HP's Apotheker recounts TouchPad disaster in post mortem

HP's Apotheker recounts TouchPad disaster in post mortem

Summary: "The tablet effect is real and sales of the TouchPad are not meeting our expectations," says HP's CEO. The TouchPad was quickly becoming a money pit.

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HP CEO Leo Apotheker wasn't shy about outlining the company's challenges. He noted that the "tablet effect is real" and dinged HP's PC business. In addition, the TouchPad failure was about to become a money pit.

That reality led HP to move forward on plans to discontinue WebOS devices and plan a spin-off of the PC business. A spin off and evaluation of options for the PC unit will take 12 to 18 months.

On a conference call with analysts, Apotheker laid out HP's rationale for a radical transformation effort that included the end of the TouchPad, a $10 billion purchase of Autonomy and PC business spin off. He said:

Consumers are changing the use of their PC. The tablet effect is real and sales of the TouchPad are not meeting our expectations...The velocity of change in the personal device marketplace continues to increase as the competitive landscape is growing increasingly more complex especially around the personal computing arena. There's a clear secular movement in the consumer PC space. The impact of the economy has impacted consumer sales and the tablet effect is real and our TouchPads has not been gaining enough traction in the marketplace. For our PC business to remain the world's largest personal computing business it needs the flexibility and agility to make decisions best for its user direction.

As for WebOS, Apotheker said the effort was solid, but the traction just wasn't there. He added:

We were successful at launching software that was poised for a different user experience. We know that many developers feel the operating system is elegantly designed and is a respected platform. Therefore, we are exploring options for how best to optimize the value of WebOS software going forward. However, our WebOS devices has not gained enough traction in the marketplace with consumers and we see too long of ramp-up in the market share. Due to market dynamics significant competition and a rapidly changing environment and this week's new only reiterates the speed and nature of this change, continuing to execute our current device approach in this marketplace is no longer in the best interest of HP and HP shareholders.

CFO Cathy Lesjak indicated how bleak the TouchPad battle had become:

Our intention was to solidify WebOS as the clear No. 2 platform for tablets, but with such a young ecosystem and poorly received hardware we were unable to achieve our target. Additionally, it quickly became clear that pricing parity would not generate demand and we subsequently lowered TouchPad pricing by $100 which has added incremental near remember it costs to our model. Even with the price reduction in Q3 we needed to better align our unit forecast with the sell-through reality in quarter and we took a $0.05 charge to EPS in addition to the loss we were already expecting in the business. We would expect an even larger loss for WebOS in Q4 if we continue to operate the business in its current form. Essentially the TouchPad and our WebOS phones have not met our financial targets and other milestones that were set. To make this investment a financial success would require significant investments over the next one to two years creating risks without clear returns. Therefore, we have decided to shut down operations around WebOS devices and will be exploring strategic alternatives.

In the end, keeping up with the PC business and trying to compete with the TouchPad became a dangerous distraction as HP tried to retool it enterprise services business. HP is also under fire from Oracle for critical systems. In other words, HP couldn't allow a tablet foray to kill its cash cows. Apotheker said:

There are practical issues that we are facing. The challenge to our business critical systems business due to the Oracle is real and we are addressing that and we are confronting the challenge of the Japanese earthquake in our printing business and still face the yen headwind and fourth, we must create more strategic relationships with our customers that will come from the delivering value-added IP.

Topics: Hardware, Hewlett-Packard, Laptops, Mobile OS, Mobility, Operating Systems, Tablets

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  • Sounds like HP is scared of the consumer ...

    ... market, and is heading for the quieter business market.
    P. Douglas
    • RE: HP's Apotheker recounts TouchPad disaster in post mortem

      @P. Douglas The happenings of the business market don't get much coverage on blogs but it's a market that's going to be just as challenging (if not more) than the consumer market for HP.
      LP212
    • RE: HP's Apotheker recounts TouchPad disaster in post mortem

      @P. Douglas

      Quieter? Different. I don't recall that H-P has a real Cloud or virtualization strategy, and that's where business seems to be headed.
      PMC-CON
  • RE: HP's Apotheker recounts TouchPad disaster in post mortem

    Quoted in the article:<br>"Therefore, we have decided to shut down operations around WebOS devices and will be exploring strategic alternatives.<br><br>Such as selling Palm and WebOS for the IP value to the highest bidder?
    Rabid Howler Monkey
    • RE: HP's Apotheker recounts TouchPad disaster in post mortem

      @Rabid Howler Monkey
      +1
      Ram U
    • RE: HP's Apotheker recounts TouchPad disaster in post mortem

