HP TouchPad

HP Pre 3
Acquired Palm unit lasted little more than a year

Hewlett-Packard Comp. (HPQreported [press release] on Thursday afternoon news that some of us saw coming.  It was killing webOS.

I. From High Hopes to the Depths of Despair

HP acquired webOS, a smart phone (and later tablet-adapted) operating system from its purchase of struggling gadget-maker Palm, Inc. for $1.2B USD in April, 2010.

At the time the price seemed right for Palm, Inc.  The company had tremendous industry experience having defined the PDA movement, which would later transform into the smart phone craze.

WebOS seemed like a winner -- many reviewers billed its card system of multi-tasking as the best on the market, and praised features like "Synergy" and the unified messaging system (which combined im's, emails, texts, etc. into a single conversation stream).  Sales were horrible, but the hope was with HP's brand might and expertise it would be able to make the attractive parts into a market winner.

However, in the end it was Palm's same flaws that led it to abysmal sales in the first place -- sloppy execution, overproduction, and a snail's pace of hardware releases -- that killed sales of its new HP-branded devices.

In the end enough was enough and during its quarterly earnings report on Thursday HP sealed the deal, discontinuing the Pre 3 smart phone, and the TouchPad.

II. Why Palm Failed on its Own

The news of webOS's demise is somewhat shocking because the operating system was once viewed as the strongest challenger to the iPhone.  In late 2009 Palm, Inc. had just launched the Palm Pre and Pixi and had nearly half the users of Apple, Inc.  That would be about the closest to Apple, it would ever get.

But over the course of the next several months the market was swept by a wave of chic Android handsets [1][2] with bleeding edge hardware.  Overnight Palm went from legitimate contender to forgotten footnote.

One major factor in Palm being left behind was that it just wasn't keeping up with Android in hardware and wasn't release enough handsets.  Palm didn't have the luxury that Apple did of selling phones with outdated hardware solely on brand image.  

After its November 2009 release of the Pixi, Palm only was able to muster a minor memory bump in January 2010 for its Verizon versions of its smart phone duo.  At the time these units lagged behind the top-of-the-line Androids, particularly in screen resolution.

As the months passed by in early 2010, Palm's sales plunged.  In addition to dated hardware and limited selection, Palm increasingly found itself experiencing another problem -- overproduction.  It was classic supply and demand -- Palm was supplying, but the market wasn't demanding.  The consequence of Palm's unrealistic sales hopes was a downward plunge in prices that hastened Palm's sales plunge, as interested customers opted to wait for next month... and then next month... in hopes of lower prices.

By April 2010 the situation had gotten so bad that Palm was looking to sell itself to the highest bidder.  It wasn't producing smart phones as it had accumulated abundant surpluses.  And those smart phones it was selling at fire sale prices -- as low as a penny.  And the company had nary a new product.

Despite Palm's increasingly self-defeating performance, the company did perk some interest from prospective buyers.  HTC Corp. (SEO:066570) considered a purchase, but ultimately (and perhaps wisely) decided to stay away.  Hong Kong-based Lenovo Group, Ltd. (HKG: 0992) similar contemplated a deal, but then bailed.  

And then what Palm hoped was its night in shining armor appeared -- HP.

III. Why HP Failed at Palm

HP desperately was looking to come up with an entrant in the burgeoning smart phone and tablet markets, and Palm seemed the perfect vehicle for those aspirations.

But ultimately HP's plan fizzled for a simple reason -- it let Palm be Palm.

Much like Palm did on its own, Palm at HP committed the familiar sins.  It overproduced.  It under-delivered in hardware. And it delivered new releases at a familiar lackadaisical churn.  

After the April acquisitions, HP would not release a new webOS handset until November, when it finally pulled the wraps off the Pre 2.  And to make matters worse, the Pre 2 lagged badly behind its Android counterparts with a measly 320x480 screen -- unacceptable dated hardware for a flagship phone at the time (unless you happened to be the iPhone).  That would be bad enough, were it not for the fact that the Pre 2 was also Palm's first major hardware revision in a year.

In February things were already starting to look bad again for HP's acquisition.  It had no sales presence and the Pre 2 was largely a market flop.  But if there's one thing that Palm's mastered in recent years it was entertaining high hopes.  So when it unveiled the Veer, the Pre3, and the TouchPad tablet in February, many -- DailyTech staffers included -- were hopeful that things might finally be turning around.

Shakespeare recognized that to craft the perfect tragedy you always had to build high hopes and optimism before the final fall.  Thus it was with webOS.

The Veer would eventually launch in May of this year, and the TouchPad in July, but the final act was already beginning.  Negative reviews of the HP TouchPad poured in.  Many, like Anandtech's writeup, praised the overall operating system, but said that it was a series of flaws that prevented the device from shining.

The TouchPad entered into a cycle of price cuts and plunging sales, as "fickle" customers opted to wait to get that lowest price the next month.  Even an OS update from HP, which polished off many of the device's rough edges, wasn't enough to change the public's mind.

Still, it wasn't just the Palm units old bad habits -- overproduction, lacking hardware, and too few releases -- which doomed HP's webOS project.  It was also lack of patience of HP.

HP could have tested the waters with its new, more polished webOS 3.0 interface, cutting production to more cautious levels, pushing for more devices (a device every two months would have seemed a minimum), and better hardware in the flagship models (more RAM, higher resolution LCD screens, etc.).

Instead HP chose to ax the webOS experiment altogether.

We'll never know if webOS could have turned the corner under more disciplined leadership.  
But if there's one take home message from this announcement, it's that HP since day one was rather clueless on how to manage a mobile device unit and remains just as clueless as ever.  While it may eventually muster competitive tablets, it appears increasingly unlikely HP will ever succeed in the near term in the smart phone market.  That's very bad news financially for HP.

As for webOS, HP promises, "HP will continue to explore options to optimize the value of webOS software going forward."

But don't get your hopes up.  HP has buried its webOS smart phones and tablets.  About the most a webOS fan has to hope for is that long-promised webOS printer.  But even if HP isn't officially killing webOS at present, the operating system is now a dead man walking.  After all, there's little reason to maintain a full-fledged smart phone and tablet operating system for printers only.

webOS -- the webOS tech enthusiasts knew, at least -- leaves behind a legacy of five phones and one tablet in the U.S. (the Pre, Pixi, Pre Plus, Pix Plus, Pre 2, and TouchPad).  The Pre3?  It never made it to market in the U.S.  For Palm and webOS fans, that may be the bitterest pill to swallow amid all this gloom.

"It's okay. The scenarios aren't that clear. But it's good looking. [Steve Jobs] does good design, and [the iPad] is absolutely a good example of that." -- Bill Gates on the Apple iPad

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