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With recent news and opinion flying around HP’s acquisition of Palm, we at ABI Research thought it important to take a step back and look at what this event means for HP, Palm and WebOS. It is well known that Palm needed a buyer who could sweep them off their feet and hit the ground running with WebOS. HP, while somewhat of a surprise is shaping up to be the perfect suitor for Palm because:

• They have the cash on hand to buy Palm in a hurry, and Palm did not have much time to waste
• Many former Palm executives currently work at HP including Todd Bradley who was once CEO of Palm and oversaw the highly successful Treo line of products. This will serve nicely to mitigate the bane of most mergers & acquisitions….corporate culture clash.
• HP and Palm are right down the street from one another.
• HP needed a quick, competent revamp of their smartphone products and strategy, and Palm is essentially a smartphone business in a box for HP with tried and tested IP.
• HP needed a competitive answer to the smartphone plays being made by Dell, Lenovo and Asus
• The key factor keeping WebOS from gaining momentum in the smartphone market was a lack of big budget advertising that HP can afford to deliver.
• For once, HP now owns its own OS to do with as it pleases. This point will have the greatest effect on the future of WebOS.

With this deal in place, we can feel fairly confident that WebOS smartphones will continue to exist in the market place and that the schedule carrier roll out plans will continue as scheduled. However, with HP paying a 20% premium for Palm, it is likely that HP will need to do more than just support the carrier driven smartphone sales if it wants to extract the full value of its new OS.

Both HP and its competitors have been openly targeting UMD segments such as tablet computers and media tablets. Until now, HP has been dependent on licensing the OS for these ’ in -development ‘ devices. This has also left HP trapped by the vision or limitations of what Windows can deliver for this segment of devices. With WebOS now under its purvey, HP has the opportunity to mold WebOS to its needs and its key customer segment, the enterprise.
WebOS may become the “glue” that solidifies HP’s solutions for the mobile enterprise market—not just leveraging the loyalty from Palm's storied past, but building synergy with HP’s growing enterprise networking portfolio, as well as its wireless networking and even its services solutions.

Tailoring devices for the enterprise UMD (Ultra Mobile Device) market requires the flexibility and control to manage the user experience from end to end. Devices need to support the requirements of both the business and the network, including applications, connectivity, and security. In addition, the development environment must support applications that use standard technologies and can be run natively or deployed from the cloud. To date, it has been difficult for HP to address the needs of this market while relying a proprietary OS from another vendor. With ownership of webOS, HP has all the pieces in place to develop and support a solid play in the enterprise smartphone and UMD market.

As HP continues to mold WebOS to meet its needs, RIM and Microsoft partners will have to watch their backs in the smartphone and tablet arenas.

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