HP: Is a push into tablets, smartphones risky?

HP: Is a push into tablets, smartphones risky?

Summary: An analyst downgraded shares of HP based on a likely push into tablets and smartphones. However, HP has to push into the post-PC era regardless of the risks.

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Hewlett-Packard is taking on a risky strategy to "aggressively attack" the smartphone and tablet market and risks damaging its balance sheet, said Jefferies analyst Peter Misek.

The larger question is whether HP can afford to stay out of the mobile fray in the name of profit margins.

Oh no. Not again!

In a research note, Misek said "we believe HP will aggressively attack the smartphone and tablet markets, which we believe are risky investments."

He continued:

After failing with its acquisition of Palm and subsequent goodwill and inventory write-offs totaling $3.3B, recent comments from HP management point to a retargeting of tablets and smartphones. While the move makes sense strategically, we see it as a high risk move. On top of adding costs and working capital burdens to an already stressed balance sheet, there could be additional write-offs. We note that to date almost all PC OEMs have failed to gain significant traction in consumer tablets/smartphones.

Misek's point is well taken. HP's mobile plans will be risky. And no PC makers have made the mobile transition except for Lenovo, which is gaining traction in China.

But the reality is that HP is a PC company facing the post-PC era. It's clear that the PC and printer businesses will be challenged for some time. However, HP has to try. Is doing nothing on the mobile front really a choice?

The short answer is that HP thinks it has to go mobile. Meg Whitman told Fox Business that it has to offer a smartphone. Other signs point to HP making a mobile move.

It's clear HP is caught in a bit of a mobile vice, but the do-nothing option isn't much of one.

Topics: Mobility, Hewlett-Packard, Smartphones, Tablets

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36 comments
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  • HP really blew it with the Palm debacle

    Now they have to start over with no obvious solutions, strengths or assets. Becoming anything other than an also ran will be a huge and risky undertaking, but I agree, they probably do not have a choice.
    D.T.Long
    • nobody does

      And yet this is what people want...
      HypnoToad72
    • Are you sure?

      I'm not so sure, what about Android with the Enyo Framework on top? They have user facing applications (and they are quite spiffy) if you added the ability to run Android applications to the mix... See where I'm headed?

      This isn't a "VM" solution (well no more than any other Android handset) like RIM's Playbook, but "proper" Android with an added JavaScript Framework.

      That not an interesting proposition?

      Of course, they are also sat on the BeOS, this would require more work - but I could see a mobile platform built on that being mighty.
      jeremychappell
    • They had the chance but did blow it big time

      Half Palm's fault, half HP's but the real blunder is that they have been sitting on their thumbs ever since. Come on guys. An HP Envy gorilla glass tab should be on the market next month. It's not, and that's the problem. They are going to be the last to the party, and they shouldn't have been. Having said that they do have strengths and scale so get at it Meg. If you wait forever, you'll be writing your own obituary.
      Oknarf
      • Half Palm's fault?

        I fail to see how it was Palm's fault. Every true Palm device I ever used (Palm Pilot, Palm Pro, Palm III, Palm V, Palm Vx, Palm T2, Palm TX) was rock solid. It was only after they were acquired and changes made that their hardware designs became ill-thought out, shoddy, etc. The PalmPre as a POS. Mine was replaced 13 times in just over a year. There was no way to hold on to it without triggering something, you couldn't slide it open one-handed, and the keyboard couldn't be used by anyone larger than a Pixie.

        The WebOS table was nice, but it had its weaknesses in the hardware and design. I had one fail and brick, another is working fine. After the first major software update, that is. Sadly, the software just wasn't ready at release. Had they had the software version from September or so at release in June, we might be seeing a whole different market today.

        No, I don't see Palm having fault in the failure. The fault lies squarely on the shoulder of those who took it over and destroyed something quite exceptional.
        Tumbleweed_Biff
  • OS?

    I'd like to see a Windows 8 and an Android offering.
    MajorlyCool
  • OS

    And an Open WebOS offering too.
    adinas
    • WebOS could be a strong move

      HP still has one the best supply chain infrastuctures in the industry. They could easily be a serious contender to the mobile market.
      jamesaxton
      • WebOS

        WebOS would be a wonderful way to go, but HP's mismanagment of it to date makes such a venture a very steep uphill climb. They would have to demonstrate a substantial and long term support of the platform in order to attract developers at this point. It would be awesome if they did and if it succeeded.

        Regardless of how, it seems clear that HP must find a way to get a foothold in these markets and they cannot fail this time.
        Tumbleweed_Biff
        • So ......

          HP is in, then they're out, then they're in ...................... hard to keep track of what is next with them ....
          da philster
  • vice?

