Posted by Greg Mills
The Great HP Train Wreck, Mikey likes it, Michel Dell that is. The immediate stock market reaction to the HP implosion was that HP stock went down 20% and Dell went up 7%. The gut reaction of the market to the HP reorganization was sort of as if HP had done the seppuku ceremony where the ancient Japanese publicly cut their own belly open with a sharp knife. A gory, painful and dramatic way to die, indeed, but it sure makes a statement. The age of the PC is over, long live iPad, to paraphrase Steve Jobs.
Part of the problem for HP is with the general perception of the public that the consumer PC manufacturing division of HP was the bulk of their business. That turns out to not be true, since the profit margins of HP PCs is so low, the manufacturing arm of HP wasn't the money maker the pubic imagined. The misconception also comes from the public face of HP, the consumer products that splash the HP logo everywhere. When I think of HP, I think of cheap printers and expensive ink cartridges cleverly designed to keep me from refilling them.
Another part of the public perception of HP is that the business end of HP they hope to enhance isn't as well known outside of business circles. Server and business software is a big business, so HP will trade the likes of Dell and the other PC box assemblers for competitors in business service companies like IBM, Cisco and Oracle.
Only time will tell whether HP was really smart or really stupid, but the move was "really" something. IBM got out of hardware and concentrated on business software successfully, HP has a much harder row to hoe due to both the weak economy and the fact that the two businesses are not that similar. HP was heavily invested in consumer hardware and the prospects for really cashing out of that business isn't too bright. No one in the PC assembly business is big enough to buy the entire HP hardware business so it will be cut up like a fattened steer.
I have read the prognostication of a number of analysts who figure Dell may be the big winner in all this. The massive change in the industry that led HP to cut its losses and get out of the low profit PC business won't benefit Dell any more that it did HP. Apple is likely to continue to suck up a larger share of the declining PC business with its Mac division, which as grown every quarter for 5 years, as mobile grows dramatically with little real competition for Apple.
The cut throat business of assembling lack luster PCs, that just work, but have no magic, will continue to be a soft business from a profit stand point for who ever survives. I expect Apple and the other PC makers to divide the market share HP is abandoning, rather than expecting one competitor to steal the whole thing. I don't look for Windows machines to jump in price due to HP pulling out, there is too much competition.
That the market is going mobile in the form of tablets and smartphones is evident to the entire industry. HP knew the Palm acquisition and the TouchPad and Palm based smartphones were critical to the long term survival of their business. When the Palm product line failed, HP figured they had better get into another line of business, and they did.
Look for a considerable number of HP employees to be hitting the job market soon and for HP to carve its hardware business up into small enough chunks to be able to sell them off. HP will look much different a year from now. When you see the dramatic moves HP made since they realized they were shut out of the mobile computer market by the failure of TouchPad, the combining of the Apple Lion and iOS platforms clearly shows the way Apple sees the future. Mobile rules!
The MacBook Air and iPad will dominate the Apple consumer computer market soon enough. WiFi devices with hard drives allow mobile flash memory devices with limited memory on board to access those hard drives locally as sort of a wireless server mode. The mobile devices also use the Cloud when mobile and I expect MacBook Air to be available with cellular radios soon.
I look for Apple to slim their product line down again soon. The prospects for a larger iPad is likely as the screen resolution of iPad and apps increase under iOS 5, putting an HD screen on a larger iPad becomes less daunting with easy scaleability. The Apple iPad is just too great a product to remain a one size fits all product.
Samsung and the other handset makers are, as Steve Jobs famously put it, flummoxed by Apple's category defining mobile products. With Palm having bitten the dust, the viable mobile operating systems are left to sort out the survivors.
The recent move by Google to purchase Motorola has upset the remaining Android handset makers more than Google expected. Samsung is dusting off their proprietary OS called "Bada" which is the word Ocean in Korean. To Samsung the answer to the Android bag of hurt is to fragment the handset market even more, by adding its own new platform to the mix at the very same time HP failed with the Palm OS. See: http://gizmodo.com/5401326/why-did-samsung-just-announce-another-mobile-os
Fragmenting the Android OS and having a slew of smaller mobile platforms to compete with is to Apple's advantage. After all, developers can only support so many platforms. In politics the mantra is that "all politics is local" while in the smartphone and touch screen tablet world, the mantra is that "it is all about apps".
Creating a modern mobile platform, attracting and supporting app developers, managing an app store and supplying a desirable hardware selection and then marketing it to a somewhat jaded market place dominated for over four years by Apple, is no easy task. Just ask RIM.
Does the world need another mobile OS? I don't think so but Samsung has the resources to launch a spectacular disaster in the fashion of the recent HP train wreck. Apple just continues to be Apple as the industry sees desperation and disasters in Steve Job's wake. That's Greg's Bite anyway