Microsoft Surface Reveals the Cost of HP’s webOS Folly

Steve Wildstrom / June 20th, 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.

 

Steve Wildstrom

Steve Wildstrom is veteran technology reporter, writer, and analyst based in the Washington, D.C. area. He created and wrote BusinessWeek’s Technology & You column for 15 years. Since leaving BusinessWeek in the fall of 2009, he has written his own blog, Wildstrom on Tech and has contributed to corporate blogs, including those of Cisco and AMD and also consults for major technology companies.
  • eid

    yup you’re right. Hp made bad decisions while run briefly by leo. MS probably encouraged them to drop webos not mentioning that MS would be making tablets themselves soon. Maybe whitman can use this to add resources to the barebones openwebos division. If no oems take up webos then hp should make a webos tablet themselves as a hedge.

  • FalKirk

    Nice piece. I think you nailed it.

    I will say this. I’m not sure if HP could have pulled off webOS anyway. (Not that that excuses the way they mishandled the situation.) The webOS software looked like a really well put together operating system. But you’ve got to have good hardware too and, frankly, HP’s hardware standards have appeared to drop to unacceptably low levels.

    But most importantly, you’ve got to have a supporting ecosystem. And ecosystems are huge and hugely expensive. I don’t think HP had any intention of investing the resources necessary to create an ecosystem that could have measured up to those established by Apple, Google and Microsoft.

    If your’e going to go into the platform business, you’ve got to go all in. HP barely dipped their toe in the water before they bailed out.

  • synthmeister

    I always felt that HP’s vision for WebOS was actually one of the few ways they had the potential to chart their own destiny, i.e. control their own integrated platform. But I also felt they would have to be incredibly patient and focused to execute that vision. (It took Apple 10 years to get from NEXT to iPhone, for example.)

    But HP’s execution was an absolute fiasco.

    Now they are back to square one: completely dependent on third parties for strategic parts of their future.

  • Pingback: Veteran BW tech reporter makes the great case for webOS - webOS Nation Forums()

  • Tsquare

    This article is right on point. HP screwed up big time. They needed to invest and give WebOs a chance.

  • StrikeThree

    Faulty reasoning in the article, I’m afraid. WebOS is just an operating system, and as you said…Apple, Microsoft, and Google control platforms/ecosystems that go across devices and form factors. It took Apple years to leverage the iPod brand and develop iOS and the iPad. It took Microsoft years to build the Xbox ecosystem and build the Zune catalog. It took Google years to build Google Maps and Gmail. What assets does HP have to contribute to a mobile ecosystem?

    Nothing. All they can do is rebrand stuff like Roxio’s video platform into the “HP Movie Store” or some music streaming service they acquired into the “HP Music Store”. Even companies who provide a huge content ecosystem and price devices to sell like Amazon are hardly disrupting the market (nor do they mean to, as the Kindle Fire is essentially an electronic vending machine for Amazon products).

    What sense would it make for HP to go for years and tens of billions into the red to do this when they aren’t a software or content company? WebOS was a nice potential-filled OS that was born in the age of ecosystems. Kinda like being one of the fastest, sleekest horse-drawn carriages made when automobiles became widespread.

    • Rich

      “The Kindle Fire is essentially an electronic vending machine for Amazon products.”

      Definitely true!

    • John

      webOS was much more than what you make it out to be and had more potential than it sounds like you were aware. But HP has no one else to blame but themselves….

      • steve_wildstrom

        Amen. The original goal of HP PSG was to create exactly the kind of ecosystem StrikeThree is talking about. But they could barely get started in the six months they were given by top corporate management.

  • Pre 2 & Veer

    Don’t forget: Apple and Samsung are eating up all the profits in mobile. HP is not alone in it’s position. A huge number of OEMs must find a way to innovate or yield the field. webOS going open source truly is a way for a smart, hungry OEM to offer something different in a market place overcrowded with sameness. It is an elegant and intuitive UI that has been tested in the field and does not need to built from the ground up.

    If OpenMobile releases ACL this fall as promised it will negate the lack of an ecosystem argument that is the main hue and cry of webOS detractors.

  • bill

    Great post and right on the money…. literally

    The folks at Palm did understand this. I had conversations with them a long time ago about how they were going about building an integrated hardware software platform and their belief that with a “standard” platform you run the risk of (1) divergence/fracturing from an ecosystem standpoint or (2) homogenization since everyone is running the same software. Neither are fun, especially if you are fundamentally a hardware company.

    What Palm didn’t have was cash to invest in the grand vision, so the purchase by HP made a lot of sense. They got a team that was focused on doing what was right and they had the cash to put into doing it. If they had done it right and stuck with it, they could have made something of it. But they abandoned it before it got a chance to even get off the ground.

    But now HP has a serious problem and I see no way to recover from it.

  • Jon the witch

    unless they buy rim HP are screwed

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