Palm, HP, WebOS and Promises Broken

20 August, 2011 04:12PM · 5 minute read

There are no industries that move as fast as consumer technology. The reason is simple: people want the latest, thinnest, lightest, fastest tech toy they can get their hands on. This leads to companies like Samsung, Motorola, Apple, HP, Dell, and the list goes on, that are battling to innovate to make the next best thing in the consumer market. In an effort to get involved in the tablet and smartphone consumer market HP decided to make a big investment and try to join the other companies already succeeding in those markets.

On the 28th of April last year, HP announced that it was purchasing Palm and the rights to use all of their work on WebOS. In their press release they stated the: “…webOS platform will enhance HP’s ability to participate more aggressively in the fast-growing, highly profitable smartphone and connected mobile device markets…”  It wasn’t until mid May 2011 that HP delivered their first WebOS product to the market: the pint-sized Veer, followed by their much anticipated TouchPad in early July 2011.

Sales of both devices weren’t stellar, but entering a highly competitive market with a premium priced product is never easy. The reviews were mostly positive however the OS had a feel of being unfinished and whilst a software update that followed in August solved a great number of performance issues with the TouchPad, the product didn’t seem to be gaining momentum. The final product in the line: the Pre 3 was released in the UK on the 17th of August, 2011. Suddenly, a bombshell.

Yesterday on the 18th of August 2011, HP announced that it was discontinuing their WebOS products in the market: The TouchPad, Veer and Pre 3. More details followed on a conference call/webcast later in the day. A transcript [pdf] of the conference call outlined their reasons more specifically. They indicated that: “…the tablet effect is real and our TouchPad has not been gaining enough traction in the marketplace…” and “…we see too long a ramp-up in the market share.” The most important context for their decision rests around this: “…the Board of Directors has authorized our Management team to explore strategic alternatives for PSG [the Products and Services Group]. We intend to evaluate…options that may include…a separation of PSG from HP to a spinoff or other transaction.”

There are two things I draw from this situation. First, HP executives wanted, expected, believed that WebOS and its devices would sell just like the Apple iPhone and iPad. If they didn’t perhaps believe they could sell those sorts of numbers, they certainly expected better than they saw. The cautionary tale is that original iPhone took 2-12 months to reach 1 million sales. That was without a GPS, without third party Apps, exclusive to one carrier in the USA. Apple didn’t start selling the iPhone 4 (at 1-12 million units on its first day) they built up to it.

HP should have had more realistic expectations about their new product. HP only just released these devices and it takes more than a few weeks months or a day to gain traction and ramp-up market share. Translation: HP aren’t interested in being in the smartphone business or tablet business as it currently stands. WebOS was their best chance and big investment to get them off the ground. They didn’t provide enough of a compelling reason for their product to be preferred over their competition, but that takes time when you’re entering a market dominated by one or more big devices and players. Perhaps the headstart that Apple has with its eco-system of iTunes and its App Store momentum was too great a pill for HP to swallow. To be a big competitor to the iPad for example, HP needed to deliver an eco-system and applications by the truckload. It was still early days and totally achievable if HP would put more money where its mouth was (at that time) but clearly they decided they’d spent enough on WebOS devices.

The second thing I draw from this is a large element that has nothing at all to do with WebOS or its apparent initial lack of stellar success. Splitting off the PSG from the rest of HP is a major undertaking and this affects much larger business units than HP/Palm/WebOS. In this way I have no doubt that WebOS has just become a victim of the traditional corporate restructure. Sometimes these restructures have a positive effect on the business as a whole and can focus the company (or companies) on their core businesses with less top-level management interference. Other times it can be the beginning of the end. Which of these it is only time will tell and I’m not going to hazard a guess as to which scenario will befall HP. I would say though that traditionalists within big companies that see acquisitions as deviations from the core business will often take the restructure and use it as a way to rid themselves of a division they don’t believe should be there. The more things change, the more they stay the same.

For us the consumers or the tech junkie onlookers we collectively shake our heads today, wondering why a set of products that were credible contenders to compete with the iPad and iPhone with genuinely new ideas and implementations, have just had their lives cut short by executives that still think their Blackberries are the pinnacle of tech.

It’s a terrible shame. A terrible, terrible shame.