As I write this, I’m sitting in a cafe. Around me, there are five people on laptops — four of them are MacBooks. Four other people are using tablets — all four are iPads. Welcome to the Post-PC world.
That phrase was one of the first things that jumped to my mind today when I heard the news that HP was not only killing off their TouchPad and Pre webOS-based products, but also trying to spin-off their PC business. The largest PC business in the world, mind you.
And HP’s statements during their earnings call today only further reaffirmed the idea of the Post-PC world.
“Consumers are changing the use of their PC,” HP CEO Leo Apotheker said. “The tablet effect is real and sales of the TouchPad are not meeting our expectations. The velocity of change in the personal device marketplace continues to increase as the competitive landscape is growing increasingly more complex especially around the personal computing arena,” he continued. He then repeated, “the tablet effect is real”.
But wait, then why is he exiting the tablet space after only a matter of weeks? Because when Apotheker says “the tablet effect”, he really means “the iPad effect”.
Put another way, “Apple, you win.”
And not just in the tablet space. Again, the largest PC-maker in the world is exiting the space. Think about how crazy that is for a second. It sounds like a completely irrational panic move. But maybe it’s not.
After all, while HP may be the worldwide leader in PC sales with massive revenues, their actual profit from those sales has already been far surpassed by Apple. Further, while overall PC growth continues to contract, Apple’s Mac sales continue to grow and have outpaced the rest of the PC industry for 21 consecutive quarters. That’s over five consecutive years. That’s certainly another way to interpret “Post-PC world”.
The writing is on the wall. HP is perhaps reading it a bit early, but they may well be reading it clearly.
Let’s look back at what Steve Jobs said last March when unveiling the iPad 2:
I’ve said this before, but thought it was worth repeating: It’s in Apple’s DNA that technology alone is not enough. That it’s technology married with liberal arts, married with the humanities, that yields us the result that makes our hearts sing.
And nowhere is that more true than in these post-PC devices.
And a lot of folks in this tablet market are rushing in and they’re looking at this as the next PC. The hardware and the software are done by different companies. And they’re talking about speeds and feeds just like they did with PCs.
And our experience and every bone in our body says that that is not the right approach to this. That these are post-PC devices that need to be even easier to use than a PC. That need to be even more intuitive than a PC. And where the software and the hardware and the applications need to intertwine in an even more seamless way than they do on a PC.
And we think we’re on the right track with this. We think we have the right architecture not just in silicon, but in the organization to build these kinds of products.
And so I think we stand a pretty good chance of being pretty competitive in this market. And I hope that what you’ve seen today gives you a good feel for that.
What’s perhaps most noteworthy about HP’s move today is that they, more so than any other company attacking the tablet space, seemed to have a grasp of what Jobs was talking about — undoubtedly thanks to Jon Rubinstein, the longtime Apple general leading webOS. The Post-PC device is about the combination of hardware and software all built and integrated by one company. Google doesn’t get that. RIM can’t execute. But with the Palm/webOS purchase, it seemed that HP had both the vision and resources to possibly compete with Apple.
In fact, a year ago, that’s exactly what we had heard the plan was. The subsequent talk about webOS integration across their entire product line as well as the unveiling of the TouchPad and a new Pre seemed to reaffirm this. But something funny happened on the way to the battle with Apple. Amid scandal, then-HP CEO Mark Hurd was forced to resign.
This happened just three months after HP acquired Palm for $1.2 billion. At the time of the deal, HP told us very clearly: “our intent is to double down on webOS“. Again, while they wouldn’t explicitly admit it at the time, the plan was to compete with Apple.
But with Hurd out, HP turned to Apotheker, the man who previously ran SAP. He had been with the enterprise company for 20 years. This whole “HP as Apple” plan must have sounded like Latin to him.
Since the wheels of this plan were already in motion when he came on board, Apotheker stuck to it. But while he watched for any sign of shakiness, he scooped up some data companies like Vertica. It was probably clear to those inside HP what was going on. Last month, Rubinstein switched roles, to be an executive at HP instead of the guy in charge of webOS.
When the TouchPad launched, and subsequently floundered out of the gate, Apotheker had what he needed. He landed Autonomy and it was set. HP wasn’t going to be the next Apple. They were going to be the next IBM.
Not IBM, the PC juggernaut, mind you — IBM the company that cut loose the PC hardware division and focused on data and enterprise. That’s what so jarring about today’s news: HP just did a full stop and then a 180 before our very eyes. Apple and IBM both resurrected themselves in recent years, but each did it in opposite ways. The Apple plan didn’t work for HP, Apotheker decided. He now clearly believes the IBM plan will.
During today’s earnings call, Apotheker also cited the threat their “business critical services” were facing from Oracle. That’s interesting since Hurd landed at Oracle as a co-President. The two companies hate one another. In choosing the IBM resurrection model over the Apple one, Apotheker has also better aligned his company for a full-on battle with Oracle.
So where does all of this leave webOS? The TouchPad is dead. The Pre sleeps with the fishes. HP seems to be open to all options including licensing out webOS for others to use. But the simplest solution will probably end up being the one they go with: a sale of webOS to some other entity that can actually use it. HP VP Richard Kerris made this option pretty clear in a tweet today.
HTC? Samsung? Facebook? Google?! One thing to consider: Jon Rubinstein sits on Amazon’s board…
Something else to consider: when HP bought Palm for $1.2 billion last year, the world was a different place. These days, companies are paying $4.5 billion for a group of patents. Google is paying $12.5 billion for Motorola, a large portion is which is also for patents. Along with Palm and webOS, HP got Palm’s 1,500+ patents last year, as they emphasized to us at the time of the sale.
If those patents are as important in the mobile space as some believe, they alone could be worth more than the $1.2 billion Palm sale price now. If HP can flip those for north of that price, the whole acquisition won’t look like nearly as much of a disaster as it does right now.
But the big picture item of today remains what HP is no longer doing: making Post-PC devices or even PCs themselves. In less than the span of a year, the biggest PC maker in the world realized not only that they couldn’t be Apple, but that they couldn’t even compete with Apple. And they admitted it. And called the fight. It was a first-round T.K.O.
The question is: does this make HP look foolish, cowardly, or smart? The answer today may be different from the one tomorrow.
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