HP’s Billion Dollar Bet

For as much as I hate tech journalism, I sure do read a lot of it. Google’s “Fast Flip” feature turns up a lot of good, or at least interesting articles. I was dubious Palm would even find a buyer, particularly at full price, let alone in less than a month. To say the least, I was dumbfounded when I heard that Hewlett-Packard had bought them for full price, less than a month after Palm had officially announced their intent to sell.

I don’t need to enumerate why it’s a bad idea – anyone familiar with consumer electronics can tell you HP’s track record with mobile consumer electronics (Journada exempted). Rumbles of the rumored iPad prompted marketing from many companies to order R&D to develop competitors. Competitors built netbooks with touchscreens, running Windows 7, and showed them off in advance of the iPad, expecting some sort of thin client version of OSX. People bitched and moaned that TabletPCs had been tried and failed before, but PC makers weren’t going to be caught off guard without a competing product.

The iPad debuted, instead with the iPod Touch/iPhone OS. No OSX, not enven OSX app compatibility. Just syncing with iTunes. PC maker R&D departments breathed a sigh of relief, shelved their ill conceived prototypes ordered by marketing, and went back to building potentially profitable products. HP even announced they were cancelling the Slate tablet product that Steve Ballmer, the CEO of Microsoft, had demoed personally.

So how did HP end up buying Palm?My guess is that HP is trying to brand themselves as “another Apple”. Simply going “linux” isn’t going to work out, at least not as a complete solution; and Microsoft would bury them, but purchasing Palm for their WebOS might allow them to build up the brand enough to inspire consumer confidence in their mobile offerings and uptake in HP consumer computer purchases down the road. Apple has fierce brand loyalty, and has also achieved excellent consumer lock in through impressive mobile devices, which has given them considerable growth. It’s certainly a long shot for HP to achieve even a fraction of what Apple has done, but it’s really the only road map I can see a bench warmer executive at HP, probably from a third-rate MBA program pitching, and successfully selling. It doesn’t matter if the initiative lives or dies in the long run, he gets a raise and a bonus anyways, with guaranteed job security for the next 3-5 years. 1 billion dollars for HP is “too big to fail” money.

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