My blog covering the acquisition of Palm by HP in April of 2010 opened with the sentence: "When I heard the news that HP had bought Palm for $1.2 billion...I had the same reaction I have when my wife comes home from one of her shopping trips: 'What did you buy THAT for?' Well it appears that HP’s board has come to the same conclusion. The company announced yesterday that it will “discontinue operations for webOS devices".
Not only is WebOS getting the ax, but the company is exploring options for its entire Personal Systems Group (PSG). According to the press release, those options include "the exploration of the separation of its PC business into a separate company through a spin-off or other transaction." PSG sells PCs along with HP's fledgling line of tablets and smartphones, but while it accounts for one-third of HP’s revenues, it earned the company's lowest profit margins in 2010.
Clearly CEO Leo Apotheker is shedding low-margin product lines, but the big question is why they got into the mobile O/S business to begin with. In an interview in June 2010, two months after HP bought Palm, then-CEO Mark Hurd said "We didn't buy Palm to be in the smartphone business. And I tell people that, but it doesn't seem to resonate well. We bought it for the IP [Intellectual Property]." Of course they then went ahead and introduced a tablet and two smartphones.
With two and a half strong players currently dominating the mobile O/S market, WebOS was relegated to the wannabe category along with Microsoft's Phone 7. With the combined Microsoft-Nokia checkbook behind it, Phone 7 can last a little longer, but there are only so many seats at the table. Given the requirement to build and maintain a developer ecosystem to provide value to an OS, how many seats can there effectively be? My long-standing guess has been three, which means that either RIM has to leave the dance floor or Microsoft’s going to be left standing when the music stops.
From a business standpoint, WebOS simply didn't fit well in HP’s portfolio. For UC&C, the bigger play is the Frontline Partnership with Microsoft they announced at Interop in 2009. Microsoft has their own floundering mobile O/S and it is more interested in getting Lync clients for iPhone and Android than anything else. WebOS didn't get much of a shot, but it was doomed from the outset.
