As we reported earlier today, Hewlett-Packard announced its plans to purchase Palm for $1.2 billion. The acquisition comes a few weeks after Palm put itself up for sale and less than a week after potential suitor HTC walked away from the table.
The deal comes as a bit of a surprise, given that it was Lenovo, not HP, who seemed most likely to acquire the struggling mobile company. However, as HP discussed in a call with investors and analysts earlier this afternoon, the deal may actually end up benefiting both companies.
As Mashable’s Adam Ostrow pointed out earlier today, this is a move that immediately puts HP back in the smartphone business. Although the company sells a smattering of Windows Mobile-based devices, it hasn’t been a significant player in the handheld market for at least five years.
During an investor call this afternoon, HP executives laid out the reasons for the Palm acquisition by pointing out what Palm can bring to HP and, in turn, what HP can bring to Palm. You can view the slide deck that was referenced in the call below:
It’s All About webOS
If there is only one reason for HP to acquire Palm, it is webOS and its potential. When Palm first introduced webOS at CES 2009, even the most jaded tech journalists had to step forward and take notice. The user experience of webOS rivals — and in some cases exceeds — that of the iPhone in terms of fluidity and consistency.
This is what HP wants. HP reiterated the size of the global smartphone market repeatedly during its call and the company feels strongly that this is just the beginning. What HP is able to embrace with Palm is the ability to have a seamlessly integrated user experience that extend across devices. This includes smartphones, tablets or slate PCs, and maybe even netbooks.
While more and more companies look at licensing operating systems like Android, Windows Phone 7, Symbian and Meego, there’s still something very compelling about owning and controlling your own platform. As much as licensed solutions can be customized, companies are still ultimately at the mercy of whoever is licensing the software. That means that bringing technology to new platforms or device types is often up to someone else; it also means that companies risk entrusting their market futures to a party who could ultimately seek to cut them out of the equation.
This is why companies like RIM and Apple have their own platforms and why even companies like HTC are looking at building their own native operating system.
HP is good at working with licensing partners; it’s the number one PC manufacturer in the world for a reason. However, owning webOS allows HP to distinguish itself from the pack. It sounds like the plan is to have the webOS exist across a number of devices and, in turn, to offer consumers a uniquely HP experience across products.
Even better, HP is in a much better position to target both consumers and corporations when selling webOS. HP has plenty of money and marketing power to target the right carriers, the right retail chains and to reach out to the most responsive consumers. Palm lacked the money and the skill to market itself and to attract developers and consumers the right way.
HP Will Not Abandon Other Platforms
Just because HP envisions having tablet or slate devices running webOS doesn’t mean the company intends to abandon Windows 7 on those devices as well. The company expressed its belief in choice and its plans to support Windows Mobile (and presumably Windows Phone 7).
That’s actually a very smart strategy. HP is a large enough company that it can diversify its investments. Businesses or users who are more comfortable with Windows 7 or Windows Mobile products can continue to get HP devices that are made for those platforms, while a consumer-focused platform will also be available across devices.
Just as many handset makers make devices for Windows Mobile, Android and even Symbian, HP will also support other platforms.
Of course, if webOS on HP is successful, the company may have less of a reason to invest in other platforms for reasons other than keeping existing customers satisfied.
Can This Work?
The more we think about the deal, the more sense this makes. HP gets a really strong product and Palm gets a company that actually knows how to make deals and market products.
HP stressed how much it wants to retain the current Palm team, and while that makes sense from a developer perspective, the differences in corporate culture mean that some people are going to choose to leave the company.
But the big question remains: Can webOS with HP at the helm succeed in a marketplace that is quickly become a battle of big players? HP has had tremendous success selling computers and printers and its corporate and consumer channels are very strong.
HP made it clear that it intends to invest in the webOS ecosystem and in its development. That’s vital. On paper, webOS is a dream platform for developers; in practice, however, the company has absolutely failed to gain any traction in the community or to even highlight its own strengths.
For example, when I attended the Future of Web Apps conference in Miami back in March, the two developer evangelists for webOS (people that were hired explicitly to help sell and promote webOS to other developers) spent most of their presentation talking about developing device-agnostic mobile sites or working with the iPhone. webOS was only mentioned in passing. That’s not how you get people excited about wanting to use your product and improve your platform.
In order to succeed, HP must revamp Palm’s developer marketing strategy entirely. This means that development tools and terms need to be more accessible and that the process for getting into the official Palm Catalog needs to be more simple, less expensive and less restrictive than the competition.
Fortunately, HP doesn’t seem to be on a timeline. It’s investing in Palm and webOS for the long term. Hopefully that means the company will be able to nurture webOS and the Palm developers and really give the technology a chance to shine.
What do you think about the Palm-HP deal? Do you think HP has what it takes to make webOS viable? Let us know!