HP & Palm – Fragments & Quick Analysis

“The only thing that’s shocking is that we’re still shocked,” said a friend of mine (co-host of the Austin Tech Scene, Brandon Whichard) a long time ago. That’s been the phrase for acquisitions over the past year starting with Oracle buying Sun and now HP buying Palm for $1.2 billion.

Below are some interesting fragments from here and there and quick analysis to go along with them:

Owning the full stack, developer relations

Some nice bits from the announcement call yesterday:

Todd Bradley – Hewlett-Packard – EVP, Personal Systems Group: We see further opportunities beyond smart phones into additional connected mobile form factors. We anticipate that with the webOS we will be able to aggressively deploy an integrated platform that will allow HP to own the entire customer experience, to effectively nurture and grow the developer community, and to provide a rich, valued experience for our customers. With Palm HP acquires a strong operating system to deliver a unique customer experience in applications to over 2000 apps and growing, a platform to deliver mobile cloud-based services, and an opportunity to drive preference in the market among consumers.

The parts I’ve bolded point to two things clearly:

• Owning as much as the mobile stack as possible – not just OS (as with Microsoft), or handset, etc. – but the whole deal (minus wireless carriers) a la Apple.
• Good cognizance that bootstrapping to success here is about building a strong clutch of developers. This will be tough: competing for developer hearts and minds against Apple and Google (“Android”) will be hard for HP, two letters that most developers associate with nice but expensive printers. An alliance with Mozilla to push and latch onto the HTML 5 fanboy wagon would help. WebOS has been well positioned, technologically and somewhat community marketing wise, to be the “pure web” for mobile option.

Why not Android? Windows 7 Phone?

From the same transcript, in response to Citigroup’s Richard Gardner asking why HP didn’t just decide to use Google’s Andoird:

[HP’s] breadth of products between smartphones, slates and potentially netbooks represents an enormous opportunity to our customers. We believe that this is a very, very early stage market. I think the developer community will very aggressively as we invest and provide support begin to develop that suite of applications for webOS that will make it even more compelling than it is today. At the same time we clearly believe in choice and why you did not ask we intend to continue to be a strategic partner for Microsoft. They are a huge piece of our business today and will continue to be so, and we believe there is a unique opportunity with Palm to create an HP experience across these connected products.

Again, some commentary on the most striking items:

• He didn’t answer the question about using Android directly. Clearly, the answer is the desire to control the entire stack rather than be beholden to Google. That’s classic tech company strategy, and Apple’s moves to shut-out Adobe from the iPhone tools marker with fine-print shoes why tech companies loathe partnerships in their stack. No one wants to create the Microsoft of mobile OSes.
• Again, there’s this notion of bringing a unified experience across all of the HP brands, of which there are many. HP has always struggled to go unified like this. Cisco is an interesting comparison: they’re in the same pickle with a portfolio filled with super-high end networking equipment and home/SOHO Linksys and Flip video camera product lines.
• Later in the transcript Bradley implies that before buying Palm, they made sure they could get WebOS to run on other HP devices, giving HP an operating system in addition to legacy OSes like HP-UX, NonStop, etc.

Can you just be an arms dealer?

The strategy of owning the whole stack, at the moment, means owning services that are largely consumer based, not just providing the technologies and software needed for the “expierience.” It means copying the way Apple provides music, video, and soon ads.

From that same transcript, this questioning from Rod Hall at JPMorgan exposes that challenge for HP:

Rod Hall – JPMorgan – Analyst I’m going to be asking for Mark Moskowitz as well who covers HP. He is out of office at the moment. One of the main questions we have got is we have seen Apple succeeding as a content platform in addition to the hardware platform that they are providing. So they are doing a lot of content aggregation. Do you intend to get into that side of the business to move the platform forward? Can you just talk a little bit about what your content strategy might be?

Todd Bradley – Hewlett-Packard – EVP, Personal Systems Group Our focus is to provide connected devices that enable people to safely and seamlessly connect to that information that is important to them, be that entertainment or work or personal data. So I don’t think we are content creators, but we are access providers.

