HP-Palm Industry Explosion Part 2: Winners and Losers

Rob Enderle

As mentioned in my earlier piece, the HP buyout of Palm was the explosion that would rock the computer industry. I pointed out why this was much more important than it seemed. With this purchase, HP is buying its freedom in terms of smartphones and tablets from x86, Google and Microsoft. This will allow HP to go its own way, but it also has broader implications for a number of vendors and initiatives. Let's cover the major winners and losers.


Winners (Other than HP)


ARM: The ARM consortium is a clear winner with this move as Palm is solidly ARM. Even if it wanted to report the OS to x86, the time it would take to do that would likely result in HP being locked out of the tablet market until after it had matured. Given that HP, Dell, Apple and Lenovo are all exploring ARM, this move by HP shouldn't be a surprise. It is as yet unclear whether Marvell, Freescale, Qualcomm or Nvidia will be the biggest beneficiaries. (Based on the initial rumored specification, this product likely favors a graphics-rich offering from Nvidia or Qualcomm.)


Palm users: This company tends to stick with things for decades, and HP just validated this otherwise failing platform. This means that existing Palm users -- and there are still a surprising number of them -- no longer have to worry about the death of their beloved company and can rest assured that their loyalty will be rewarded.


IBM: At least initially, this will focus attention away from HP's major lines and reposition the firm in the minds of some as more of a consumer company. Sometimes enterprise deals come down to the wire between IBM and HP, and any time HP looks more like Apple, enterprise buyers get slightly nervous. I would expect IBM to use this with some success to argue that HP isn't really that focused on large systems.


Apple customers: This may sound strange, but Apple carries incredibly high margins, making it vulnerable to a price-based attack. Its response should be to reduce prices soon to better match HP's. Apple customers would benefit from any reduction.




Microsoft: HP has been upset with Microsoft for some time because the relationship to HP was upside-down. In other words, HP looked at Microsoft like a vendor, but Microsoft subordinated HP's needs to its own. For smartphones and tablets, this is a strong -- and expensive -- vote away from Microsoft's products and a vote toward building something on your own that shouldn't be economically possible if Microsoft's model were working well.


Google: HP had been looking at Google for this work, but Google's inability to protect its intellectual property plus behavior -- getting booted out of China, for instance -- voided that decision. Google made Microsoft appear to be the less-risky choice. When paying over a billion dollars is a better solution than "free," there is something seriously wrong with the free offering. That likely is giving a lot of people pause this month.


Intel: Intel's Atom was to be used in the HP tablet, but by moving to Palm, that clearly won't be the case -- at least near term. HP was one of the vendors closest to Intel, thanks to their Itanium partnership, but recently has moved about 50 percent of its new products to AMD. Now this ARM/Palm deal doesn't look favorable for Atom, either. Most OEMs want to do things with Atom that Intel won't allow and, as a result, the majority are more aggressively looking at ARM. Microsoft is rumored to have moved its large-scale low-cost processor IT test from Atom to ARM for similar reasons. Intel's rigid rules, designed to protect its margins, might be helping ARM more than either realizes. Clearly the talks Intel was having with HP on these restrictions didn't go well.


Apple: While focused competition might be great for Apple customers, no vendor likes margin erosion. Thanks to its labs, HP has the potential to bring out more advanced products at much lower prices than Apple. For instance, HP has a memory technology as fast as DRAM, but that performs like Flash memory. It has a display technology that is both lower power and, unlike Apple's display, without glare outdoors. Thanks to its PC lines, HP has some of the best shelf space in places like Best Buy as well and, even though HP's equivalent to the iPod didn't sell well, retailers preferred working with HP over Apple. These could be serious problems for Apple if HP gets a competitive product to market.


Wrapping Up


All this depends on HP successfully bringing out a stellar product, but also stepping up to Apple's level in marketing. PC companies seldom fund marketing to required levels, and Apple traditionally walks all over them. Palm's own campaigns, while well funded, were a colossal waste of money. And while HP had a very creative "Make the PC Personal Again" campaign, the guy who led the effort, David Roman, now works for Lenovo. So the success of this effort is far from a given, but it certainly could shake things up. Given that influencers are starting to use iPads instead of laptops, this shakeup could go farther than most realize.

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Add Comment      Leave a comment on this blog post
May 7, 2010 12:41 PM a. asdf a. asdf  says:

I've read your TGDaily article on the new Atom and it's one of the better articles written on the subject by anyone. For instance;

--"tablet is better for the web but unusable as a phone and Smartphones tend to be great at everything but being a phone."


--"A more modular approach "

Way ahead of you. I've been looking into that approach for the past 3 months. I've figured out the required form factor, the technology, looked into team members, and sent it to a few venture firms. And since what I say doesn't carry much weight, it just gets lost in the noise.

Anyway, back to Palm. I still don't know what HP is going to do differently to rescue WebOS that Palm hasn't done already. Or know anyone who does.

May 16, 2010 7:49 AM a. asdf a. asdf  says:

At least one company has their thinking cap on;


I hope they know what they're doing, I know of at least 1, more like 3 patents that cover that implementation.

(Sorry for the off topic post)


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