AS the fallout from HP's abrupt change of direction continues, I am left wondering what the real impact of HP's moves will be on the high-tech community.
For those of you who do not eat, drink, and sleep hightech, last week HP shocked the tech sector with a series of announcements, including their intention to get out of the PC business. This in and of itself is not as earth-shaking as the announcement that followed: HP is stepping away from their new tablet and WebOS, its operating system.
The decision to spin off their PC division (PSG) is somewhat understandable. PC margins have fallen to minuscule levels and HP finds itself in a constant race downward on price. They are not Apple with their own OS on the PC (although WebOS may have changed that). Even though HP was the top-selling computer manufacturer in the U.S., they had to sell somewhere around six PCs to make as much money as Apple makes selling a single computer. That, by any calculation, is one heck of a disadvantage.
Disengaging from a profitable-but-thin-margin business has been done before in this industry. IBM made a very successful transition from consumer player to service provider when they spun off their computer division (now Lenovo). What is different in this case is the fact that HP seemed poised to launch into a new phase of consumer business. The acquisition of WebOS from Palm meant that HP had an OS they could call their own - one that could transition very nicely to all computer platforms, and allow them to mirror Apple in that regard. The launch of the HP tablet was the first major stride in that direction, and we were anticipating a whole range of WebOS devices from HP, including phones and computers. That expectation will not be met now.
HP has a vision for the future. New CEO Leo Apotheker comes from the service sector and it certainly appears they are headed in that direction.
The rest of us need not share that vision. I have long been a fan and business partner of HP. While I think I understand the business case behind the PC division shift (I am far less understanding of the WebOS move), what concerns me most about this is the way HP has treated their
customers. Just weeks after asking loyal customers to shell out $500 on a new vision for tablet computing, they fire-sale the systems for one-fifth the price and abandon the field. If I was one of the 100,000 early adopters, or one of the companies spending R&D time and money developing apps for the platform, I am not sure I would ever forgive or trust HP again.
If Apotheker leads HP completely out of the consumer space, this may not be an issue, but we must not forget that HP is the industry leader in another tech sector: imaging. They lead the whole world in printers, scanners and multi-function devices. I certainly don't expect any changes in that space soon, but who knows what the future holds? I would never have predicted the changes a single week has wrought.
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Steve Dotto hosts Dotto Tech, Wednesdays 6 p.m. on AM 650.
