How Uber crossed the line with its threats against Sarah Lacy

You probably know that, at a dinner last Friday, Uber Senior Vice President Emil Michael suggested that his company should hire four top political opposition researchers and four journalists to investigate the personal lives and families of journalists who write negative articles about the company. Michael focused his anger on PandoDaily's founder Sarah Lacy, and said that the Uber "smear team" could, according to BuzzFeed's Ben Smith, "...in particular, prove a particular and very specific claim about (Lacy's) personal life."

Since BuzzFeed broke the story, there's been a firestorm of media attention, which led to apologies from Michael and a tweetstorm from Uber head Travis Kalanick, in which he disavowed Michael's statements and said that they didn't represent Uber, but that he wouldn't fire Michael. Uber's response, or lack thereof, hasn't dampened the firestorm one bit, and the company has managed to alienate much of the press that it needs for future publicity.

One thing to keep in mind is that it's been long-standing policy at some tech firms to retaliate against journalists and publications that report stories negative to the the companies' interests. Apple and Microsoft are most notorious for doing this, but many other companies in Silicon Valley have done the same. However, with one known exception, the method that the companies have used is to withhold information from the targeted journalists. Both Microsoft and Apple have documented cases in which they barred certain journalists and publications/websites from embargoed previews of new products, reviews of unreleased products and announcement events. Without access to new and forthcoming products, those journalists and publications were at a competitive disadvantage, because they couldn't review or cover the products until they were released.

Where Michael's threat crossed the line is that it moved from withholding proprietary information, which any company has the right to do, to digging up and revealing negative information about journalists with the intent of damaging or destroying their reputations. Even in the one case that I mentioned above, which was Hewlett Packard's hiring of private investigators in 2006 to identify the source of leaks by lying to phone companies in order to get journalists' call records, HP's objective was to find out who leaked the information, not to gather information to destroy the reputations of the journalists.

Both Michael and Kalanick have characterized Michael's remarks as, essentially, a revenge fantasy rather than anything that the company would actually do. However, by making the statements in front of Kalanick at the dinner, and with Kalanick not disavowing them immediately, both Michael and Kalanick reinforced the increasingly common view of Uber as an amoral, out-of-control company that will do anything in order to win, up to and including breaking the law and ignoring court rulings. I would remind Kalanick and Uber that Microsoft had the same philosophy, and believed that it was too big to touch by anyone. However, both the U.S. Justice Department and European Union successfully prosecuted Microsoft for antitrust violations. That in turn led to a loss of management focus, disillusionment and loss of morale for employees and damage to Microsoft's reputation, all of which contributed to the company's decline and loss of direction.

In essence, unless Uber starts making fundamental changes in the way that it does business, it's setting itself up for an eventual battle (or battles) that it can't win. There is always someone who can take you down if they really want to.

When "something for everyone" may be too much

On the cover of the current issue of "TWICE" (This Week in Consumer Electronics,) there's an ad for Nikon's cameras with the tagline "There's a Nikon for Everyone." It got me thinking about something I noticed at the Sony and Panasonic booths at last week's NAB conference. These companies have so many different camcorders and cinema cameras that even the people selling them can't keep track of all of them. For example, when I was in the Sony booth, I couldn't find the 35mm cinema cameras (NEX-FS100, FS700, F3, etc.) I asked one of Sony's salespeople where they were, and she said that all of the company's cameras were on display in the huge circular "camera pit" at the center of the booth. I'd walked around the entire pit and hadn't seen the 35mm cameras, so I went around again but didn't find them. It turned out that the 35mm cameras were in a completely separate section of the booth.

There are so many products that they overlap each other in price and functionality. The same is also true for still cameras from Canon, Nikon, Sony and others, and smartphones from Samsung, HTC, LG, Motorola, Nokia, etc. Makers of notebook and desktop computers have the same problem--just look at the proliferation of models at HP, Dell and Acer. Manufacturers make so many models in order to avoid losing a sale, but they wind up confusing potential customers. Each of these products costs a significant amount of money to develop, manufacture and support. Resources that could be used to develop entirely new products are instead used to create minor product variations to fit into every conceivable price point.

Apple is a great example of a better approach to the problem. At any one time, Apple has a single line of smartphones, tablets, and notebook, all-in-one, mini and full-sized desktop computers, each of which is refreshed once a year. Apple continues to sell a single version of the previous year's tablet and smartphone (two years in the case of phones) at lower prices. Each computer line has four or five models, which vary by display size and processor. When a new computer line is launched, the previous line is discontinued. It covers all the price points, yet it's simple for consumers to understand and for Apple to sell. It also works well with Apple's strategy of making product announcements into newsworthy events.

