How HP's Palm buy could crush Apple

How HP's Palm buy could crush Apple

Summary: HP may just have become the first credible contender to Apple's dominance in the smartphone game.


Last week, in Palm, a Silicon Valley soap opera, I opined that HP had overspent to the tune of $1,195,000,000 when it bought Palm for $1.2 billion. After reading two fascinating articles and thinking about the deal all weekend, I'm thinking instead that HP may have made a very smart move.

First, let me credit the two writers. The first is our own Jason Perlow, who wrote HP's Slate was an Ugly Baby with Windows 7 and basically claimed that the Slate would never have been a contender running just Windows 7.

The second article was by the wise and very French Jean-Louis Gassée who wrote Very Personal Computing. In it, Jean-Louis contends that the financial gravity of the computing world has shifted to smartphones.

He claims:

The smartphone isn’t just a new genre, it's nothing less than a reboot of personal computing.

I knew Jean-Louis back in the 1980s, when he was the head of the "Paris" project at Apple, the creation of the Mac II -- the first very beige, very boxy, color Macintosh. During Steve Jobs' wilderness years, Jean-Louis provided much of the vision for Apple engineering and in my opinion held Apple together spiritually until Jobs returned.

Next: Lessons from Jean-Louis »

Besides traditional Apple fare, Jean-Louis was heavily involved in the Newton project. Say what you will about the Newton, it broke new ground for handheld computers and got us thinking about what they should (and shouldn't) be. Jean-Louis then went on and founded Be, Inc -- originally a hardware company and then the vendor of a multimedia operating system that was probably 20 years or more ahead of its time.

From starting his career at HP to heading up Apple engineering, to creating the BeOS, which eventually was acquired by Palm to becoming chairman of PalmSource, Inc -- when Gassée talks about the future of smartphones, he knows of what he speaks.

Both Perlow and Gassée describe how Windows wasn't really appropriate for this new class of device -- and how a new operating system answer is needed. When you put Jason's premise that the HP Slate was ugly compared to the iPad up against Jean-Louis's contention that the lion's share of future growth potential lies with smartphones, I began to see the Palm acquisition in new light.

First, there's a historical, cultural, and social fit. Many of Palm's execs came from HP and one of Palm's former CEO's is now an HP senior executive. HP recently bought 3Com, which used to own Palm. And HP itself was one of the earliest producers of handheld technology -- anyone remember HP's completely indestructible and wildly expensive calculators of the late 70s and early 80s?

Next: What makes HP's choice so smart »

HP is a huge organization, with revenues near $115 billion. It's also one of the largest PC vendors on the planet. The problem, as Jean-Louis so eloquently describes it, is that PC's are mature, nearing the very end of their growth opportunities. Smartphones, on the other hand, are going nowhere but up.

PC vendors are becoming major players in the smartphone world, with Exhibit A being Apple. Dell has introduced its round of smartphones, Microsoft has had many incarnations with the latest being the Kin, and, of course, Google has launched a vibrant Android marketplace.

HP could play business as usual and come out with its own smartphones and tablet offerings, licensing the OS as it's done in the past. But that doesn't put it in the driver's seat. HP will always be competing with their OS provider, whether it's Microsoft or Google. HP would provide high-quality, but relatively unexciting -- and undifferentiable -- offerings from everyone else out there.

For a $115 billion company, that's not the way you want to ride the growth curve.

Instead, by buying Palm, HP gets webOS -- a smartphone-centric operating system that, by all reports, is excellent. There was no problem with the webOS -- it's major failing was that it belonged to Palm.

But by acquiring webOS, HP is able to get back into the game -- and compete with a fully-differentiated offering that it completely controls.

If, as Jean-Louis contends, the smartphone is a reboot of personal computing, HP just bought itself a central position. And rather than being forced to rely on partnerships with aggressive predators, HP gains control of its own destiny.

In my Palm article, I made the contention that HP could have waited a few weeks for Palm to implode and picked up the engineers for a song. But if you follow what I've outlined here, had HP waited, someone else might have picked up Palm.

