It Was Just a $1.2B Mistake

Posted: August 19, 2011 in Apple, Convergence, Microsoft, RIM, Smartpone
Tags: , , , ,

HP paid $1.2B for Palm. Now they are dumping that and more. I have been saying that the only ecosystems that will survive are Apple, Google (Android) and Microsoft. The carnage has started. WebOS was a good OS. That doesn’t matter. It was too late, too poorly marketed and never got traction. Now it is essentially dead. RIM will follow although not in the near future.

More shocking is the announcement that HP may exit the PC market. HP leads the PC market in market share. How can they possible be wanting to exit that market? To understand why HP could even be considering this you need to look a little deeper. The laptop market is very competitive. That translates to low margins for everyone except Apple. Only Apple has a customer base willing to consistently pay a premium for their laptop product. Additionally, HP’s market share has been falling. But… here is the main reason. The phone is becoming the dominant computing device. The laptop is rapidly becoming secondary. Desktops are already secondary devices. The only way to shore up laptops in a way that would maintain margins was to develop an ecosystems with laptops as part of that. WebOS was a poor attempt at that. With the failure of WebOS, HP laptops will have to compete as just another part of the Microsoft ecosystem. That’s OK now but it will be a position that gets worse each day. If you count tablets as part of mobile computing then Apple has already surpassed HP in market share. What HP is afraid of is being trapped in a market that is losing relevance, decreasing in size and so commoditized that there is little differentiation. All that will lead to little or no profit.

The big take away from this is that it is not an isolated event. It is a part of the convergence trend I have been discussing. There will be more Titanic changes to come and they will involve more than RIM.

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