HP can take Palm's webOS global

Since 2004, Hewlett Packard (HP) has invested US$20 billion in acquisitions. Yesterday, it continued this strategy by acquiring distressed US handset manufacturer Palm for US$1.2 billion. Palm has been struggling for a while to revive its position in the smartphone market despite the launch of its Palm Pre hero product, based on webOS; one of the open-source software platforms in the market today which competes against iPhone OS, BlackBerry OS, Android, Symbian and Windows Mobile.

Palm’s webOS is the missing piece of the puzzle that HP was looking for. In yesterday’s investors’ call, HP made it clear that it wants its share of the fast-growing smartphone market and that it will use Palm’s assets to introduce its integrated solutions. Behind its convergence motto, HP wants to embed webOS in its smartphones, netbooks and tablets portfolios to attract commitments from the vital developer community. HP wants to launch a compelling suite of applications on webOS that will address both enterprise and consumer segments. On top of that, webOS also allows applications such as multi-tasking and is an efficient platform for cloud-based services, all of which could easily focus on high-margin enterprise and consumer segments.

Considering that HP is all about scale and global reach, its new webOS application store could potentially gain stronger momentum. Its newly acquired mobile division could benefit heavily from its supply chain capabilities. As a matter of fact, HP is equipped with the industry’s largest PC supply chain and its distribution channels encompass thousands of partners around the world. By sharing its supply base amongst different product categories such as servers and PCs, HP has managed to introduce better performance at lower cost. It is now looking to apply this model to other categories such as storage and networking to transition towards converged infrastructure.

By developing webOS-based integrated mobile devices, HP expects to address the needs of segments such as healthcare or education which it is already targeting via its PC arm. The company will leverage retail and distribution channels to boost its performances but also explained that it is likely to leverage partnerships with existing carriers rather than numerous smaller carriers. This suggests that HP could launch a number of integrated mobile devices dedicated to enterprise and consumer segments via exclusive deals with mobile operators.

HP also promises to invest more money in sales and marketing. Considering its impressive track record in launching global mass-market solutions, its consumer mobile devices will surely hit the market at competitive ASPs. Meanwhile the company noted that it will continue to work with Microsoft,which represents a large chunk of its direct sales. Overall, HP is highly skilled in managing products with short life cycles and already competes with Dell, Acer, Asustek, Apple, Lenovo and Toshiba; all of which have an interest in the mobile market. It will be interesting to see how its smartphones, notebooks and tablets - based on webOS - will stack up against much-hyped devices already available. By the time its first new devices hit the shopping streets, HP will have to balance branding priorities and come up with a strong marketing strategy to differentiate itself from the competition. Moreover, it will be interesting to see if bundling integrated devices in affordable packages is the norm by then.

To conclude, Mark Hurd – HP’s chairman – recently confirmed the company’s intent in a few wise words: “Throughout history, every few centuries, we harness a new source of power. First it was fire, later electricity and oil. Today, it is information. At HP, we have helped lead a revolution in the way information is created, captured, stored, processed and shared.” Hurd will be hoping that the Palm deal fits well with this business model.