Hewlett-Packard expects to change up its product line and optimize its WebOS and business ventures in response to failures in its core PC divisions.
HP reports disappointing numbers for its first quarter, with net income for all its major divisions falling short of company and analyst expectations. Business software revenue did well, but company linchpins, like its PC products, underperformed, losing 25 percent from the first quarter in 2011. Printing sales also took a hit, losing 15 percent from the same period last year.
Future success depends on a move away from PC and printing sales and into mobile technology. The company refocused efforts on developing its WebOS this year, open-sourcing the system in a move to attract developers and detract from Android's appeal. WebOS garnered positive reviews, but the platform's lack of apps hurt its appeal.
HP announced its decision to open up WebOS at an opportune moment, as phone makers like Samsung and HTC worry Google's Motorola buyout will damage their relationship with Google and turn Android into a more closed system. If WebOS attracts developers, it could also entice other phone makers to pick up the platform.
The company's first outing with WebOS resulted in disappointing sales and ended with a decision to drop support for the products running on the operating system. HP expected the operating system to propel sales of its TouchPad, and pulled support after the tablet underperformed, pledging to improve its next iteration.
This time around, HP anticipates better reception to its revamped OS, continuing to bet its open source format will attract a stronger roster of apps.
Despite the TouchPad's poor showing, HP is expanding into commercial tablets to keep up its business base with a new Windows tablet. Aimed at the healthcare, financial, and hospitality industries, the HP Slate 500 runs on Windows 7, a move designed to appeal to businesses comfortable with Microsoft programming.
HP also expects to release new tablets running on Windows 8, indicating the company's focus on business customers familiar with Microsoft's offerings.
CEO Meg Whitman discussed the company's strategy, noting "There will be a tighter line of products for consumers and commercial buyers. We have to meet a desire for security and customer delight in enterprise sales."
Ex-CEO Leo Apotheker weathered criticism for his purchase of U.K. business software company Autonomy, but HP's strong showing in business software this quarter points to the acquisition's success. Whitman is likely to capitalize on Autonomy's huge portfolio of enterprise-software clients, as well as its business-oriented cloud computing capabilities, in an effort to re-establish its enterprise competitiveness.
The company plans to keep its PC division, despite slipping sales, but as these numbers show, it cannot rely on the PC market alone amid the burgeoning popularity of tablets, which is cutting into demand for desktops.
HP's success depends on the company's ability to evolve beyond PCs and printing as it pushes to mobile, so turnaround hinges on consumer response to the WebOS and the reception its products receive in the enterprise market. HP relies on business customers for continued profits, so its strategy centers on maintaining its PC unit while expanding into mobile technology to keep up with competitors.
Tech companies agreed to stronger privacy policies for mobile apps, as scrutiny ramps up among lawmakers and consumer advocates about how apps handle personal information.
Apple, Google, Microsoft, Amazon, Hewlett-Packard and Research in Motion entered into the agreement with the California Office of the Attorney General. Going forward, these firms must require developers to include clear privacy policies in apps, and inform users before they download or purchase an app about what data it will access, use or share, California Attorney General Kamal Harris said in a news conference yesterday.
In the wake of news that several apps, including Path and Twitter, upload and store address books and other personal information without users' knowledge or consent, the agreement holds technology companies and app store owners to a higher standard of transparency and disclosure regarding app activity.
Companies that run app stores, such as Apple and Google, will need to display privacy policies in a prominent place and set up a way for users to report apps that don't provide a clear privacy explanation prior to download. And, if technology companies fail to hold their developers to these tightened regulations, they risk violating California online privacy laws.
The new rules hold the biggest potential implications for Apple and Google, because their app stores are the largest and most widely used.
Apple has strict rules on its curated apps and does not allow software in its App Store that takes user information without asking first. However, after an iOS application called Path was found to collect user address book data and store it on remote servers without prior permission, it became clear not all Apple's developers follow the rules.
The new regulations will require Apple to curate apps in terms of privacy as well as safety.
Google prides itself on offering an Android marketplace that is open to all app developers, even though the open-source nature of the Android OS and its app store led to malware infections and privacy issues in the past.
Google must now require developers to adhere to strict, clear privacy policies in order to offer their apps to Android users, adding a new layer of scrutiny to a fairly open app marketplace.
Privacy inquiries are also reaching the national level. Congress is investigating Apple about how its apps store user data, and questions whether its closed-door screening process prevents disclosure about how it apps use consumer data, as well as other vulnerabilities.