      @Rabid Howler Monkey
      Hope there is life after death for the system. I was burned on the Slate 500, but have been very pleased with the touchpad. I would like to be able to use it for a year or two, but who knows what may catch my fancy next. Sure won't be an HP product.
      jedwinkoontz
      • Alternatives

        @jedwinkoontz I hear there is some other slate computer out there; "the iPad" I think it's called? Not sure if it's as good as a touchpad or not. I hear this apple outfit is pretty lame though. They've barely sold 25 million of them. But unlike the touchpad, you won't get a free iPad when you buy a tv at best buy.
        jondrew
  • RE: HP's Apotheker recounts TouchPad disaster in post mortem

    Many companies are at crossroads, 2012 will be a defining year....
    owlnet
    • RE: HP's Apotheker recounts TouchPad disaster in post mortem

      @owlnet
      not for HP...their credibility is totally destroyed...may I suggest a new corporate name: Tiinkerbell Enterprises

      It does describe current HP management style....
      The_Grabber
  • RE: HP's Apotheker recounts TouchPad disaster in post mortem

    that means there will be no more updates to the OS and whoever bought into Touchpad are left to eat dust. Good thing, I am still in 30 day return period, and I am going to return mine shortly. So long Touchpad, it is nice knowing you.
    Ram U
    • RE: HP's Apotheker recounts TouchPad disaster in post mortem

      @Rama.NET
      Hope there is some kind of life after death for the system. I was burned on the Slate 500, but have been very pleased with the touchpad. I would like to be able to use it for a year or two, but who knows what may catch my fancy next. Sure won't be an HP product.
      jedwinkoontz
    • RE: HP's Apotheker recounts TouchPad disaster in post mortem

      @Rama.NET What I can't believe is that they just rolled out the Pre3 in Europe a few DAYS ago! Unbelievable!

      Imagine if Microsoft gave up after Windows 1.0....
      jgm@...
      • RE: HP's Apotheker recounts TouchPad disaster in post mortem

        @jgm@...
        That's why the Pre3 was rolled out with no announcement.
        The Pre3 should have been out over six months ago, long before they tried to sell any tablets.
        Synthmeister
      • RE: HP's Apotheker recounts TouchPad disaster in post mortem

        @Synthmeister:

        People were initially excited about WebOS on a tablet. It [i]should've[/i] been a great tablet, based on the OS. There were a lot of people who were convinced that the card metaphor and the fluidty of WebOS (as it existed on the phones) would be great for a tablet. Unfortunately, HP completely screwed up on the hardware. If they had produced a faster tablet that didn't feel cheap, they might not have sold boatloads of them, but they wouldn't have gotten panned in the press.
        bhartman36
  • I thought HP should have spun off the PC business years ago

    Call it "Compaq".

    I'm sorry to see that WebOS is being discontinued, though, as that signals the death of Palm (unless HP wants to revive PalmOS).
    John L. Ries
  • RE: HP's Apotheker recounts TouchPad disaster in post mortem

    A sad day for the only mobile OS that could provide an alternative to iOS. Hope they find somebody to take up the cause . . . Samsung is looking for an alternative to Google spyware.
    jorjitop
  • Maybe RIM will buy the HP computer business

    Like HP, they've shown a stunning inability to make sound management decisions, and this would seem right up their alley...
    NameRedacted
  • So long Best Buy!

    IBM's smartest move was to get out of the consumer business years ago, I've never understood why HP couldn't figure this out.

    While the tablet story represents a huge f*-up for HP, the fact that they are cutting their losses is probably sending shudders through the other tablet makers, who are asking themselves "Should we bail out now?" In my mind, the only possible competitor to Apple would be a tight tie-up between Google, Amazon, and Motorola. Technology, marketplace and hardware all have to be there to compete with the Apple juggernaut.
    terry flores
    • RE: HP's Apotheker recounts TouchPad disaster in post mortem

      @terry flores
      Except Amazon wants an Android tablet without Google.
      Synthmeister
  • Businesses version of Mad Cow Disease!

    Stock Market Madness! Let's see here HP is or until very recently the number one seller of PC's right? Making money right? They had a rough start to their Tablet venture granted but nothing that could not have been fixed or better still done better in the first place. What is the old saying when things get tough the tough get going. So why this sudden move? The fear of a market that won't be growing as fast as HP and or shareholders would like? Not that they'd stop actually making money mind you but that growth would be slower!?! Why not stick it out and try to gain MORE growth by taking on others like DELL and or Acer? Why not put on you're man pants and admit to failures in the tablet arena and buckle down for a real fight? Instead you bail in an attempt to find greener pastures? PLEASE this is madness.

    Pagan jim
    James Quinn