HP’s just-announced $1.2 billion offer to buy Palm is as close as this industry gets to a lifejacket. Despite the fact that the deal won’t suddenly vault Palm back to the top of the mobile market it practically created, HP’s ultimate goals for its latest acquisition extend well beyond the near-term.
It’s been clear for years that Palm simply couldn’t make a go of it on its own — that if the company hoped to remain relevant in today’s fast-evolving mobile marketplace, it needed to be acquired. The announcement earlier this spring that Palm was seeking a buyer and speaking with interested parties confirmed that it was only a matter of time before a deal was struck.
A necessary deal
In that context, the HP buyout is hardly a surprise, and it represents the best possible outcome for Palm. The two companies complement each other rather nicely. HP gets Palm’s innovative mobile operating system, webOS, a stable of well-regarded mobile handsets, and a treasure trove of patents. Palm gains access to HP’s prodigious marketing muscle and global reach. It’s that global reach that not even Apple can compete with, and could seriously rewrite how and where mobile devices are sold.
For its part, HP’s efforts in mobile handsets for much of the past decade were largely ineffective. Its iPaq brand, acquired through the purchase of Compaq, was virtually ignored through much of its existence, with sporadic hardware refreshes and a stubborn adherence to the now-dead Microsoft Windows Mobile operating system. HP’s mobile offerings had near-zero consumer impact and no carrier presence. Enterprise adoption was similarly weak before the Palm announcement. With $25 million in sales last quarter, it’s easy to forgive casual observers who assumed HP wasn’t even playing in this market. In many respects, it gave up long ago.
This deal gives HP another shot at mobile relevance, but it’ll have to invest significant resources to give Palm the push that it needs to remain current and competitive. After years of reinventing itself to the detriment of a well-stocked product pipeline, Palm now finds itself in dire need of a rebuild. As its new owner, HP will be faced with the daunting task of not only bringing new products to market, but also rebuilding shattered developer loyalty and turning webOS into the kind of platform that spawns thousands of apps and an economy all its own.
Carmi Levy Wide Angle Zoom (v.2)A few years too late
Palm’s mistake in introducing the Pre and webOS in 2009 was in focusing so heavily on the actual device that it forgot how significantly the market had changed since it introduced its first Treo smartphone. The offerings themselves were — and are — brilliantly engineered examples of next-generation mobility. From a usability standpoint, they even gave the market leading iPhone and Android solutions a run for their money. Had they hit the market three years earlier, they might have been enough to guarantee Palm’s independent survival.
Unfortunately for Palm, it isn’t 2007. Apple’s iPhone and later, its App Store, rewrote the rule book that all mobile vendors must now follow. Market success is no longer determined by whoever rolls out the coolest devices. Without developer support, even the most deftly advanced piece of hardware will fail miserably. Despite Palm’s efforts to reconnect with developers who had long since defected to competing platforms, the end result was an application store filled with tumbleweed and a roadmap with no direction. With no ecosystem to support the critically acclaimed devices and operating system, Palm’s market share erosion continued to accelerate.
It’s a process that will likely continue for some time to come. In the absence of an actual plan to kick-start the app side of the house and get developers on board, Palm will remain stuck around the fringes of a mobile market that’s rapidly passing it by. The clock is ticking for HP, and its corporate leadership — spearheaded by Tom Bradley, EVP of the Personal Systems Group — knows it. Bradley was once Palm’s CEO, so it’s likely Palm will get what it needs to market, and quickly — which includes that chance to develop its way out of its current hole.
But the Titanic couldn’t turn on a dime, and neither can jaded and faded smartphone vendors.
The good news for Apple and Google is they have nothing to fear. It’ll take the better part of a year to 18 months for HP to integrate what it’s just bought and begin to turn things in a more profitable, growth-focused direction. In the interim, the Apple and Google mobile juggernauts will continue to grow, virtually guaranteeing that Palm will never again be a #1 player, and it won’t directly threaten the industry giants anytime soon.
A different definition of success
Even so, dominance isn’t necessarily HP’s near-term goal here. For now, it’s entirely sufficient to build a new foundation and leave the long-term stuff for another day. What matters to Palm is that it now has a new corporate parent willing to give it the resources it needs to become a viable, profitable smaller player in a market that’ll eventually be large enough to support more than two dominant leaders. Apple’s Mac has carved out a respectable and profitable business with only 10% market share, albeit in the computer space; and iPhone has commanded a 16.2% share of the global smartphone space, according to iSuppli estimates published today.
Palm has about a 1.5% stake in that smartphone realm, and the distance between it and iPhone from one point of view looks like a chasm. But Motorola is at 3.9%, which means Palm doesn’t have far to go to resume being taken seriously. If that happens, Palm could indeed regain viability in the mobile market, but only if HP plays its cards right and invests deeply and quickly enough to turn things around.
Longer-term, however, HP will be selling Palms in places Apple and Google can only dream about. And with a global manufacturing influence that makes Apple look puny by comparison, HP can play the economies-of-scale game better than anyone. While an HP-owned Palm won’t dominate today’s market, HP’s end game likely envisions a significantly changed environment that renders 2010-based assumptions of mobile market success obsolete.
Your chances of buying a Palm-branded device sometime this year may not have increased much as a result of this acquisition. But what you’ll be buying years down the line may very well have changed after this week’s announcement. It often takes that long to realize just how fundamentally things have changed following a business-seismic event like this. Don’t bet against HP having the patience and the wherewithal to invest, heavily, in this long-term game. Just because we didn’t feel the ground move doesn’t mean it didn’t.
Carmi Levy is a Canadian-based independent technology analyst and journalist still trying to live down his past life leading help desks and managing projects for large financial services organizations. He comments extensively in a wide range of media, and works closely with clients to help them leverage technology and social media tools and processes to drive their business.
Source:-http://www.betanews.com/article/Actual-Analysis-HP-buys-Palm-and-the-earth-does-move/1272496743