Sony lost $6.4 billion last year; Panasonic lost $10.2 billion. They no longer have the money to invest in endless product proliferation--which might explain the relatively paltry number of new products shown by Panasonic at NAB. They, and companies like Canon, Nikon, Samsung, etc., would be well advised to focus on fewer, better products that are clearly differentiated from competitors and from each other.

eBooks: After the transition

In my last post, I examined the impact that eBooks have had on the publishing industry, and I noted that things are just getting started. Most industry observers agree that eBooks now comprise around 20% of book sales by unit volume. The Forrester Research/Digital Book World survey of U.S. publishers I wrote about found that the single largest group of respondents believes that eBooks will comprise 50% or more of total book sales by sometime in 2014.

What will the book industry look like when today's ratio of eBook to print book sales is reversed--when 80% of book sales by unit volume comes from eBooks? I'm not willing to guess when the industry will get to that point, but I have no doubts that it will get to that point eventually. Here are some likely results of the transition:

• Print books will be much more expensive: As anyone who's purchased large print jobs, from business cards to books, will tell you, the unit cost for printing decreases dramatically as the size of a print job increases. It's sometimes no more expensive to purchase a larger print run than a small one, even if you end up recycling some of the printed materials rather than using them. The reason is that set-up costs are the same whether you're printing a small number of items or a large number, and that set-up cost is spread over the total number of items that you print. Books encounter additional set-up costs for binding, especially for hardcover books.
  
  Companies such as Kodak, HP and Xerox are major players in the print-on-demand market, using digital presses rather than offset or letterpress in order to make small runs economical. However, some of the costs, such as binding, remain, no matter what method is used to print. Even with digital presses, it's not going to be possible to make short-run books at the same unit cost as large-run books. We're already seeing this effect, as the "Big 6" publishers are using agency pricing to boost the prices of their eBooks in order to offset the lower profit margins they're getting on print titles. That's with 20% of sales going to eBooks. When eBooks comprise 80% of sales, publishers aren't going to be able to hide the true cost of printing and binding books.
• Nevertheless, print books will still be around: Even though print will be more expensive, I have no doubt that print books will survive, just as vinyl records have achieved a renaissance thanks to audiophiles and nostalgia buffs.
• Publishers will only commit to print runs for their "sure-fire hits": Just as the movie industry is fixated on producing sequels and movies based on existing successful books, television shows and comic book characters, major publishers will only print books that are from well-known, previously-successful authors, as well as new authors who are well-known from other arenas, such as television, movies, sports and politics. All of their other titles will be published as eBooks first, and will get print runs only if they're justified by customer demand.
• Bookstores will be very different: In the U.S., there will be far fewer Barnes & Noble bookstores, and the ones that remain will be much smaller. As I wrote some time ago, they're likely to be cafes with bookstores inside them, rather than bookstores with cafes inside them. They'll still carry some print books, albeit a much smaller selection. Big touchscreen displays will give customers a similar experience when shopping for eBooks that they have today when shopping for print books: They'll see bookshelves with book covers, and with a flick of a finger, they'll be able to see the back cover, inside covers, and leaf through the book, just as they can today with print books. With another few touches, they'll be able to buy the title as an eBook and download it instantly, or for some titles, purchase it in a print version that will be shipped directly to their home if it's not in stock at the store.
  
  As for independent bookstores, there will also be fewer of them, but the ones that focus on used books will do quite well. Used titles will be much less expensive than new ones, so for price-sensitive customers and those who have to have print books, used bookstores will be their best choices.
• Today's black & white eReaders will be a thing of the past: All eReaders and tablets will use color displays. In the case of eReaders, they'll use low-power displays such as Qualcomm's Mirasol and E Ink electrophoretic color displays; tablets will use LCD and OLED displays. The functionality of the devices will be more similar to each other than they are today; both eReaders and tablets will be able to handle audio, video and interactivity. The primary differences will be in battery life and cost.
• The "Big 6" will become the Big 3 or 4: Just as in the music industry, where financial problems have resulted in a wave of consolidation, we're almost certainly going to see consolidation among the "Big 6" publishers, as well as publishers in every market segment: Business and professional books, children's books, religious books, K-12 and college textbooks.

I would argue that most of these developments are already underway, and the ones that aren't will start once eBooks pass 50% market share. As I wrote in my last post, anyone who doesn't believe that eBooks will result in revolutionary changes in the book industry is fooling themselves.

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

Why you shouldn't announce products without delivery dates and prices

Yesterday, Apple announced the iPad 2 in San Francisco. I won't go over the details, since it seems like every news outlet in the U.S. has already covered them. However, I want to point out one thing that Apple does consistently that its competitors still do all too rarely: Apple announced hard retail availability dates and prices for the iPad 2, iMovie and GarageBand for iOS, as well as the availability date for iOS 4.3. When the event was over, everyone knew when the products would be available and how much they'll cost. Apple regularly does this; in fact, it's rare when Apple announces a product without giving hard prices and availability dates.

