If at first you don't succeed, quit

PC World has a great article about wby Windows PCs are having so much difficulty competing with Apple's MacBook Air. When the Air was first released, it was an overpriced, underpowered novelty that sold well to Apple fanatics, but poorly to everyone else. Jason Cross, the author of the PC World article, points out that Sony had a notebook computer, the X505, that was about as thin and light as the Air, in 2003. Dell had the Adamo, and then the Adamo XPS, starting in 2009. None of them sold well, because they were all very expensive, and the Dell models had the additional drawback of poor battery life.

Both Sony and Dell abandoned the ultralight segment, but Apple continued to press on with the Air, despite poor sales. The fourth-generation Air, released not long ago, is widely acknowledged to be the "must-have" laptop of the year, combining extremely small size and weight with a fully-usable keyboard, excellent performance and a competitive price.

I bring this up in large part because of HP's announcements last week that it would discontinue its webOS-based hardware and maybe, sometime, get rid of its PC business. HP could have decided that it needed to be in the mobile business for the long run, and with webOS, it already had the best tablet operating system next to iOS. Instead, it abandoned the mobile business, and has signaled that it has no commitment to the PC business, either. Sony and Dell took the same approach with their ultralight notebook businesses, and Dell is moving in the same direction with tablets. Sony has two tablets ready to launch, but I wouldn't be surprised to see the company pull back if they don't sell well, either.

Apple demonstrates that success requires long-term commitment, but it's not just Apple that has that attitude. Microsoft is legendary for working on products until it gets them right; the saying for years has been that Microsoft doesn't get it right until Version 3. If Microsoft had quit after Versions 1 or 2, there wouldn't be Windows or the Office suite--in fact, there probably wouldn't be a Microsoft.

HP's own top management acknowledges that mobile computing is the future, but it gave up on mobile because its first tablet didn't make a big splash in its first 60 days. That's incredibly short-sighted thinking. Does HP seriously believe that there's no place for mobile computing in the enterprise market? Instead of having some control over its destiny in mobile, HP will be forced to partner with other companies and adapt its systems to their offerings.

Success requires time, effort, and the willingness to fail in order to learn. If you don't have a long-term commitment to be willing to fail on the way to success, you shouldn't even start. Do something simpler, like building clones of other people's PCs, or clones of other Internet companies. You'll still probably fail, but it won't require any creativity or risk.

Cold, dead fish

I started my career 30 years ago at Hewlett-Packard. Back then, HP was almost completely engineering-driven--so much so that the saying at the time was that "HP would market sushi as cold, dead fish." HP's marketing may have been lacking, but its product development capabilities were undeniable. Turn the clock forward to 2011, however, and the HP of today is a company with only one real strength--its printer division--and a management team that's almost completely lost the trust of the company's investors.

Yesterday, in addition to releasing its financial results, HP announced that it was killing its webOS-based tablet, the TouchPad, which had been shipped less than two months earlier, and its line of smartphones. Not only did the company announce that it was killing the products, but it was also immediately ending support, leaving customers who had purchased the products as late as yesterday in the lurch. HP then said that it was considering what to do in order to "maximize the value" of the webOS software. HP also announced that it had made an offer for Autonomy, the U.K.'s second-largest software company, and that it was looking at "strategic options" for its PC business.

These may very well be the right decisions; rumors have been floating that the company has considered getting out of the PC business for years, and those rumors picked up over the last six months. HP's acquisition of Palm was questionable to begin with, and the company bungled the launch of its new webOS products, along with the management of the webOS Developers Program. The acquisition of Autonomy will push HP further into the software business, with an emphasis on "big data" analysis applications. The problem isn't with what HP announced, but how it announced it.

The decision to kill the webOS products came just two weeks after the company launched a major promotional campaign dropping the price of the TouchPad tablet by $100, and while HP was running a national television advertising campaign to promote the device. I saw two HP TouchPad ads on national television last night, after HP had announced the decision to kill the product. HP announced that it was reserving $100 million for returns of TouchPads, but it said nothing about what it was going to do for recent purchasers of the HP devices. Should they return them to where they purchased them for a refund? Should they send them to HP? Should they keep them but send proof of purchase to HP? Would HP do anything at all to make them whole?

