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HP reportedly is poised to reenter a market it abruptly quit

Jeffries analyst Peter Misek made some surprising claims in a recent research note.  He writes, "[W]e believe HP will aggressively attack the smartphone and tablet markets, which we believe are risky investments."

He writes:

After failing with its acquisition of Palm and subsequent goodwill and inventory write-offs totaling $3.3B, recent comments from HP management point to a retargeting of tablets and smartphones. While the move makes sense strategically, we see it as a high risk move. On top of adding costs and working capital burdens to an already stressed balance sheet, there could be additional write-offs. We note that to date almost all PC OEMs have failed to gain significant traction in consumer tablets/smartphones.

Of course Mr. Misek has made some controversial predictions that he's been flat-out wrong about in the past -- such as his claim that phonemaker Research in Motion, Ltd. (TSE:RIM) would post a big fiscal Q2 2013 fiscal miss (instead RIM handsomely beat analyst outlook, post a smaller than expected loss).

There is some supporting evidence, though, for this claim.  New Hewlett-Packard Comp. (HPQ) CEO Meg Whitman told Fox Business Network, "We have to ultimately offer a smartphone because in many countries of the world that would be your first computing device.  We are a computing company."

The HP chief rejected rumors of a RIM purchase, commenting, "No, that is not a direction that we're going to head."

RIM webOS RIP
HP's first mobile effort ended in a (largely) self-inflicted trainwreck. [Image Source: IntoMobile]

But the real question, if this idea of a smartphone push is true is what direction HP is going to head in.  The most logical option would perhaps be Windows Phone 8 [1][2][3] handset, given its strong relationship with Microsoft Corp. (MSFT).  Google Inc.'s (GOOG) Android is also a possibility.

But those with fond memories of webOS, don't get your hopes up for a comeback tour.  Much of HP's webOS staff has jumped shipped to Google in recent months.  Only a barebones skeleton crew has continued on working open-sourcing the webOS code.  Given how outdated the code base is, and the lack of experienced personnel a revival of webOS seems the least likely scenario.

However, HP's flippant treatment of webOS raised eyebrows, and thus is pertinent to the risk assessment.  If there is one thing Mr. Misek is for sure right about it's that an HP smartphone and tablet push is high risk.  After all it tried once and quickly pulled the plug.

Sources: HP, ZDNet





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