    "It's clear HP is caught in a bit of a mobile vice, but the do-nothing option isn't much of one."
    I guess you could call mobile phones a vice, but I believe you meant to say vise.
    If HP can make quality equipment and convince buyers to go for it they should have no problems. I still am using my HP computer from several years ago and we are using an HP Printer that is less than the computer in age, but still a few years old. I have an HP laser printer at my desk that is 18 years old and still works, it is not pushed hard though. The point is they know how to make quality products--have you ever seen HP test equipment? They were the industry standard, then they spun that portion off as Agilent. I know that they had problems a while back with their tablet offering, and when they bought Compaq, but those were more problems with purchased companies and melding their products into thier own lines, not quality of manufacturing.
    dhays
  • What reality are you living in?

    HP doesn't make PCs. HP makes SOLUTIONS. This is why HP's acquisitions so often fail. You can't just latch on. Palm was a fine company, but offered no advantage to HP. Palm worked no better, and sometimes worse, with the rest of HP's solutions than Android or Apple.

    PC makers in the smartphone market:
    Acer
    Asus
    and, hmmm, who I forgetting... oh, yeah. SAMSUNG!!!!!!!!!

    As for HP, they never tried. Buying a company doesn't count as trying. Hurd was an idiot. We should all be glad he's gone.
    tkejlboom
    • Solutions

      Yes, and that's how HP can make it a low-risk endeavor. So long as they don't invest tons of money in R&D (which means using off-the-shelf stuff like OMAPs and Tegras and Android and Win 8), or tons of money in consumer marketing, they can happily sell these things to their friends as part of much larger "solutions" that involve servers, storage, etc.

      Those are pretty much the only ones they're going to sell anyway, so setting expectations higher than that is a mistake.
      Robert Hahn
      • An Open WebOS

        An open WebOS, with a real community behind it would make that much easier.

        Small 'apps' don't always cut it. With WebOS, you have a real Linux system. The front shell runs something kinda sorta like Android does. Then, just have well documented hooks into the hardware, and there you go.

        Make the things on a heavily automated assembly line, instead of using Chinese slaves, and get the cost down lower than they can go. Then, sell one to everybody. It would be the book reader of choice. How many school kids are there in the US anyway? What about Europe? Or, India?

        I know that I would buy a $200.00 7 inch tablet with a 1024X760 screen, and switchable back light or reflected light source. Let me buy the SD card separately. It could ship with a very cheap 4GM internal, and then I just buy a plug in card for my user memory. Put /home on the SD, and it's all good. USB port for both charging and data transfer, wireless and Bluetooth and we're set. It's not a phone, and I would only need a face camera.

        Yes, that sounds like a winner.

        Looser is to try to put out a $600.00 weak machine that is undersold by their own laptops in price.
        YetAnotherBob
  • Palm, WebOS, and HP

    Meg has her work cutout for her, as she knows HP blew it. I went iPad/iPhone right after the WebOS debacle, and frankly, lower price and similar specs won't cut it. I don't want to root phones and tablets to get them to work well, I want to buy it, take it out of the box, and use it.
    Simplicity. It's the simplicity, stupid.
    dalspartan
  • There's A Difference Between "Risky" And "Foolish"

    "Risky" = going with a Linux-based platform like Android, WebOS, Tizen, MeeGo etc. But given the success others have enjoyed, this seems the best bet.
    "Foolish" = going with anything with "Windows" in its name.
    ldo17
    • Last Time I Looked

      The last time I looked at Smart Phone sales numbers, Android was accounting for around 60% of the total market.

      The WebOS tablets sold very quickly, once the price dropped to what the market was willing to pay. The tablets seem to have been very good for use too. The problems were that HP wanted too much money, and that they didn't give enough support. More community support from HP, and the tablets would have sold well. As it is, HP sold every tablet it made in less than two months.

      Market Failure is having a warehouse full of something and no one to buy it.

      What HP suffered wasn't market failure, it was management failure.
      YetAnotherBob
  • HP Needs

    HP need to come out with both Windows 8 devices and WebOS devices (with WebOS devices being cheaper since they own the OS)

    Anyways they will both add up to total sales volume, and WebOS is great for HP to offer lower cost option since they don't have to pay Microsoft for licenses on that device. Although an hi-end WebOS device would be nice, as HP need to get WebOS in the spotlight too.
    ShqTth
  • No-brainer

    The vast majority of HP shops would also be Windows shops. It makes sense to focus on a Win8 offering with seamless and secure hooks into existing infrastructure.
    If IT departments have access to a smartphone with device management and security built in, they will fall over themselves to offer it to their users.
    I'm a Google/Android man myself, but anyone who thinks the Windows mobile platform isn't going to be a massive player in large organisations is sorely mistaken. The hype over BYOD is far exceeding the reality.
    NickABryant
    • Re: The vast majority of HP shops would also be Windows shops.

      The trouble is, Windows is losing money. If HP were to stick to that, it would be out of business in a year.

      That’s why it needs to branch out. Mobile is the obvious growth business to be in. And the fastest-growing part of mobile is Android.
      ldo17