For HP And Barnes & Noble: A Modest Proposal

HP needs some consumer mojo. Barnes & Noble needs some IT help and an answer to Amazon's Kindle Fire. I smell a partnership.
Now that the dust has settled from the Kindle Fire announcement, competitors can't let the $199 bombshell knock 'em down and keep 'em down. Barnes & Noble needs help, and so does Hewlett-Packard. Cooperation between the two companies could be a match made in heaven. Here's why.

Just over a week ago, Barnes & Noble CEO William Lynch sent a message to ex-Borders customers like me letting us know that his company had bought the Borders customer list. Unlike Borders, Barnes & Noble survived in book retailing because it didn't outsource its Web and e-commerce site to Amazon, its (cough, cough) competition! And even though Barnes & Noble was late to jump on the e-reader bandwagon, it made up yardage with the Nook Color.

But managing not to go bankrupt isn't exactly an indication of e-commerce expertise. There, Amazon is king. When I use Amazon's site, it's so easy to buy stuff that when my wife sees the bills, she wants to put parental controls on my Web usage. Not so much on I really, really want to buy my media there after reading about working conditions at Amazon warehouses. But my abandonment rate on the Barnes & Noble site is high, as I often get frustrated and close the window. (Ever try to associate your member number with your email account on that site?)

HP has plenty of talent that could help out Barnes & Noble with site usability and system performance (don't get me started on the five-minute transaction at the brick-and-mortar store that took 30 minutes because of bad info systems). And unlike most observers, I happen to think new HP CEO Meg Whitman can help. Given that she was the CEO of the biggest and most successful online auction company on the planet, do you think she might be able to fix a bad e-commerce site?

HP needs to be active in the consumer market, even if pundits want the company to steer clear of consumer-friendly leaders--witness the immediate vilification of Whitman because of her track record at Procter & Gamble, Disney, Hasbro, Stride-Rite, and eBay and lack of experience with consumer-unfriendly enterprise IT companies. Has anyone been paying attention while Apple has raised its market cap to exceed HP's and Microsoft's combined, accomplished in part by selling iPads to practically every senior executive in the United States? Hello--this is the consumerization of IT calling. Can you hear me?

If an IT vendor succeeds in the consumer market, then over the long term it will succeed in the enterprise market. That happened with PCs, it's happening with tablets, and it will continue to happen in future product categories.

That's where the alliance I'm proposing could have some magic. Yes, HP's stated strategy is to move further into the unstructured data market, mainly through its Autonomy acquisition. But that's an immature market space full of risk.

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How about a strategic alliance with Barnes & Noble, since it's a major content player that needs outside help? It's all about the content. Put another way, it's all about the ongoing revenue. Amazon is selling the Kindle Fire for less than it costs to make, and not out of the kindness of its heart. Generating ongoing revenue from content, not the hardware, is more important.

Meantime, HP basically shrugged off the TouchPad mania that ensued when it ran a fire sale before killing off its tablet. Yes, the tablet's components were worth more than the $99 fire sale price, so HP couldn't continue to sell the TouchPad at that high-volume price. But Barnes & Noble could offer a home to that orphan.

Under a strategic alliance, HP could offer a sweet media tablet customized for the Nook--a valuable proposition for consumers, as well as a reason to buy lots of content from Barnes & Noble. Amazon's almost begging for competition. Barnes & Noble needs a technology partner. HP needs a strategy that will make investors happy.

Meg? William? Are you listening?

Jonathan Feldman is a contributing editor for InformationWeek and director of IT services for a rapidly growing city in North Carolina. Write to him at [email protected] or at @_jfeldman.

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