App development races ahead, as users turn to apps for a range of mobile activities in increasing numbers. More scrutiny by lawmakers and consumer advocates could force tech companies to slow the pace, strengthen app standards and fully disclose how they use personal information.
HP said it plans to continue optimizing WebOS, as it questions Android's appeal, to revive its brand and ramp up competition against Apple and Google.
At a company meeting Wednesday, CEO Meg Whitman said even though WebOS's development will take a few years, "the industry really needs another operating system," believing HP's platform will attract top developers.
Apple's iOS and Google's Android operating systems dominate the app market, but iOS is a closed platform, and Google's acquisition of Motorola Mobility, approved by the Department of Justice this week, is leading to speculation that Android could soon become essentially closed as well.
"I think that Android may end up as a closed system because of [Google's] relationship with Motorola," said Whitman, who has also criticized Android's fragmentation in the past.
Whitman's remarks angle WebOS as a true alternative for up-and-coming developers who want an open-source platform, meaning a major new competitor for Apple and Google.
HP had high hopes for WebOS when it purchased the software's maker Palm in 2010, but the platform couldn't propel the ill-fated TouchPad tablet to success, and the device and its OS were soon pulled from shelves altogether despite the platform's good reviews.
Amid inner management turmoil, HP hired Whitman as its new in September of 2011, and announced in December the company would offer WebOS as an open platform, placing the responsibility for the success of the platform squarely on Whitman's shoulders.
There's a lot of pressure on WebOS, but it stands a solid chance of succeeding if developers find it easy and lucrative to create apps for, and still keep up high security standards. Android faces scrutiny over its privacy practices and repeated malware attacks, and consumers might flock to another open-source OS that's safer.
Further, Google bolstered its legal protections for Android with Motorola's sizable portfolio of technology patents, but the $12.5 billion acquisition could give Motorola a major advantage over other phone makers, despite Google's reassurances to the contrary.
Rival manufacturers like Samsung and HTC might gravitate toward another open-source OS that doesn't seem to give preference to one of their competitors, another hopeful sign for WebOS.
Beyond Android, however, WebOS must contend with other platforms aiming to gain ground with consumers and developers. Windows Phone will likely gain in share this year through its boost through a revitalized Nokia. Developers looking to reach a growing audience with their apps could look closer at Microsoft's offering, making it paramount that WebOS make inroads with developers quickly.
The company is rolling out revisions to WebOS slowly as it transitions the platform to an open-source resource, but with more Android phones being released and Windows gaining steam, the audience for it could be shrinking.
With Whitman at the helm, HP is standing behind its decision to retain and develop WebOS, and while the move is risky, the payoff could be big, making HP a serious contender once again.
Hewlett-Packard announced it will release parts of its WebOS to the open-source community over the next several months to sidestep potential patent problems and boost its competitive chances against Android.
HP said in a statement Wednesday it will make the WebOS app development tool Enyo 2.0 available immediately, kick starting the app-creation process. Enyo is a developer's tool used for writing apps that will work across multiple mobile devices and web browsers.
By releasing Enyo 2.0 first, HP hopes to attract the first wave of developers to its operating system as it continues with the process of making it an open-source platform.
The technology giant plans to gradually release individual WebOS components to the open-source community over the next eight months, hitting scheduled milestones until it makes version 1.0 of the entire source code available in late September.
The drawn-out schedule reflects a cautious outlook on HP's part, and hints at the scale of the ambitious project. HP's development staff must make sure no part of its WebOS source code infringes on any other operating system, such as Android or iOS, to avoid becoming embroiled in the patent lawsuits plaguing much of the mobile technology industry.
At the same time, HP needs to keep interest and momentum alive among the open-source community and follow a schedule that balances the time necessary to release an error-free OS against demand for another open-source system to run on mobile devices.
On the WebOS-enthusiasts' forum WebOS Nation, members are complaining about the long wait, saying "HP should have hired more people," and that the September deadline is "a little longer than hoped," the tech blog Mashable reported.
HP, however, stands behind its plan. "We feel really good about the timeline," an HP spokesman told Mashable. "We're thrilled to be putting some of the code into the hands of developers today. We feel it's a smart and aggressive schedule."
The release schedule also impacts where WebOS will stand in the marketplace against rival Android once it becomes available. Google boasts 700,000 Android activations daily, and plans to put its OS on everything from new smartphones and tablets to washer-dryers and refrigerators this year.
The longer HP waits, the more widespread Android grows, making time of the essence if HP hopes to create a strong Android competitor by making WebOS open source.
