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HP strategy reversal a refreshing dose of honesty

HP’s decision on a new direction is a clear sign of surrender to Apple, not just in tablets and phones, but in computers as well.


Trouble continues to dog the tech titan. HP’s board fired CEO Léo Apotheker after a tumultuous 11 months on the job. Sales forecasts were slashed multiple times during Apotheker’s reign, and he made several unpopular decisions, but he will still get an exit package worth US$13 million for his troubles. Former eBay Inc. CEO Meg Whitman will replace him. The appointment did little to restore investor confidence in HP, with shares now trading at a six-year low.

Last week certainly wasn’t wanting for bombshell tech news, what with Google’s acquisition of Motorola and HP announcing it was effectively exiting the consumer business in favour of concentrating on business customers.

HP chief Leo Apotheker said he was discontinuing the TouchPad tablet, launched just last month, as well as other products based on the webOS software, including the Pre line of phones. More to the point, he also said the company was looking to sell off its computer business and spend $10 billion on business software maker Autonomy.

HP stock took a drubbing, which is why things appeared to get muddier over the weekend. Not only did the company itself say that webOS isn’t necessarily dead, the TouchPad was also sold off at the fire sale price of $99. According to reports, the device sold out everywhere, which probably makes it the second-best selling tablet, next to the iPad.

Despite the hit to its share price, Apotheker’s decision is the sort of incredibly bold and honest move that is rarely seen in the world of technology—and it should be applauded.

As numerous observers have pointed out, HP’s decision on a new direction is a clear sign of surrender to Apple, not just in tablets and phones but in computers as well. Apple has been amassing mega-momentum in all of those categories, despite selling devices at a relative premium to similar offerings from HP. When customers are opting to spend twice as much to buy an Apple laptop than an HP, it’s time to massively shake up that business or get out of it entirely (by the way, I’m not sure if anybody has pointed out the obvious yet, but it sure seems like Microsoft Windows is at the core of HP’s problem in this area).

In that vein, deciding to get out of computers—like IBM did in 2004—is probably a very smart idea. Computers and printers, the two things HP is known for, are commoditized with little promising growth left.

But HP is also deciding against getting involved in the fierce battle for the quickly growing markets of smartphones and tablets, and that too is smart. Despite what many may say, this too is a battle that has already been decided—and the victors are Apple and Google, the two companies that have cultivated an army of app developers. Anyone else who tries to play in this field is going to face an incredibly tough uphill battle because, as is obviously the case, apps are everything. As HP learned, if you can’t even get Twitter to create an app for your platform, nobody is going to buy it.

There is perhaps room for a distant number three competitor in smartphones and tablets, but that less-than-prestigious title is likely to go to Microsoft, which has never-ending mountains of cash that will allow it to literally buy its spot.

What Microsoft doesn’t have—yet—is the honesty to admit defeat in the face of insurmountable odds in phones and tablets. Same goes for BlackBerry maker Research In Motion. Both companies will keep trying but ultimately it won’t be a surprise at all if they end up taking the same route as HP and reorient their focus on business customers. HP at least had the good sense to save a lot of cash before giving up, something its shareholders should be thankful for.