HP's Apotheker changes his tune on mobility

Six months after laying out his "strategic vision" for HP, CEO Leo Apotheker took the actions to realize it. And abandoned the mobile computing space.

In a March 2011 interview, Apotheker was asked about HP's view and plans for the consumer space, where it has been a strong brand in personal computing, and for mobility. His comments then and his actions this week show how his view of these market dynamics has changed.

A year ago, HP acquired Palm for $1.2 billion, mainly to get its hands on Palm's innovative webOS for smartphones. Almost from the outset, HP made it clear that it saw webOS as a strategic platform for a whole range of connectivity-enabled devices, mobile and otherwise: webOS would be bundled with its Windows PCs, and with printers and other HP devices, including a new line of tablets to compete with the market created by Apple's hugely successful iPad.

ANALYSIS: HP's webOS failure highlights PC giants' mobile struggle

This week, as part of a massive reorganization, HP announced it would stop selling webOS tablets and smartphones, including its first webOS tablet, the HP TouchPad, introduced barely 50 days earlier. Instead, Apotheker said, the company will focus on the "enterprise information management space" and software.

Apotheker was asked in March what HP tablets would offer enterprise users that Apple's tablets can't.

Apotheker: "There are a certain number of native things that are built into webOS that made webOS into a very unique proposition. The best way to describe it is that it's capable of truly multitasking, it's capable of really sharing information, and it's able to synergize a lot of the things that are happening in the Web. The reason for that is it's the only operating system, Apple's included, that has been designed from the ground up to assume that you're always connected. So that's point No. 1.

"And point No. 2 is that we are capable -- and that's the thing that makes HP rather unique -- of totally securing and managing these devices for an enterprise with our technology. The CIO can be absolutely at ease with knowing that the devices he will get from HP, he will get something that is totally secured, absolutely manageable. He can switch these things on and off whenever he wants, for any user, and all of the capabilities that are developed with it."

These management technologies would address critical enterprise issues of compliance and security.

But that plausible scenario foundered on the brute fact of TouchPad's disappointing sales, which Apotheker acknowledged this week "did not meet expectations." One report said the retail electronics chain Best Buy had taken delivery of 270,000 TouchPads but by this past week had sold no more than 12,500 of them.

Apotheker was also questioned about the viability of webOS and Windows on the same device, especially in light of Microsoft's move to make Windows more touch-oriented. Wouldn't webOS become redundant in such a case, and be better positioned as a replacement than as a complement for Windows?

Apotheker: "They actually complement each other really well. The fact that Windows, that Microsoft, supports ARM going forward is a very important announcement that enables these kinds of things to happen in a very natural, very non-frictional and very complementary way. If Microsoft Windows will support gesture-based operating systems, that's good. You make an assumption that you should never make, which is that we will stand still and nothing will change with webOS. That's not the kind of world we're living in, are we?"

Question: That kind of begs the question of where webOS is going.

Apotheker: "Fair question. I'll talk to you next time."

Now we know where webOS is going: essentially nowhere. At the earnings announcement this week, HP executives said webOS would not be scrapped completely but would seek licenses for the platform, and retarget it toward new markets such as automotive "infotainment" systems and, of all things, home appliances. But these tend to be the domain of real-time operating systems, which was not the design point for webOS. And its license appeal may be limited because it runs on only one chipset, from Qualcomm.

Joshua Topolsky at ThisIsMyNext.com reports that an HP "insider" gave an account of a meeting between employees of the webOS Global Business Unit and its chief, Stephen DeWitt.

"DeWitt was adamant, saying several times, 'We are not walking away from webOS,'" Topolsky writes. "He detailed a plan to try to determine what the platform's future will look like within the next two weeks, although he admitted that 'Clearly, we don't have all the answers today.'"

Someone asked about licensing webOS to HTC or Samsung. "HP VP Todd Bradley pointed out that, to date, webOS is designed to work on a single set of silicon -- Qualcomm -- and that many potential licensees would likely want to see webOS support other chipsets. He did not elaborate further on potential partners," Topolsky writes.

In the March interview, Apotheker trumpeted HP's understanding of endpoint devices and the consumer. Yet the manifest failure of TouchPad shows how mistaken that understanding was.

Apotheker: "But we actually have one, if not two, strategic advantages over IBM. One is we understand the consumer business, so therefore we understand the endpoint devices. And that is a huge advantage, which IBM has given away when they sold their PC business to Lenovo. ... And maybe last, but not least, we don't have any legacy to protect, so we can really leapfrog to the leading edge and we don't have to worry about cannibalizing this or the other part of our legacy software business because in that space we don't have enough."

Going forward, that leading edge will not include mobile computing. The investments needed were more than HP was willing to make, especially given the intense competition of Apple and Google in the mobile OS space. "WebOS would require significant investments over the next five years, generating risk without clear rewards," HP Chief Financial Officer Cathy Lesjak said during this week's earning's call with financial analysts.

In the third quarter alone, the group that includes the webOS unit booked $332 million in losses from operations, which Lesjak said was due almost entirely to webOS.

John Cox covers wireless networking and mobile computing for Network World.

Twitter: http://twitter.com/johnwcoxnww

Email: john_cox@nww.com

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This story, "HP's Apotheker changes his tune on mobility" was originally published by Network World.

Copyright © 2011 IDG Communications, Inc.

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