Rod Hall: So does that mean you would look to do deals with music companies and video companies and things like that, kind of along
the lines of what we have seen Apple do?

Todd Bradley: Well, look, we are not going to get into the specifics of how we will execute the strategy that we have laid out for the acquisition. I think we will do more of that as we get the transaction closed.

This is where things get messy. Where-as HP has strong connections to carriers (providing equipment, software, and services) can you imagine them sitting down with the music, movie, and entertainment industries to broker iTunes-like deals? Perhaps a partnership with Amazon or someone else who’s riddled that problem away.

The question becomes how much success can be had if the “content,” as Hall puts it, is not controlled by HP but outsourced through partners. Then you’ve got a mess of cable, TV, a music distributors world-wide to deal with, much complexity that can leak up to the “experience” and look sloppy.

There is, however, a chance to do a classic open flexibility vs. closed perfection: while the Apple “experience” may be unified and beautiful, it’s not at all open. We’ve yet to see what a truly open experience in mobile would look like – or if it can work.

Industry Context

We know from painful experience that letting a third party layer of software come between the platform and the developer ultimately results in sub-standard apps and hinders the enhancement and progress of the platform. If developers grow dependent on third party development libraries and tools, they can only take advantage of platform enhancements if and when the third party chooses to adopt the new features. We cannot be at the mercy of a third party deciding if and when they will make our enhancements available to our developers. —Steve Jobs’s “Thoughts on Flash”

Adobe

First off, Adobe has a short term win that could be a long term win if partnerships pan out. Since getting pooped on by Apple who shut-out Adobe’s clever end-run around Apple’s (strategic and otherwise) loathing of Flash, Adobe was forced to put the eggs everyone cares about in Google’s basket, which is dicey. Now they have three baskets: traditional handsets (Nokia, RIM etc.), Android, and Palm.

I don’t believe that iPhone/iPad access is critical for Adobe’s overall success – Creative Suite 5 is a whole lot more than just Flash development – but getting on widely used and enjoyed mobile platforms is key for it’s Flash ambitions. If HP can boost up Palm, and Google can raise the profile of Android devices, Adobe is sleeping on something better than the old cardboard boxes Apple would like to tuck them into.

Microsoft

Clearly, Microsoft would have preferred that HP went with Windows 7 Phone. It’s easy to start freaking out that WebOS would be a big threat against Windows, and that seems to be the case in non-traditional PC installs – all those “slates” HP keeps talking about in this discussion. But, I’m not sure that even medium-term there’s much to fret about beyond “mobile” devices where Microsoft doesn’t so much have market to loose, and market to not get.

There a question of just who Microsoft would partner with in mobile. Dell seems to be leaning more Android, and then there’s the raft of other hardware folks out there. The question to keep in mind is what landing points on hardware – PC and handset/mobile – Microsoft can easily keep slipping into. Long-term, if it’s to be a world of iPads and tablets instead of PCs and servers, Windows needs to get its act together – and everyone else will be looking to shut them out.

For better or worse, it also puts pressure on Microsoft to be more invested in the actual handset business – owning something there beyond Danger/Pink. I’m not sure that’s a super idea for Microsoft – unlike HP, Apple, etc. Microsoft is, well, more about the soft than the hard. An interesting angle to noodle on where Microsoft would fit in with all those “mobile cloud-based services” HP speaks to here. There is a certain consumer-friendlyness that Microsoft has which HP (outside of printers) lacks, and the Ray Ozzie vision of “cloud” seems a good fit here – though we don’t hear much from that camp in Redmond much anymore.

Google

With Google, there’s only ever one question: will it help sell more ads?

With the open spirit that Palm/WebOS has, drizzled with the amount of effort it’d take for HP to launch something like iAds, the answer is simple: yes.

Tools vendors

Other tools vendors like PhoneGap, Appcelerator, Eclipse tool-chains, and even Microsoft have to be happy about this: the more platforms there are, the more market there is for tools that make dealing with all those platforms easier. As I’m fond of saying, a classic and effective technology marketing strategy is:

1. Create a mess
2. Point out a mess to your customers
3. Charge to clean up the mess

Multiple platforms is, indeed, a mess.

