Last week, HP shocked the tech world when it announced its acquisition of Palm. While many industry-watchers were expecting Palm, a company that has seen less than stellar sales of its new Pre and Pixi hardware as well as an abysmal fiscal third quarter, to be bought (or do some serious in-house restructuring), hardly anyone thought HP would be the buyer. Now, one shocking announcement and $1.2 billion dollars in cash later, HP is a few legal and regulatory hearings away from owning the house that Pilot (and Treo) built.
So the world’s largest PC manufacturer just bought a smartphone company that was flirting with disaster just a few short weeks ago. What does Palm stand to gain from such an acquisition, and more importantly, what does this mean for the smartphone world, and leading companies like Apple? Here are eight reasons why the HP/Palm deal means serious risk and competition for Apple and the rest of the smartphone world.
Note: The acquisition of Palm by HP is not yet official. The latter has miles of red tape to get through before Palm is officially bought. That said, this article is operating under the assumption that this deal will go through without a hitch.
Palm is not the first major company to be bought by HP. The buyout of Compaq back in 2001 made HP into an even bigger PC player than it already was, and is a major factor behind the company's successful rise to the top 2 in the PC manufacturing space. When HP bought Voodoo PC in 2006, it infused the boutique manufacturer’s “DNA” into some of its products. This gave us great machines like the Blackbird and Firebird desktops as well as the well-received Envy series of notebooks. The purchase of Palm will likely be no different from the previous examples.
Though concrete details are few and far between, it looks as though Palm, as a brand, will survive the HP acquisition…at least in the short term. The Pre and Pixi smartphone lines (which include the Pre Plus and Pixi Plus) aren’t going to disappear anytime soon, and should still find their way onto AT&Ts network at some point in the near future. Furthermore, Palm CEO Jon Rubenstein says it will be “business as usual” at Palm in the short term, so whatever software and hardware that was already in line for the first half/first three-quarters of 2010 should proceed as planned. However, this doesn’t mean HP isn’t already planning big things for Palm and its assets.
The Palm brand used to be the most trusted name in handheld computing. The Pilot PDA line was a force to be reckoned with, and in the early days of smartphones, the Treo line was a safe bet for business users. By now, though, Palm has certainly lost a step or two, and its brand recognition isn’t what it used to be. But on the other hand, HP brings clout to any market it steps into; such is the benefit of being a top PC maker on a global scale. With that kind of brand recognition now behind it, Palm should have an easier time getting its products to market on a global scale, although this might require some combined branding, like HP-Palm, on future devices.
The recent shortcomings at Palm aren’t as much related to hardware and software as to timing and poor choice of partners. Choosing Sprint as an exclusive Pre and Pixi carrier was a huge misstep. If the hardware had launched on Verizon or AT&T instead, then Palm might have great phone sales and solid quarterly figures instead of under-performing numbers. With this in mind, HP should steer Palm into the right relationships with carriers and help the brand flourish in retail channels and marketing. Worldwide simultaneous release for products is now a distinct possibility for Palm.
Palm has gone from a struggling smartphone maker to…a struggling smartphone maker with some major financial backing. Let’s be honest: The HP/Palm deal is not going to change anything for a least a few quarters, especially when you consider that the deal might not be completed until the middle of this summer (the end of July). An educated guess puts any fruit bore from the deal at CES 2011, which is still roughly eight months away.
Between the finalization of the deal and CES 2011, you can expect HP to put a lot of money behind Palm and the ideas HP has regarding assets like WebOS. HP has as much, if not more money and resources as any smartphone maker currently making hardware, and you can expect Palm to fully utilize its new-found wealth. WebOS is certainly not the worst smartphone operating system out there, but many believe it has yet to live up to its potential. With backing from HP, Palm could finally make WebOS into what everyone is expecting it to be.
