When I saw a tweet last night about HP agreeing to acquire Palm I immediately began spinning up scenarios. After about five minutes trying to work out some holes in the idea I was surprised by just how good the fit potentially is, even in areas that might at first glance be a problem.
HP has already been very clear about what it brings to the party- muscle. Distribution muscle, deep pockets and a huge customer base. But what about Palm? Palm’s webOS is a work in progress, but a very nice work in progress. The Pre’ is a shiny piece of kit (see the video above). HP gets an embedded OS, a surprisingly potent brand and a huge set of patents and related IP… and a web app development play.
What Went Wrong At Palm
The management of the company has made some mistakes – to my mind Palm’s biggest error was not being as open to developers as its platform was. webOS was designed to take advantage of Web development skills – but Palm tried to use Apple’s trick of secrecy first rather than investing heavily in developer good will and playing the open card. It didn’t work.
How Palm Fixed It
Palm realised its error last year and did something incredibly smart – it hired Dion Almaer and Ben Galbraith to develop a new, web-savvy, strategy around its platform. These guys are developers, think like developers, talk like developers, walk like developers and eat dim sum like developers (the pizza thing is a myth). These chaps are awesome, they are friends of mine, and at some point (probably soon now) they will finally pony up to be a client. But don’t take my word for it.
As @chrisblizzard put it yesterday:
Web App Development at HP?
IF HP can’t encourage and foster and retain Dion and Ben though then its likely the acquisition itself will not succeed.
Seriously- they are a bellwether. But it seems to be the new web-driven development model goes way beyond phones. Sure HP wants to play in that game- but now it owns an OS it can stick in car dashboards, TVs, set-top boxes, home power monitoring and automation units, printers even. And the OS runs standard Web apps. Nice place to be.
Oh wait- did i forget to say… iPad?
Software and Services: Towards Consumer Clouds
Perhaps more so than the actual runtimes involved – HP suddenly has a shot at Web developer relevancy that it didn’t before. Which could serve to really juice up its Consumer Web Services – not well known among the Flickr cognoscenti but with tens of millions of users – see SnapFish, or HP’s Gabble for video sharing.
When I first saw HP offering video and photo sharing services I thought it was kind of odd HP was building them. But the more Facebook turns its service into a place where you definitely don’t want to share photos of your kids the more attractive a trusted wall garden look. Oh sure – these pictures of my kids? Yes please- use them in advertising without permission… awesome. knock yourself out.
And hey look – now HP can offer “safe” phone/camera/video recorders etc too. Who would bet against HP offering a Cisco Flip “killer” in the near future.
End To End
Relying on partners can kind of suck, especially in fast moving consumer spaces. And customers vote again and again for tightly integrated experiences. Mark Hurd has to look at Apple and think – I’d like a piece of that. And he only needs a small fraction of Apple’s success to make a ton of money, and push up the shareprice.
Waiting on Microsoft or Google? Why bother? With webOS HP is in charge of its own destiny. I must admit, I am pretty excited about the competition about to ensue between HP with webOS and Dell with Android. Win!
Bridging Enterprise and Consumer – The Killer App
HP, unlike many other firms, most notably IBM, wants to sell to both consumers and enterprises. Its not making any false distinctions. And it seems to me IBM is on the wrong side of history here, for all its part attempts at succeeding in the consumer market. As I said on Twitter earlier:
blurring of consumer and enterprise tech is real. IBM has to adjust to that reality “we don’t do consumer” is not a strategy
Palm is a great bridge, in terms of what it is, and what the brand means. What’s the difference between a consumer and an enterprise device? Who pays the bill, basically. HP will be able to sell slick phones in stores, or offer volume licensing deals to corporations, using its IT installed base to resell telecoms services, creating new linkages with telcos and carriers, rather than trying to cut them out of the loop. One needs to be wary of “halo” strategies- Sun for example struggled to turn mobile Java into money through Big Server sales. But unlike Sun, HP will be making good money on every device sold.
Phones are for work and play. That’s perfect for HP.
What if HP messes it up?
This is course a possibility. HP’s acquisition record is patchy at best. Apollo, DEC etc. HP acquired both Agilent (medical imaging and diagnostics) and Bluestone (Java app server) only to spin them out later, having failed to make the mergers stick.
All that said – while the jury was out on HP-Compaq while Carly Fiorina was in charge, HP’s current CEO Mark Hurd has undoubtedly made a success of the deal, driving the necessary cost savings, and even delivering the much overused word in deal-making “synergy”.
I think HP needs a balance of hands off and hands on. One interesting point to note is that Todd Bradley, head of HP’s personal systems group used to work at Palm. Clearly he knows how the firm should work.
Partners, What Partners?
When I started running scenarios something stuck me pretty squarely. Microsoft’s failures in the mobile phone market made it easy for HP to pull the trigger on the Palm deal. Partner loyalty is one thing, but being loyalty to a market laggard is another. If you’re going to be in fourth place, why not do it from a position of ownership, with much better margin upside.
No Need To Act Like An Android Sheep
I am a huge fan of Google’s Android mobile OS. I have an HTC Magic and it makes me very happy indeed. Happy enough to award the Android folks my team of the year for 2009. Clearly Android has extraordinary market momentum – notably among Asian manufacturing firms. And yet. And yet… Google wants to sell its own phones too – in the shape of the Nexus One. At some point Android is going to start looking evil – and from an HP perspective, why should it give Google a channel for its software products every time it sells a phone?
And that, dear readers, is a wrap. I know that Michael and Stephen also have analysis coming, so I think that’s enough on the deal for now. IBM is a client, HP is not.