Buying webOS essentially frees HP from partnership jail. To HP, it's less than 1% of the company's yearly income. To HP, buying Palm is about the same level of expense as if you or I bought an iPad.

It'll be interesting to see where all this goes. Personally, I wanted a Windows 7-based Slate. Although HP doesn't have a showman of Jobs' caliber, HP may just have become the first credible contender to Apple's dominance in the smartphone game.

I'm telling you. It pays to listen to Jason and Jean-Louis.

Topics: Apple, Hardware, Hewlett-Packard, Mobility, Smartphones


David Gewirtz, Distinguished Lecturer at CBS Interactive, is an author, U.S. policy advisor, and computer scientist. He is featured in the History Channel special The President's Book of Secrets and is a member of the National Press Club.

Kick off your day with ZDNet's daily email newsletter. It's the freshest tech news and opinion, served hot. Get it.


Log in or register to join the discussion
  • "Crush Apple"? Sorry, but only in your **dreams**

    With iPad, Apple has perfect form-factor, perfect battery life, perfect UI, perfectly fit for UI applications.

    Any differentiations from that lead to less usable variants, which can not beat Apple's level of sales at all (Apple contracted manufacturers to produce 13 million IPS displays for iPad, so you can guess the volume).

    And even if someone will match Apple's key features I listed (which is not seen soon at all), then public still already has perfectly fit iPad devices and there is no any significant reason why would they want to choose non-iPad.

    (No, having USB port or videocamera will have no real value to customers, comparing to key features I listed above.)

    As to "smartphone games", Apple does not dominate smartphone market yet at all; it only dominates "new smartphones" category, which it created three years ago.

    However, the fact it is HP who bought Palm makes no difference since companies of all calibres tried to attack Apple's dominance in their "new smartphone" market, and they can not compete yet.

    For example, Android devices (with OS which is at least no worse than WebOS) with all of the money could not shatter Apple even a tinniest bit.
    • Reason why NOT to buy IPAD

      It belongs to Apple and its overpriced
      • $499 overpriced? There is nothing to compare with.

        The subject.
        • Admittedly, the iPad is 'sexier' than ...

          ... anything anyone else has to offer but for $499, I can buy a nice laptop that will do much more than what the iPad will do.

          The iPad is little more than an over-sized iPod Touch.
          M Wagner
      • Urablas heading should read:

        Reason why I will NOT buy an IPAD.

        It is personal Uralbas. No one is making you buy it.
      • HP Slate was going to be more expensive

        Until Slate was put on hold the price was higher and the features more limited
      • Your Loss

        We are having tons of fun with ours, sorry that you can't be part of this. So go back to your PeeCee and play some of you're boring games.

        Long live the iPad
    • You're the Dreamer friend

      "there is no any significant reason why would they want to choose non-iPad."

      1st off, ((WRONG))
      There are literally millions of people that wont buy in ipad simply because it servers no purpose. Its strictly a luxury item/status symbol and if you think otherwise you're the one dreaming. 2nd, There are millions more who wont buy an ipad because once you do you're locked into apples closed off proprietary system and that's a deal breaker for more people than you think. Software may be good, buy absolutely NOT the best.

      And you're smart phone rant is off the mark. apple has already peaked in this area. At this point apple will never "dominate" the smart phone market. Yes apple leads in this area but everyday they lose more customers because the iphone hardware/software has become dated. People want something more than what apple can provide. Thats where Android comes in (and HP/Palm if they can get it together). You can sing the praises of apple all you want but im willing to bet you haven't even tried Android for more than 2 min. SO your comments about other OS's are uninformed and ridiculous.
      • I'm The Dreamer and Apple's Target Market

        I am the dreamer friend. I don't care about the
        latest apps, usb ports or camera's. I want to be
        able to turn the thing on and given the BEST MEDIA
        experience EVER. No thinking necessary. This is
        the beauty of Apple. I have had enough of my PC,
        my $400.00 HTC TOUCHPRO 2 with the world worst
        windows or whatever operating system. Have had the
        thing for 8 months and I have grown to hate it
        more and more every day. I am ready for my IPAD.
        • I'm The Dreamer and Apple's Target Market

          "No thinking necessary"
          you got that right, Apple is the Pop-up books of the tech world lol..