Android, however, is also reportedly more susceptible to malware and suffers from fragmentation due to different versions of the OS operating on varied devices. In addition, Google's recent changes to its privacy policy could have some Android enthusiasts looking for other options when it comes time to buy a new phone or tablet.
If HP can drum up enough developer interest over its eight-month release schedule and assure the marketplace it can offer an OS that combats Android's security and fragmentation issues, it could find a new niche in the mobile market.
HP will make WebOS an open-source platform, offering a challenge to Android as phone makers begin to investigate other software alternatives.
The company said today that it still will develop and support WebOS, but by offering it to the open-source community, the tech giant hopes to stimulate app development by letting any developer or device maker use and modify the platform freely.
Today's announcement brings resolution to one of the casualties of HP's ill-fated foray into smartphones and tablets. HP acquired WebOS when it bought struggling smartphone pioneer Palm in 2010. HP put the OS on several smartphones, and in July HP released the TouchPad tablet, but the devices stalled in the market.
In August, HP announced it would stop making smartphones and tablets amid tumult among its leadership, and the fate of the platform, which garnered strong reviews, remained unclear. Some analysts speculated HP would sell the OS, while others believed it would attempt another tablet, especially under the direction of new CEO Meg Whitman.
But a new chapter is expected to open for WebOS, with its open-source status offering possible disruptions to Android's strength at a moment when Google's OS is beset with challenges.
Android's own openness as a platform contributed to its widescale adoption by phone makers, with its inexpensive cost and developers' freedom to modify and customize the OS. Flexibility and low cost helped it compete against iOS, BlackBerry and other systems, and companies like Motorola, Samsung and HTC all built up formidable smartphone businesses on Android devices, which proved able to compete against the iPhone.
However, Android faces a slate of challenges even as its hardware partners gain further market dominance. The openness of the OS makes it prone to patent infringement legal challenges, facing a complex web of litigation targeted at phone makers who use Google's OS. Samsung, Motorola and Google face challenges from rivals like Apple, Microsoft and Oracle over alleged patent violations in their use of Android.
Those phone makers have already explored offering more devices on alternate platforms like Windows Phone, and may gravitate towards another open-source, well-regarded software as well.
WebOS's transformation to an open-source software also comes as Google looks to acquire Motorola, a transaction expected to shift dynamics among Android phone makers. The Mountain View, Calif.-based company said its purchase of Motorola will bolster legal protections for Android, due to Motorola's sizable portfolio of technology patents.
But many phone makers fear that Android will give Motorola an advantage, despite Google's reassurances that it plans to treat all Android device manufacturers equally.
HP's announcement today answers the question of what the company plans to do with its expensive OS, but its transformation into an open-source mobile platform creates more questions for phone makers in a highly competitive industry.
HP announced it will manufacture "one last run" of its TouchPad tablet device after intense consumer demand wiped out inventory on the deeply discounted devices, but did not say whether the new TouchPad batch will carry fire-sale prices.
"Despite announcing an end to manufacturing WebOS hardware, we have decided to produce one last run of TouchPads to meet unfulfilled demand," said Mark Budgell, HP social media strategist, yesterday. "We don't know exactly when these units will be available or how many we'll get, and we can't promise we'll have enough for everyone. We do know that it will be at least a few weeks before you can purchase."
On Monday, HP suggested it would produce more sought-after TouchPads after overwhelming demand contradicted the company's earlier plans to scrap its WebOS system, which runs the tablet.
Budgell said HP will make "a limited quantity" of the tablets "during our fourth fiscal quarter 2011, which ends October 31," and will leave the pricing to each retailer to manage. It's unclear where HP plans to offer this new stock of TouchPads; the recent fire sale stormed U.S. and select European markets.
The TouchPad, which only came out two months ago, retailed for $500 for the 16 gigabyte version and $600 for the model with 32 gigabytes. Just over a week ago, HP said it was dropping the prices to $100 and $150, respectively.
While the sale was definitely efficient in depleting supply, investors are concerned how the sell-off will affect the company in the long term. Analyst Benedict Evans estimates HP may have sold between 200,000 and 300,000 in the past ten days of the fire sale.
Reports indicate it costs about $300 to assemble a TouchPad, more than double the sale price, leading to speculation the price tag for this adventure may cost HP as much as $100 million.
While making more inventory of a product destined to be discontinued may be a strange strategy, with rumors of the TouchPad's OS being bought by a third party ramping up, building the tablet's user base may make the software more attractive to sell or license.
