The era of webOS is over at
Hewlett-Packard Comp. (HPQ). While some would
argue that the decision to kill the struggling lineup of tablet and smartphone
devices was premature, HP has made its decision and it's standing behind it.
I. A TouchPad Fire Sale?
But that doesn't change the fact that it has a very big problem on its hands --
$100M USD worth of unsold
HP TouchPad tablets. At $400, that works out to 250,000 unsold units,
but some speculate that HP may be taking a smaller per-unit write-off, which
could indicate an unsold total as high as 300,000 units.
So what to do with the stock of TouchPads? Sell them for pennies on the
dollar? Burn them? Bury them in concrete in the desert?
HP says it will be up to its sales partners, which include Best Buy Comp.,
Inc. (BBY) and Staples, Inc. (SPLS). It will give them
a case payout for the devices, which they can either return to HP or using the
cash, sell the stock at fire sale prices.
It's unclear whether any of the big box retails are going to bite on the latter
route. But if they do, the former Palm unit may just have one last gift
in store for its fans -- a deeply discounted TouchPad. Such an offer may
even convince some skeptics to partake. Much like that girl at the bar
starts looking better after a couple drinks, the rough
edges of the TouchPad may become lovable quirks, if it's offered for,
say, $150 USD.
HP and its carrier partners have not yet announced whether they will be
conducting a similar program for unsold Pre3 smartphones, which
were reportedly in advanced production, but sadly died soon before what would
have been its U.S. launch. Likewise, it must decide what to do with
whatever Pre Plus, Pixi Plus, Pre 2, and HP Veer handset stock is sticking
around at carriers.
The one word of warning when it comes to buying these devices is to consider
that while they'll likely come at great prices, should they be sold, the
operating system is unlikely to see significant future work, and likewise the
app catalog is unlikely to see many new titles, now that HP has abandoned the
II. HP May Have to Chop up PC Unit to Make it Sellable
In related news, HP's bid to offload its consumer PC unit (which
reportedly has to sell seven computers to make as much profit as a single
Apple, Inc. (AAPL) machine) is encountering
resistance because of the unit's high value.
HP is the world's
top seller of personal computers, and the top seller in the U.S., so
the company is literally putting the number one position in the market up for
bid -- an unusual sight. Again, the reason why gets back to its dropping
profitability -- HP wants to focus on more lucrative business solutions, following in
the path of rival International Business Machines Corp. (IBM).
The unit is valued, according to Reuters, at around $10-12B USD.
It makes $38B USD in annual revenue, but only has a 5.7 percent profit
margin (around $2.17B USD in annual profit).
Reportedly Taiwan's ASUSTEK Computer, Inc. (TPE:2357) and Acer
Inc. (TPE:2353) are interested,
but don't have enough cash on hand to fully purchase the whole business.
Hong Kong-based Lenovo Group, Ltd. (HKG: 0992) has $3.8B
USD in cash and a market cap of $45.76B USD, so it could complete a purchase
with a mix of approximately 30-40 percent cash and 60-70 percent stock.
South Korea's Samsung Electronics (SEO 005930)
also reportedly has a lot of cash on hand and is interested in getting deeper
into the world of computers. The deal could see problems, though, with
U.S. antitrust regulators, as Samsung is already in the top
two spots in global phone sales.
Whoever HP sells too, it's looking to move relatively fast, avoiding waffling
on the transition. That's bad news for HP's Taiwanese suppliers
like Quanta Computer, Inc. (TPE:2382). Whoever
buys HP, they're likely to favor new suppliers -- a general market trend.
HP is looking to use the cash in generates to fund a $11.7B USD bid for
London-based Autonomy Corporation Plc. (LON:AU).
Autonomy is one of the world's largest enterprise software companies.
quote: HP made the announcement that it was ceasing to make webOS hardware, but neglected to get a hardware licensing deal in place before doing so. This seemed to drive home the point that webOS was dead in the water, when in fact it is very much alive and was never the issue. It was the hardware that was killing HP’s OS.
quote: HP will continue to explore options to optimize the value of webOS software going forward.
quote: I have never liked HP. Overpriced printer ink on junk printers