          Listen im not trying to change your opinion about apple, its obvious that *most* apple fanboys/girls are going to stay just that but don't perpetuate apples ridiculous behavior. There is other innovative tech that's just as good if not better. FACT
      • You're uninfo-d: iPhone has the highest growth rate: no loss of customers

        -- it is actually opposite.

        So my take was correct and you were dreaming, sorry.
        • You're uninfo-d: iPhone has the heighest growth rate: no lose of customers

          not for long, do some research lol..

    • Too much "personal opinion" going on....

      iPad isn't perfect. (And Apple knows this, that's why they continue to work on new and improved versions.) Someday, all of these "smartphones" will replace HD videocameras-- completely, except for professional films. That's not "of no value to customers", it's just of no value to you.

      The competition isn't done until all of the OTHER competitors quit and drop out of the business completely. And there's no signs that HTC, Nokia, Motorola, and everybody is about to do that. You make a mess of excellent points by extrapolating into total nonsense.
      - - - - -

      Pablo, you need to give it rest, too. You and a bunch of other people feel that iPhone is overpriced- fine. for you. There are MILLIONS of people who have happily paid Apples' price, creating vast profits at Apple-- because they really, really like 'em.

      There's more iPhones than WinMo phones, and the growth rate is higher too. (Yeah, I just did the "research, LOL". So just stop screaming, please.)
      Rick S._z
    • sorry but perfect battery life is batteries that last forever and don't ...

      @denisrs need to charged ever.
  • RE: How HP's Palm buy could crush Apple

    Refreshing to see a tech writer who actually thinks and
    re-thinks his position. You make salient points on all
    sides. Well done! Ball is in HP's court now. The only
    thing that concerns me is that they may be so distracted
    with their quest to put webOS on a
    tablet/printer/refrigerator/toaster that they lose the
    much-needed focus required to compete in the SMARTPHONE
    market. If smartphones is where they wanna go, then they
    need to go ALL-IN.
  • Dynamic duo?

    Let's see here... Palm was doing great, really ripping them
    up, right? And HP has long been an innovator in UI and user
    experience, right? Right? Sounds like a perfect combination.
    For something.
    • But don't stop there....

      Palm's hardware was not that great. And HP is
      not known for great designs in hardware.
      Actually one of the reasons I stay away from HP
      is there hardware. Great match!
  • What means crush to you?

    I mean, macbook and macbook pros do crush HP laptops, obviously Ipad crushed Slate before birth and also crushes any HP netbook and Imacs are way ahead HPs all in one machines.
    The only area where hp shines are printers, so assuming that only because of the adquisition of Palm the recipe for a successfull smartphone and tablet OS is done sounds too optimistic, not only beacuse are hundred or thousands of other factors but also because time is running and HP/Palm is at least 6 mothns behind Apple and Google at least. And once they catch up and pass Apple then maybe will be able to 'crush' them. Really unlikely in my opinion.
    • Re:

      "I mean, macbook and macbook pros do crush HP
      Maybe that's your opinion, but not a fact. Did
      you know that HP Elitebooks meets military
      specification for a rugged notebook?

      Does Apple have it? No. BTW, why Apple still
      making you pay more for a 3YR warranty when the
      in the Elitebooks are standard?

      Or maybe you are refering sales, where Apple
      crushes HP. But it looks like HP have a big
      advantage over Apple too,

      Apple make great hardware, but can't match
      neither HP or Lenovo in notebook quality...
  • A Big Ask.

    Good luck to HP and Palm in their endeavors but they have
    a long way to go. I don't see them having a product for at
    least 3 months and then, once they have one, where are
    the apps, where are the movies / music / books?

    Apple have spent a long time lining these ducks up and no
    one saw it coming. It isn't just that the hardware is great. It
    isn't just that the software is fast. It isn't just that the
    battery life is so good. It is a continuation of all the things
    that Apple have put in place since 1997. So a bit of a way
    to go then.