Compare that to what its competitors have done. When Samsung announced the original Galaxy Tab Android tablet, it didn't release any prices or availability dates. The information leaked out over the next several weeks. Motorola and Verizon didn't announce prices or availability dates when the Xoom tablet was shown at Mobile World Congress; that information leaked out of Best Buy weeks later. LG's G-Slate came out with German pricing but no U.S. pricing or availability date. Samsung's new Galaxy Tab 10.1 doesn't have either availbility dates or prices.

It's not just the Android tablet vendors who can't get their numbers straight. RIM has been showing the BlackBerry PlayBook for months, still without hard prices or a release date, although a date of April 11th has been leaked. HP held a big event in San Francisco to launch its new WebOS-based smartphones and TouchPad tablet, but gave no prices. As for the ship dates, HP was unwilling to get more specific than "Spring" or "Summer".

It's difficult to take a product announcement seriously if the manufacturer isn't willing to say how much it will cost or when it will be available. I understand the problem when products are sold through mobile carriers, who have their own release schedules and pricing plans. However, Apple works with carriers around the world and has managed to be able to announce consistent release dates and prices.

In hindsight, given the difficulties that Samsung had with the original Galaxy Tab and that Motorola is having with the Xoom, it wouldn't have hurt to delay the announcements until price and availability dates were set. In the Xoom's case, it probably wouldn't have hurt to wait until it ships with LTE built-in and until there's a decent population of tablet-optimized Android apps. Rushing product announcements out in order to "freeze" the market and prevent consumers from buying competitive products may have worked once, but today, when new products are released continuously, consumers won't wait. For example, they're going to compare the second-generation iPad 2 and its 65,000 tablet-optimized apps with a version 0.9 Xoom--not quite ready to ship and with less than 100 tablet-optimized apps--and in the vast majority of cases, the iPad 2 will win.

Google and its partners went through this with Google TV, which should have been announced as a product concept to encourage app developers, but instead was rushed to market at too high a price, with inadequate content partnerships and insufficient user experience testing. RED preannounced its Scarlet camcorder years before it was ready, and ended up educating its competitors, frustrating its customers and frittering away its market credibility.

If you can't announce a hard price and release date, you shouldn't announce a product. It's as simple as that.

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.

The rise and fall and fall of HP

Yesterday, HP's Board of Directors dismissed CEO Mark Hurd and appointed CFO Cathie Lesjak to replace him on an interim basis. The Board awarded Hurd a $12.2 million dollar severance payment, along with extending his rights to exercise stock options worth approximately another $38 million, for a total award of $50 million.

Here's a brief summary of the "facts" (you'll see why I said "facts" in a moment): Last June, an unnamed marketing consultant represented by Los Angeles attorney Gloria Allred filed a sexual harassment complaint against Hurd. According to HP, its Board of Directors instructed the company's internal and outside counsel to conduct their own investigation, and determined that Hurd had not violated HP's sexual harassment policy. However, according to the Washington Post, "The board...found that Hurd had a personal relationship with the contractor that he had not disclosed. Hurd also filed several inaccurate expense reports meant to conceal his relationship, the board found." HP's own statement says that Hurd also misused company assets. The Post quotes HP general counsel Mike Holston as saying that Hurd "demonstrated a profound lack of judgment."

Gloria Allred made her own brief statement of behalf of the marketing consultant, saying "...there was no affair and no intimate sexual relationship between our client and Mr. Hurd." Now we get to the reason for the quotes around the word "facts." I haven't read HP's sexual harassment policy, but it's likely that if the relationship between the consultant and Hurd was consensual, it wouldn't be considered sexual harassment under the policy, whether or not sexual activity actually happened. The consultant's status as a contractor rather than an employee may have also factored into the determination that no sexual harassment took place. HP says that there was a "relationship" and implies that it was sexual but consensual; Allred says that there was no consensual relationship, and if she's correct, any sexual advances that Hurd made would constitute sexual harassment.

This is the third time in five years that HP has fired or forced the resignation of a top executive. In 2005, the board fired CEO Carly Fiorina for putting her ego ahead of sound company management. Mark Hurd was hired from NCR to replace her. The following year, board Chairman Patricia Dunn was forced to resign in the wake of a "pretexting scandal", where the board hired private investigators who engaged in illegal activity in order to identify the source of leaks from board meetings, including obtaining the phone records of journalists. Hurd was appointed as Chairman of the Board to replace Dunn. Now, Hurd has been dismissed from both his CEO and Chairman positions.

