for that unit.
Third, there are technical issues that we are facing. The challenge to our Business Critical Systems business due to the Oracle Itanium issue is real, and we are addressing that. And we are confronting the challenge of the Japanese earthquake in our Printing business and still face, again, headwinds.
And fourth, we must create more strategic relationships with our customers that will come from delivering value-added IP. Our focus on building a successful software business has momentum, and we are going to accelerate that today with the acquisition of Autonomy.
Regarding webOS and the future of webOS, and I will not talk about the device business, I will talk about the software side of it. We are looking at all of our strategic options concerning the software. I'd like to repeat what Cathie had said early on, the software has been received very well. It's very elegantly designed.
Developers like it. Users like it, and 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.
If you look at the corporate other investments and the loss of $332 million there, you can attribute that pretty much to Palm.