When I heard the news that HP had bought Palm for $1.2 billion, roughly the price Palm had been shopping itself around for, I had the same reaction I have when my wife comes home from one of her shopping trips: What did you buy THAT for? I trust in the coming months we'll get an answer to that question; the only important outcome will be whether this move turns out to be part of a really good or a very bad idea.As I noted in my piece last week, Palm's was a story worthy of Hollywood. A child prodigy (the PDA), got even bigger (the Treo smartphone), fell from grace (iPhone and RIM), and now making one last shot at the big time (Web OS).
As HP's name didn't even show up on the original list of suitors, I'm sure we'll have lots of speculation in the coming days. The basic point is clear: Palm didn't have a snowball's chance in hell at becoming a significant factor in the consumer smartphone market, and we can assume that HP had figured that one out. With the consumer play off the table, we're clearly looking at something in the enterprise space.
However, with the introduction of the iPad, that enterprise play could involve either smartphones or tablet computers; you will recall that the iPad uses the same operating system and can run the same applications as the iPhone. Now HP has had some experience with smartphones through the iPAQ, though that device ran on the Windows Mobile operating system. So coming out of the gate we can see that HP's track record at picking winners in the mobility space is a bit suspect.
Their joint announcement with Microsoft at least year's Interop was their big break out; the Colubris wireless LAN acquisition added another piece of the puzzle. They have the switches, servers, laptops and other major elements, but what we haven't seen much of their ability to deliver solutions that rise above the infrastructure level. With the OCS tie in, they were counting on Microsoft for the unified communications functionality. Software development on WebOS is going to be their responsibility, and it will compete with the promised Windows Phone 7.
HP has been gaining traction in the switch/router market based on the price advantage vis-a-vis Cisco, but being successful at applications requires a far different skill set than switches and routers. Without applications, which the WebOS currently lacks, smartphones and tablets are expensive doorstops. Further, if you take the consumer play out of the mix, you have to develop a different model to attract the critical developer community (or do it yourself).
Looking at HP's move with Palm I can see two possible outcomes. One is a dynamic new play in the enterprise space that couples HP's infrastructure and user devices with Microsoft's OCS to develop a more functional and lower cost alternative to Cisco and becomes an enterprise oriented ecosystem for fixed and mobile unified communications. The other outcome is that we discover HP has hired a bunch of smarty pants MBA types who work out some fancy "capabilities matrix", get HP to spend billions buying the generic component of that "vision", grossly underestimates the skill and imagination required to make them work together much less deliver a compelling end user experience, and the whole mess goes down in a ball of flames.
HP clearly has been on the acquisitions trail (wait, wasn't that Cisco's strategy?) so now we'll have to see if they really can make the whole greater than the sum of its parts.