There was a time, when founders Bill Hewlett and Dave Packard were active in management, that HP was a great company, even though it was much smaller. "The HP Way", a set of rules for how the company was run that put its employees and integrity above everything else, set the model for how companies should be run. In my opinion, The HP Way was at least as important as the universities and venture capitalists in making Silicon Valley the success that it has become. Companies write Policy & Procedure manuals covering hundreds of pages and every possible contingency; the five paragraphs of The HP Way were far more effective in guiding how a company and its employees should act.

Fiorina threw out The HP Way, and Hurd denied that it ever existed. HP is now one of the world's biggest technology companies and is bigger than IBM on the basis of revenues, but it's no longer a great company. The only thing that people can learn today from HP is how not to do things. It no longer stands as a model of corporate ethics or employee respect. Its research is second-rate and focused toward getting products out the door quickly, not toward major game-changing innovations. HP is a revenue machine. That's very much in favor on Wall Street. We know, from the last few years, what else has been in favor on Wall Street, and ethics are nowhere on that list.

Update, August 8, 2010: As I suspected, Mark Hurd's behavior was symptomatic of a general culture of excessive compensation, personal entitlement and a blurring, if not complete erasure, of the line between personal and company expenses on the part of Hurd and HP's other top executives. HP's board can't deny responsibility for this--they approved the compensation and policies that allowed HP's top executives to use the company as their own private bank and airline. The best thing that they could do (which of course they won't) is to change the policies and bring in an outsider as CEO and Chairman. The entire executive team at HP is tainted and should all be ruled out of contention for the CEO position.

Update 2, August 8: The Wall Street Journal is reporting that last Thursday, the day before his dismissal, Mark Hurd reached a settlement with and paid an unspecified amount of money to the unnamed marketing consultant who filed sexual harassment charges against him. The terms of the settlement weren't released, but an unnamed source told the newspaper that HP didn't pay any money to the consultant. As with many things in this case, that's technically true but effectively false. HP agreed to pay Hurd a $12.2 million dollar cash settlement, and a large portion of that settlement undoubtedly went to the consultant. Hurd almost certainly got the consultant to agree to a non-disclosure agreement, prohibiting her and her attorney from discussing either the case or the settlement. However, Gloria Allred, her attorney, made a statement after Hurd was dismissed. If an NDA was in place, the only way that the statement could have been made is if Hurd asked (or required) Allred to make it. I believe that far more details will leak out, and they'll be damaging both to Hurd and to HP.

Update 3, August 8: Well, that was fast. The unnamed marketing consultant has named herself. According to IMDB, Jodie Fisher, 50 years old, was an actress in minor television shows and "B" movies from 1992 to 1999, then she dropped out of sight. She returned to television as a contestant on a short-lived NBC reality series called "Age of Love" in 2007, where she was one of seven 40+ aged "cougars" who were attempting to be chosen by a 31-year-old Australian professional tennis player. She was voted out of the show in the very first episode. Here's a description from the Reality TV World website:

...Mark (Mark Philippoussis, the Australian tennis pro) was forced to eliminate one of the older women and decided upon Jodie Fisher, a 46-year-old vice president for a commercial real estate company from Dallas, TX who has been married once before and has an 8-year-old son.

"I have to go home tonight, but that's okay... That's okay.  I have my sweet little boy to see." said Jodie upon learning she was the first bachelorette sent packing.  "I hope I've helped show that a woman in her 40s is sexy and interesting and powerful.  Whoever the right person for me is, he's out there."

Following her appearance on "Age of Love", she appeared in another movie, "Easy Rider: The Ride Back" in 2009. I'm confused. She was a "B" actress for a decade, went into real estate in Dallas, competed in a cougar-off on NBC in 2007 and went back to acting in 2009. How exactly does any of this qualify her to be a senior marketing consultant working with the CEO of one of the world's largest technology companies?

HP dropping Windows 7 tablet: Bad news for Microsoft and Intel?

Yesterday, word unofficially came out that HP is killing the Windows 7-based tablet that it's been demonstrating for months, on the grounds that Windows 7 isn't an appropriate platform for building tablet applications and requires too much power. Another rumor started circulating that HP is planning to shift to non-Intel CPU designs for tablets (most likely ARM- or Snapdragon-based designs) because Intel's Atom processors use too much power.

If HP couldn't get Windows 7 to work as a tablet platform, it's unlikely that other vendors are going to have much more success. Microsoft compounded its problem by announcing that its Courier project, a two-screen, book-like tablet with a custom operating system and applications, has been killed. It now looks like Microsoft will only be a bit player in the tablet business, at least for a while.

Intel will similarly be hurt by HP's decision to shift to non-Intel processors for tablets. Both Intel and Microsoft are looking for new areas of profitable growth, and tablets are the hottest new platform. If Intel doesn't have a practical solution for tablets, it will miss a big growth opportunity, at the same time that sales of netbooks (the primary customers for Atom CPUs) are slowing.

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.