Update, August 20, 2011: Late yesterday, HP reduced the retail price of the 16GB TouchPad to $99 (US), and $149 for the 32GB model. Some resellers, most notably Best Buy in the U.S., have chosen to return the tablets to HP rather than sell them at the lower price. Best Buy has also extended its return period from 30 to 60 days in order to cover all sales of the TouchPad from when it first shipped.

Yer another update, August 21, 2011: Best Buy, which had initially decided to return the TouchPads in its U.S. stores, has instead decided to sell them at the prices suggested by HP. Purchases will be limited to one per customer, with no returns or refunds allowed. Customers who purchased TouchPads from Best Buy at higher prices will still be allowed to return them for a full refund.

As for keeping webOS viable, I would have expected HP to have a definitive announcement: It's selling it to another company. It's open-sourcing it and making it available for anyone who wants to use it. It's setting up a Mozilla-like foundation to take it over. But instead, HP said that it didn't know what it was going to do.

The PC announcement had at least the same level of uncertainty. Leo Apotheker, HP's CEO, said that the company was considering spinning out, selling or keeping the PC business, but that no decision would be made for as long as a year. Again, you would have expected HP to say "The PC business is being sold to X", or "We're spinning the PC business off to our investors", or nothing at all. The indecisiveness of HP's statements make the decision look like it was taken at the spur of the moment, without a lot of thought.

Even the acquisition of Autonomy was couched more as "Yeah, we're considering buying them", then as "We've made a definitive offer to acquire Autonomy for $10 billion", as has been reported. The entire set of announcements feels as though it was designed more to deflect attention from a mediocre earnings report than as a well thought out strategy for turning the company around. The investment community responded by driving HP's stock price down to its lowest level in years, dropping almost 21% in a single day near today's market close.

Making the announcements that it did, while leaving so many questions unanswered, did nothing but increase doubts about the competency of HP's management team. This is the wrong time, and the wrong stock market,  for HP to make its future plans so uncertain.

HP's WebOS opportunity

Update, August 18, 2011: HP just announced that it is discontinuing all its webOS-based hardware devices, including the TouchPad tablet and smartphones. According the The Wall Street Journal, it will hold on to the webOS operating system and will pursue licensing it to other companies.

Google's decision to acquire Motorola Mobility has thrown the Android ecosystem into chaos: Will Google really treat Motorola no differently than any other Android licensee, or will it give Motorola priority for new features and new versions of Android? Will Google be able to stay focused on releasing new versions of Android that are competitive with iOS while dealing with the Motorola acquisition?

Google's acquisition opens the door for Microsoft to become an alternative operating system vendor for some of Android's licensees, but Microsoft's partnership with Nokia has spawned its own concerns: Nokia clearly has "favored nation" status in the Windows Phone ecosystem. As a result, Microsoft may be less able to capitalize on Google's decision than it would first appear.

The company that might have the best opportunity to capitalize on Google's acquisition is HP, if it can execute quickly and decisively (always a big if when talking about HP). WebOS is an excellent operating system, but it's been crippled by HP's indecision in launching new products, and its inability to run an effective developer program. AllThingsD reported yesterday that Best Buy has taken delivery of 270,000 HP TouchPads but has only sold 25,000 of them. Best Buy is reportedly demanding that HP take back its inventory of tablets. Now, HP is launching a new line of webOS-based smartphones in Europe, but the company's chances of success aren't much better in the smartphone market than they are right now in tablets.

A number of observers have suggested that HP should license webOS, but for this plan to be successful, HP has to follow a more radical course. Here's the approach that I believe HP should take:

1. Set up a Mozilla-like organization to run future webOS development, and in particular, run the developer program. This organization would insure that all licensees have a common code base to work from, and that webOS apps work on the widest possible range of devices. One goal would be to avoid the proliferation of versions that frustrates Android developers.
2. Give licensees partial ownership of webOS and the development organization. That would give the licensees a say in the future direction of the operating system.
3. Licensees would invest in the development organization rather than pay royalties. (There could be two classes of licensees: One that owns a stake in the development organization, and another that pays royalties in lieu of investing in the development organization.)
4. Once the development organization is launched and licensees sign on, HP would drop its smartphone line. HP would remain in the tablet business, and could use webOS throughout its product line. The company would have the option to reenter the smartphone business after a number of years.

