HP to jump into smartphones. Why?

Hewlett Packard is jumping deeper into the crowded smartphone market, announcing plans for an iPaq smartphone that will be marketed toward consumers to be released first in Europe before the end of the year and later worldwide, according to a report in the Wall Street Journal.

In some respects, it's a natural extension for HP. Smartphones are increasingly becoming mobile, handheld versions of the PC, equipped with a variety of applications and access to the mobile Web. But, in other ways, the smartphone game is verrrrry different from the PC game - what with having to work with carriers on service plans and subsidies. HP - an established brand name in personal computers - will need to make a lot of noise to gain attention over Apple's iPhone, RIM's Blackberry and now Google's Android, as well as a number of others who are following the iPhone with touch-screen technology and music capabilities.

Granted, I haven't seen an iPaq phone yet. In fact, I haven't seen an iPaq since it was a PDA trying to compete with Palm in that space. But my initial reaction here is one of skepticism. Maybe it's because I still can't shake the images of dissident HP board member Walter B,. Hewlett, son of co-founder Walter R. Hewlett, battling with then-CEO Carly Fiorina over the acquisition of Compaq back in 2002. At the time, the biggest argument was that PCs were a low-margin commodity that strayed too far from HP's core business model. Contrary to Fiorina, Hewlett saw the company staying focused on what it did best - making printers and selling ink - and eventually moving into services and competing with IBM. (Fast forward to 2008.)

When CEO Mark Hurd gave a presentation earlier this year on the integration of EDS and the launch of services to compete with IBM (shadowed by news of 25,000 layoffs), it felt as if HP was at least back on track of going after a market where it had a chance of being a strong player. I know that this smartphone venture is a smaller-scale effort when compared to the services game.

What's more interesting is that HP is even bothering with this smartphone venture, seeing how the netbook market is starting to gain some speed and HP is listed as one of the initial OEMs putting Windows on their netbooks. The mobile Internet devices are starting to have an impact on notebook computers but it's only a matter of time before netbooks start going after smartphones.

Getting into the smartphone game could be a high-risk move for HP, especially since it will miss the holiday season and give all of the others a jumpstart on tapping into the fast-growth market. The number of U.S. smartphone users in the U.S. more than doubled from July 2007 to July 2008. Last year, there were less than 9 million smartphone users, according to comScore M:Metrics. This summer, there were just shy of 20 million smartphones in users' hands.