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HP Feels the WebOS Blues. Was Palm Worth the Money?

When HP (HPQ) bought mobile device vendor Palm, it was aiming for a "platform to expand HP's mobility strategy and create a unique HP experience spanning multiple mobile connected devices." Nice theory. Unfortunately, practice is another matter.

Apparently, HP has had about as much luck selling its webOS-based TouchPad tablet as it might peddling sun block during an Arctic Circle winter, according to an AllThingsD report by Arik Hesseldahl. But it's not surprising. Launching a new operating system is a risky business, and HP picked one of the worst ways to do it. Maybe the company should consider another strategy, like selling off the patent portfolio it picked up.

If you have to ask how bad, you don't want the answer
As Hesseldahl put them together, the TouchPad stats to date would make Dale Carnegie seek anti-depressants. Best Buy (BBY) reportedly sold only a tenth of the 270,000 units it originally took and now wants to return the rest, rather than have them take up warehouse space. Even though there has been tension between HP and Best Buy over the tablet from the beginning, that isn't the source of HP's real problems.

HP released its TouchPad on July 1. By the end of the month, it started cutting $50 off the price and then made the change permanent. Still, no go. People just didn't want it. Hesseldahl noted that a Woot one day offer of $120 off a 16-GB TouchPad had 612 takers.

Was that good or bad? I checked some related deals on Woot. A Samsung 7-inch Galaxy Tab sold 1755, and that was with 3G capability by Sprint (S). Heck, back in June, an Archos 8GB tablet sold 1424. And a ViewSonic gTablet deal sold 10,452.

Even the silver lining is tarnished
Some look at HP's purchase of Palm through a revisionist lens, citing Google's (GOOG) intended purchase of Motorola Mobility (MMI) as evidence that HP picked up a valuable packet of major IP. Actually, the potential litigation value of Palm's patents was clear early last year and even before.

Although HP has had PDAs and netbooks for years, it hasn't been a major force in the broader context of mobile computing. So when the company talked about the acquisition as a platform for a mobile strategy, it was being straightforward. However, what's of value to one entity may be a waste for another. In the case of Palm, the value for HP has been nil.

Selling an OS is like selling a car engine
There's an enormous difference between what Motorola's patents might bring to Google and what HP will see from Palm's. As I mentioned back in June, HP had big plans for webOS to show up in phones, tablets, PCs, industrial controllers, and every other bit of hardware imaginable.

But an operating system doesn't exist in and of itself. It needs all sorts of support, including drivers to make other devices compatible, applications, and hardware to run it. Selling the OS becomes a chicken and egg proposition. You need the infrastructure to entice users. Without users, third parties have little reason to jump on board. Few people, and even fewer corporate buyers, want to become dependent on one vendor.

The best way to given an operating system a chance to be popular is to make it available for a relatively new and rapidly growing product category. There are reasons Google was intelligent to first offer Android on smartphones the way it did:

  • The free price was an enticement to hardware vendors.
  • Smartphones were not a mass market product at that point, so Android could ride the back of category growth.
  • Third parties were willing to take a chance with the potential for big success.
  • People saw phones as self-contained devices and didn't worry much about whose operating system ran them.
The last point may be the most important. People bought the device and the operating system went along with it. Even now, if you go into a store selling mobile devices, the operating system is a secondary factor for most people. They want to know that they like the way the device works. Most people buy a car for the whole vehicle, not because of the engine make.

Wrong starting point
HP wanted to start with a tablet. Understandable, as the company still has a PC and server mindset and wants to fit mobile in. Except, that's the problem. This isn't something to tack on. By trying to sell a tablet first, HP chose a product that starts to demand third party support. Otherwise, you're back in the day of early PCs with no software vendors to provide applications that can make the machines do something.

Management also probably wanted to avoid going head-to-head with both iOS and Android in the smartphone market. Instead ... HP went head-to-head with both iOS and Android in the tablet market. And got clobbered.

The company was just too late for smartphones and wrong on tablets when it came to consumers. On the corporate front, although HP could appeal to its existing large corporate customers with intelligent infrastructure, businesses don't want to standardize on all HP equipment, even if it can talk to each other. The gear has to work as well with everything else the companies have. And the mobile-centric approach doesn't seem to be a grabber.

Maybe HP could sell the patents, keeping perpetual licenses for itself. That way, it could keep trying on to create a webOS business, and yet get some likely significant return from the investment.

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