What’s great about developer tools in the mobile space is that developers are not yet trained to expect their tools to be free: they might pay for something! Tool-spend in the traditional desktop/server/web app world is tough where just about two generations of developers have been brought up expected high quality, free, open source tools – thanks to folks like the Eclipse Foundation.

Those other phone guys

The bottom line is that the real threat to major OEMs that are trying to innovate in smartphones comes from companies such as Dell and Acer–firms rushing headlong into smartphone development. “You have a set of market conditions that are ripe for exploitation by companies like Dell who don’t have a legacy business they and their shareholders rely on quarter to quarter,” [CCS Insight analyst John Jackson] said. Such players are well-capitalized and can leverage their manufacturing resources, free of the obligation to ship volumes and attain high margins in order to survive. —“For Nokia, RIM and others, the innovation window is closing fast”

You have to feel bad for the traditional handset folks out there like Nokia, RIM, HTC, etc.. They’re always big somewhere else than the US (well, not RIM) and us myopic Yankees won’t let them coast on that. And now, it seems like the “we’re big in Japan” defense is working less and less with Apple’s iPhone snagging the top share of Japan’s smartphone market.

This lot just hasn’t cracked the developer relations problem: developers aren’t thrilled to be working on those platforms for various reasons. The phone market, esp. the smart phone market is now less about the phone and all about the software that can be run on the phone.

It’s a classic platform ecosystem: the more third parties you have delivering new features and applications to the platform, the more growth the platform will have. It worked for Microsoft, the web, Apple, and it’ll work for everyone else who uses that strategy. Unless you want to be in the Jitterbug market, your job as a handset company is now to drive as much software on the platform as possible.

The Take Away

Overall, it’s good stuff:

For mobile developers, this should be good as the Palm platform (WebOS, at least) is actually attractive. Palm’s failure to get market reach is the problem: mobile development is about making fast cash, and that’s what Apple brings…at least enough hope for it to drive the fresh crop of optimistic coders.

Following the rule of the enemy of my enemy is my friend, the partnership shifting is slightly a wash: most all tech vendors want to see Apple fail and despise Jobs and co. “They’re just so damn cocky – and they don’t play by the rules!” these folks will say. HP tends to play by the rules, and they have so much revenue tied up into the status quo of IT that they won’t be disrupting the market too much.

I haven’t speculated much on HP’s ability to “pull it off.” That’s always tricky, and I’m not sure there’d be much enthusiasm from a wet-finger-in-the-air poll. HP isn’t known to be anything but a money-maker in the enterprise space – oh yeah, and printers. They’ll have to really take on the Palm, consumer culture at the highest levels, or it’ll be iPod OEM’ing over again.

Others

• Fellow RedMonk James Governor’s write-up.
• Hear more about Palm WebOS development on RIA Weekly #66.
• A pessimistic take from Adam Lashinsky – it’s too much for even HP.
• Glyn Moody on the case: “he good news for open source is that it doesn’t really matter whether HP’s move proves deeply wise or totally witless.”
• Marshall Kirkpatrick wraps up the 140 character commentary.
• There’s over 140 comments over on Hacker News – them dudes are great for developer sentiment.
• See the Techmeme aggregation.
• For more context: Mary Meeker’s team has been doing solid work on how mobile is going to take over. See a recent write-up and then mentally bludgeon yourself with their 659 slide presentation on the topic.
• Jeff Nolan looks at the tablet angle more.
• HP/EDS’s Charlie Bess speaks to the importance of the mobile form-factor for computing: “The movement to a ‘mobile first’ approach from a value generation perspective and everything as a service will be bolstered as well. The mobile device is the computer we always have with us; the possibilities to incorporate its capability are only just being tapped. It can help an enterprise know quite a bit about the context of the individual who is carrying it that can be used to reduce latency and minimize interruptions.”

Disclosure: Adobe, Microsoft, The Eclipse Foundation, Dell, and Nitobi/PhoneGap are clients. HP has been a client in the recent past. See the RedMonk client list for others and relevant ones.