I have to believe that a joint venture development company, with talent contributed by companies such as Samsung and HTC, as well as HP, could do a much better job managing and promoting the webOS platform than HP alone. You may say, "Isn't this what Nokia tried to do with Symbian?". Yes, Nokia established the Symbian Foundation and open-sourced the operating system, then brought it back in-house and made the license proprietary. The problem was that Nokia wanted it both ways--the company wanted to control the development of Symbian but also wanted its competitors to license it. If HP is to succeed in licensing webOS, it has to truly cede control to a joint venture with its licensees, and it has to (at least temporarily) get out of the smartphone business.

In the long run, if HP establishes webOS as an industry standard for mobile devices, its acquisition of Palm will have been worth it, even if the company gives up a minor revenue stream from smartphones

Mobile's impact on Microsoft: HP's out, Nokia's in

Two announcements--one yesterday, one tomorrow--mark a major realignment of industry support for Microsoft, and also underline the transition from PCs to smartphones and mobile devices. Yesterday, HP announced two new WebOS-based smartphones and its new TouchPad, but perhaps the biggest bombshell was held for the very end of the presentation: HP will make WebOS run on its personal computers.

As I wrote yesterday, WebOS isn't a true replacement for Microsoft's Windows 7, and it relies extensively on a touch interface, so it's likely that WebOS support will be confined to HP's touchscreen all-in-one PCs and tablets, at least initially. However, HP's move is very bad news for Microsoft, because HP is Microsoft's largest software reseller. Microsoft won't get any smartphone or TouchPad operating system revenue from HP, and its revenues from Windows on HP's desktops and notebooks are now at risk. In addition, HP's decision to port WebOS to its PCs may increase the market credibility of Google's Chrome OS as a Windows alternative (although I still believe that Google should drop Chrome OS and put all its efforts behind Android.)

Bloomberg reports and other sources have confirmed that Nokia will announce a partnership with Microsoft to use its Windows Phone 7 operating system tomorrow. Nokia has been struggling in the smartphone market, and a blunt memo from Nokia's new CEO suggests that the company's existing smartphone operating systems, MeeGo and Symbian, won't turn things around. Windows Phone 7, which has been floundering in fourth place among smartphone operating systems, could get a big boost from Nokia, especially outside North America. Microsoft is addressing the big structural holes in Windows Phone 7--copy and paste are likely to be added in March, and multitasking will most likely be implemented before the end of the year.

HP's and Nokia's decisions make it very clear that Microsoft's future, as well as the future of information technology, is mobile. The problem for Microsoft is that it's moving from a position of strength (the desktop) to a position of weakness (mobile). However, Microsoft can't hold back the future, no matter how hard it tries.

HP's WebOS announcements: You mean there's no beef in this taco?

As I write this, HP's WebOS announcement in San Francisco just ended. The actual product announcements--the Veer and Pre3 smartphones, and the TouchPad tablet, are being well-covered by Engadget, CNET and others. However, what HP left out is at least as interesting as what it disclosed:

• HP didn't announce a single carrier relationship, domestically or internationally, for its smartphones or tablet, except for Verizon, which will sell a now-obsolete Pre model.
• Not a single reseller came out to commit to sell any of the products.
• HP didn't give any hard delivery dates or prices, so it's impossible to say how any of the products will stack up against their iOS and Android counterparts.
• The TouchPad will ship initially without 3G/4G support, and no carrier will bother with it until it has broadband support.
• There was no mention whatsoever of battery life for the TouchPad, which is a bad sign--if it had great life, HP would have talked about it.
• There will undoubtedly be more details tonight at HP's developer event in San Francisco, but most developers that haven't already committed to the WebOS platform are going to wait until prices and distribution deals are announced.

Near the end of the presentation, HP dropped a bombshell: It will port WebOS to its personal computers. This is clearly meant to "sweeten the pie" for software developers, but it doesn't mean anything until it's actually demonstrated. WebOS is designed to use a touch interface extensively, so porting it to a conventional PC is far from a "slam dunk". This announcement, however, has to have Microsoft shaking, since HP is its largest OEM customer for Windows. WebOS isn't going to be a complete substitute for Windows 7, but Microsoft has take the WebOS threat a lot more seriously than Google's Chrome OS.