So what will it take to transform WebOS into a mobile operating system powerhouse? If there is an area of WebOS that the executives feel needs improvment, HP and Palm can pour resources into that area, or simply go out and buy expertise (think BlackBerry buying Torch Mobile in order to build a WebKit-based Internet browser). The biggest complaint about WebOS right now is that it feels sluggish at times. Since the OS is only on version 1.4, expect HP and Palm to put some serious effort (and money) into versions 1.5 or 2.0 (or both).
Right now, Palm’s WebOS platform comes installed on four different devices: The Pre, Pre Plus, Pixi, and Pixi Plus. Now, it’s a no-brainer that WebOS will continue to be used on future Palm handsets, but there is no doubt that the OS will branch out to slate PCs and netbooks. Whether it’s Windows and Linux or Windows and Android or Windows and the forthcoming Chrome OS, most computer manufacturers who are building slates and netbooks want multiple options when it comes to the operating system. When HP was showing off the now-possibly-dead Slate at CES in January, there was just as much buzz about the Android-flavored Slate as there was the Windows 7 Slate that was showed off at the Microsoft press conference.
So how does WebOS on a laptop or slate put Apple and other companies in jeopardy? Let’s assume for a minute that whatever apps you use on, say, a Palm Pre Plus can also be used on a WebOS-powered HP netbook/thin-and-light. This isn’t a stretch since Apple is doing the same with the iPad and iPhone. Going with another assumption that Palm beefs up its app selection (more on that later), users who have a phone chock full of software that they love to use are probably going to buy a netbook/notebook that can use the same apps, especially since they won’t be paying for said apps twice. Two pieces of hardware plus one ample selection of applications that only need to be bought once equals great sales for HP and Palm.
When you talk about smartphones in 2010, the “App Store” debate is always an important point. Hardware is only as good as the software it runs, and this means both the operating system AND the downloadable applications. Say what you want about Apple, but it is slamming the competition when it comes to apps. BlackBerry (App World), Google (Android Marketplace) and Nokia (Ovi) are playing catch-up, but Apple is still the dominant force in applications.
With the backing of a juggernaut like HP, Palm is positioned to challenge Apple in the app marketplace arena. This is essentially a combination of HP’s clout and financial resources, and that one-two punch is sure to keep Apple on its toes. Palm already has an app marketplace (App Catalog) for WebOS, but if you add in a dash of HP, then you should get apps created in-house for various markets, from casuals gamers to music buffs to business-types. Combine this with the plethora of third-party apps that should, or rather could, flood in and the WebOS App Catalog could easily swell to the size of Apple’s App Store.
One area that HP dominates is business computing. Walk into any office, and chances are you’ll see an HP, Lenovo, or Dell sitting on every desk and in every cubicle. That kind of connection could prove vital to the Palm brand name. It isn’t a stretch to expect HP to offer proprietary software on its business machines that allow effortless enterprise-level software syncing with a Palm smartphone. It would operate much in the same way an iPhone interacts with iTunes, but keeping the business user in mind, the platform could be much more powerful. If this kind of syncing interaction could be combined with HP’s SkyRoom collaboration software, HP and Palm could have a powerful business hardware and software ecosystem on its hands.
This ties into the “More Money” point, but the relationship between HP and Palm means the latter could come out with some seriously kick-butt hardware. Most smartphone makers are in a constant catch-up cycle with the iPhone: an iPhone will come out, and six or nine months later a company like HTC will come out with something equal or better, only to be bested by Apple in the next quarter. Granted, innovations like the Snapdragon processor have bridged the gap closer than ever, but the next iPhone is only a few months away.
Now that Palm has world-class money and resources at its disposal, it stands a chance against Apple with it comes to hardware. To be fair, Palm’s current hardware is actually quite good, but beyond complaints about AT&T’s network, the iPhone is generally lauded as a solid, above-average smartphone. This combined with everything else the iPhone has going for it, and you get a nearly unbeatable platform. If HP puts the same effort into Palm and its hardware that it did with the Voodoo-infused Envy laptops, then the next generation of Palm hardware could be the best of the market…or at least the top contender against Apple.