Microsoft Surface Reveals the Cost of HP’s webOS Folly

on June 20, 2012

HP's TouchPadWith Microsoft’s planned launch of the Surface tablet, the full cost of Hewlett-Packard’s grotestque mishandling of the purchase and abandonment of Palm’s webOS has become clear.  HP’s Personal Systems Group now finds itself in the worst of all possible worlds, facing competition from its most important supplier in what should be its hottest market.

HP’s purchase of Palm in early 2010 was a strategic move by PSG chief Todd Bradley and then CEO Mark Hurd both to move HP into the increasingly important smartphone market and to win a measure of independence from Microsoft. The key was webOS, a rough-edged but highly promising operating system.

HP’s plans for webOS were ambitious. A tablet, the TouchPad, was added to Palm’s planned lineup of new phones and a version of webOS was being developed to run on top of Windows to create an HP webOS ecosystem across a wide variety of devices.

Alas, the whole project was caught up in HP’s boardroom melodrama. Mark Hurd was replaced by Léo Apoteker, who had little love for PSG in general or webOS in particular. The TouchPad was rushed to market before it was ready and sold poorly. Barely two months after the TouchPad’s launch, Apoteker killed the entire webOS effort, leaving HP with nothing but a huge writedown for development costs and inventory.

Although the replacement of Apoteker by Meg Whitman spared PSG from possible spin-out or sale, it hasn’t solved its fundamental problem. It’s the dominant player in a PC business that is barely profitable and seems doomed to continue its slow shrinkage. It’s not a player in smartphones and by the time it enters the tablet market, if indeed it still plans to, it will be competing directly with Microsoft-branded products.

It is becoming painfully clear that the future of personal computing belongs to those who control integrated platforms: Apple, Microsoft, and maybe Google. It’s impossible to say where the webOS vision would have taken HP had it been given the investment and time it needed for success. But it is all too clear where its failure has left the company.

HP is a stool with three rickety legs. Personal computers produce neither growth nor a lot of profit. The cash cow of imaging and printing also faces a long, slow decline. And the enterprise business—servers, software, and services—is heavily dependent on partners such as Intel, Microsoft, and, on a good day, Oracle.

The cost of the webOS misadventure was far less than the $10.3 billion HP for analytics software maker Autonomy, an Apoteker acquisition on which the jury is still out. But the price of the failure may end up being far higher: The loss of HP’s ability to shape its own destiny.