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8/19/2011
09:15 AM
Fritz Nelson
Fritz Nelson
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Wild Day Leaves HP With Much To Prove

A low margin PC business combined with a stilted mobile effort was a distraction for a company with much bigger battles to win. But it's a shame HP didn't realize this long ago.

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Earlier this week I asked if this was really the post PC era. It isn't. It's the right device for the right purpose era. Mobile, tablet, netbook, Chromebook, thin client, PC. We have more computing purposes, so we have more machines with which to carry them out. Mobile and tablet companies seem hell bent on disheveling our three-year upgrade habits by doubling, and then quadrupling the number of processors each year, or updating the operating systems every two months. Thus, we want our PCs to last. We buy less of them.

HP announced on Thursday that it had failed to adequately predict and plan for this shift, although it tried mightily, pouring money into a new version of the mobile OS and device company it bought nearly a year ago to the tune of $1.2 billion, and who knows how much further investment. Hours after the announcement that it was killing off WebOS devices, and looking to somehow liquidate the operation system asset, I saw yet another television commercial for the TouchPad. I almost wept.

WebOS was innovative, and it was that much better in version 3 on a tablet, although its performance was still being optimized. I advised potential customers to hold off until that work was done; HP couldn't wait that long.

Throughout the day Thursday, as rumors began swirling that HP was exiting the personal computing business (including PCs and mobile), the disappointment and shock crept in. HP had only given the TouchPad a month! The expectation the company built behind it earlier in the year was still ringing in my ears: WebOS everywhere, on millions of devices, from tablets to phones to printers to PCs, all working in concert like an ecosystem should. But it was just another chapter in Palm's long history of great promise, and epic disappointment.

Nobody--from US Robotics to 3Com to Palm to Handspring to Palm to HP--ever seemed to get that execution trumps innovation.

As little as a month ago, HP made some organizational shifts to combine PCs, tablets, and WebOS. Back in May, HP executives were exuberant about the TouchPad's chances, saying it wouldn't just be number one, but "number one plus."

HP shouldn't have acquired Palm to begin with. Earlier this year, after HP's analyst day where the company proclaimed WebOS its next big star, InformationWeek's Art Wittmann said:

"If HP wants WebOS to be big, it had better be ready to spend to make it big. My bet is that'll never happen. While HP has a nice piece of the consumer market and a nicer piece of the enterprise market, the former will show less loyalty than the latter. If HP's end user devices seem expensive, proprietary, or lacking features, consumers will be just as happy to buy from a competitor."

When I sat down with HP CEO Leo Apotheker in March, I asked him why it was so important for HP to have its own mobile OS--and to be fair, the Palm acquisition happened before he arrived. Apotheker's response at the time: "Why wouldn't you want to bring the excellent to market … we have a great market opportunity. The tablet business is in its infancy. This is not the end game, this is the beginning of the game." Based on that statement, I'd say HP gave up too soon.

But this is the right thing for HP. A low margin PC business combined with a stilted mobile effort was a distraction for a company with much bigger battles to win, although it's a shame the company didn't realize this long ago (AllThingsD writer John Paczkowski tweeted: "If HP does spin off its PC biz, it should call it Compaq"). Until it sells or spins out the PC business, it will remain a distraction.

In HP's earnings call on Thursday, Apotheker called out the company's commitment to Itanium, to beating Oracle in court, to revamping its services organization, to winning in networking and storage, to continuing its hard push into information security management. And, by announcing its acquisition of Autonomy, an enterprise content management and search company, HP emphasized again its seriousness in evolving its enterprise application business.

Apotheker reminded listeners, as he has done before, that he knows a thing or two about software, having headed up one of the world's largest software companies, SAP. Acquisitions like Vertica earlier this year, and now Autonomy, do show a commitment to software. You've got to start somewhere. While HP's CFO Cathy Lsjak indicated that it would take the company a while to digest Autonomy and re-load its coffers, HP will have to make even more strategic acquisitions like this. It would be nice if it just got it all over with and bought SAP once and for all.

InformationWeek's Doug Henschen, who follows the enterprise software, database, and information management space, indicated that the Autonomy acquisition is a strong one, which will help fill in gaps for HP and bolster Autonomy, but HP still has a long way to go before it can contend in the era of big data. About Autonomy, Henschen says:

"Autonomy's strong search, document management, and Web content management assets, in particular, would fill gaps in HP's software portfolio. But there are also many assets in the Autonomy portfolio that would exacerbate overlaps in the area of archiving, e-discovery, and records management. So making sense of Autonomy's broad-ranging portfolio--and wringing more value from it--will be no small task."

Back in March, after Apotheker and other executives painted HP's vision, Henschen outlined some of HP's gaps and strengths in the software market. The summary: HP has made a start, but has a long way to go. When I talked with Apotheker, he acknowledged that HP would not only acquire more assets to surround Vertica, an analytics platform, but it would build capabilities on top of it.

Later today, Henschen will provide some of his thoughts on what Autonomy actually brings to HP. Like any acquisition of this size--and Apotheker said during Thursday's earnings call that Autonomy has 25,000 customers globally--HP also gets a larger customer base.

But Apotheker and the new HP have a lot to prove.

In my interactions with Apotheker, he seemed brutally frank. He seemed so during Thursday's earnings call also.

"The market is usually not wrong," Apotheker told me back in March. And so the market spoke. HP reacted. The market will speak again.

And we will have a chance to ask Apotheker more on September 12, when he kicks off the InformationWeek 500 Conference with a fireside chat with yours truly. You might want to be there. It should be fun.

Fritz Nelson is the editorial director for InformationWeek and the Executive Producer of TechWebTV. Fritz writes about startups and established companies alike, but likes to exploit multiple forms of media into his writing.

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