In short, the bottom line from today's event is that HP's new devices might be really good, but we'll have to wait to see when we can get them and how much they'll cost.

HP buys Palm, but why?

Earlier today, HP announced that it will acquire Palm for $1.2 billion, a 23% premium over Palm's market value prior to the announcement. HP has more than enough cash on hand to complete the transaction without issuing more stock. The question is, why did HP buy Palm? What value do they see in the company, and what does this mean for the future of Palm's products?

Many people don't realize that HP has sold smartphones for some time under the iPaq label, but the company has miniscule market share. Growth in most of HP's businesses has been slowing; it needs to get into new markets, but it was getting no traction in smartphones by itself. By buying Palm, HP gets an existing line of smartphones sold through all the major U.S. mobile operators, along with some international distribution. The distribution agreements might actually be more important to HP than the existing Palm hardware line itself.

HP has said that it will increase Palm's R&D investment, and that it plans to port Palm's WebOS operating system to more devices. However, I wouldn't be at all surprised to see Palm go back to its previous strategy of offering phones with more than one operating system, when it sold different models that ran Palm OS and Windows Mobile. We could easily see Palm phones that run Android and Windows Phone 7 alongside WebOS-compatible models. This would make the Palm product line more appealing to mobile operators.

Will we see tablets running WebOS? Perhaps, but I wouldn't count on it in the near future. A lot of development work will have to be done to make WebOS work well on tablets, in the same way that Apple had to significantly rethink its iPhone OS to make it work well on the iPad.

Finally, will HP's acquisition of Palm make a big difference in the number of applications available for WebOS? Developer interest will be driven by sales of Palm's phones, not the acquisition of Palm by HP. If Palm's market share increases significantly, more developers will write for the platform, but the acquisition isn't going to open the app floodgates by itself.

Palm: Dying by self-inflicted wounds

Today, Engadget ran a long post about what Palm needs to do in order to survive. The article reads more like a list of things not to do when you launch a product. Most people agree that when the Palm Pre was first shown at CES in January 2009, it had an innovative operating system and a decent, if not great, hardware platform. However, from CES forward, Palm made one major mistake after another. Here's the summarized list from the Engadget article:

1. Palm waited six months to ship the Pre after it showed it at CES; by that time, much of the initial interest had cooled.
2. Palm shipped the Pre only days before Apple announced the iPhone 3GS, which immediately stole most of the Pre's thunder.
3. Palm's exclusive partner for the Pre launch was Sprint, probably the weakest of the major US wireless carriers. Palm should have done whatever it had to do to get the Pre into AT&T, Verizon or both.
4. There was no Software Development Kit available for the Palm Pre when it shipped. It took a long time for Palm to ship the SDK, so only a handful of applications were available while the iPhone and Android were gaining apps tens or hundreds of times faster. Also, Palm has only recently gotten around to shipping a PDK that enables access to the low-level functions of the Pre and Pixi.
5. Palm had awful marketing at launch, especially an incomprehensible advertising campaign that told buyers nothing about what made the Pre special or why they should buy it.
6. When Verizon finally got the Pre Plus and Pixi Plus, it advertised the phone as suitable only for housewives from the 70s. Palm should have done everything it could to nix Verizon's campaign, but whatever it did wasn't enough.
7. Rather than develop its own content management application or license something from a third party, Palm deliberately broke USB compatibility rules in order to make the Pre look like an iPhone to iTunes. Apple promptly retaliated, closed off iTunes and got the USB Implementers Forum to order Palm to stop masquerading as Apple.
8. The Palm Pixi makes no sense--it can't compete with other phones at its price point, and it was deliberately underpowered by Palm so as not to compete with the Pre.
9. The Pre had lots of hardware problems, most of which Palm refused to acknowledge or take responsibility for.

I'm going to stop there. My point isn't that Palm shouldn't fix these problems, but rather that it never should have had these problems in the first place. Everyone makes mistakes when they launch new products; we're all human. Palm, however, made so many disastrous mistakes that the company is now probably too far gone for any survival guide. Writing a survival guide for Palm is like telling the deceased at a funeral home to stop smoking. It's already too late.