Finally, in a nod to how frenzied the consumer demand has been, Budgell is encouraging interested parties to follow him on Twitter at @MarkatHP for the latest developments.
Samsung may purchase HP's WebOS, in a move that would help the phone maker differentiate itself from other Android phone makers in the wake of Google's Motorola acquisition.
HP recently announced it will spin off its consumer PC division and discontinue its WebOS operations, essentially exiting the smartphone and tablet business despite its software's good reviews. Samsung, which earlier debunked rumors of acquiring HP's PC division, may be investigating WebOS instead, according to website Digitimes.
The Korean company staked a claim for itself in the smartphone market with Android devices, like the growing Galaxy line, and has already developed its proprietary Bada platform, designed for newer smartphone users.
However, Google's recently announced acquisition of phone maker Motorola is anticipated to change dynamics in the Android phone ecosystem as the company shifts from software into the hardware business. If Google becomes a probable rival, phone makers previously reliant on Android may choose to diversify their software options.
Many companies have already been doing this. HTC is set to launch a group of phones running Microsoft's Windows Phone Mango release, and Samsung today announced it will roll out a line of Wave smartphones powered by Bada.
Acquiring WebOS would be another option for Samsung, as recent fire sales of HP's discontinued TouchPad device illuminate the software, which has garnered strong reviews. With TouchPad stock nearly sold out, whoever owns the software may have a strong base of users that buys apps and attracts advertisers.
The OS already increased its market share in mobile advertising on the strength of the recent fire sale, one of many signs of a strange, surprising second life for the tablet and its platform. But HP may choose to retain its rights to WebOS and license the platform, as previously hinted.
However, because Samsung already has Bada, some believe HTC may be a more probable buyer of WebOS. The company uses third-party software on all of its phones, but may choose to increase its options as the Google-Motorola acquisition's effects play out in the longer term.
WebOS was considered a moribund product when it initially launched with HP's TouchPad a few weeks ago, but the surprisingly brisk fire sales may have given the OS at least a new lease. A new user base now exists for the software, and HP itself today promised software updates to cater to this new audience.
As the fate of Android after Google's Motorola acquisition -- as well as its increasing legal vulnerabilities in patent lawsuits -- begins to loom over Android makers, many companies may eye WebOS in a new, favorable light.
HP's successful fire sale of TouchPad renewed discussion of its reappearance, as the device finds a surprising second life.
HP tablets, now priced at $100 for the 16-gigabyte model and $150 for the model with 32 gigabytes, have sold out so quickly and generated so much interest that the company may consider making more of the devices -- and possibly supporting them.
"We have been surprised by the enthusiastic response to the TouchPad price drop, and we understand that many customers were disappointed that HP and our retail partners ran out of supply so fast," wrote HP spokesman Mark Budgell in a blog post Monday.
Customers began snatching up the discounted tablets after HP announced plans to scrap the company's WebOS system, spin off its profitable PC division, and purchase U.K. software maker Autonomy for $10 billion.
The WebOS-run TouchPad, which originally sold for about $400 more than its current sale price, may appeal to those looking to test the tablet waters and those who love affordable gadgets.
The steep discounts moved the device, which, because of its discontinuation, was not expected to get software updates. WebOS is considered essentially a dead platform, although fire-sale shoppers don't seem to mind.
The company today, however, announced it will provide updates that "add functionality" to the WebOS tablet, helping to keep the device alive in spite of its official demise.
HP will "continue to investigate the best ways to leverage WebOS software and grow the applications," said the company in a statement.
Because of brisk sales, the device seems to have found a place in a market dominated by Apple's iPad and garnered largely positive reviews, possibly fueling consumer interest.
Tech savvy segments of consumers are also snatching up the devices to modify them and run Android OS, giving the TouchPad another second life. The website Hack N Mod is offering a reward for anyone who can prove they've modified the tablet to efficiently run Google's Android operating system, effectively creating a tablet with updated software able to run new apps if WebOS runs dry.
The tablet's resurgence even sparked surges in advertising on the WebOS platform. Reportedly, Jumptap, a mobile advertising agency, released statistics that show HP TouchPad apps have already gathered eight percent of the tablet mobile advertising share, comparable to Android's nearly 10 percent.
Not all analysts agree this surprising number represents the big picture, however, since Android tablets have been on sale for some time while the HP Touchpad has been on the market for only a few weeks. Still, the possibility is generating interest in the advertising industry.
While analysts are still debating what the TouchPad buzz means, it does demonstrate consumers respond very favorably to a low-priced tablet. As for what healthy fire sales mean in the longer term future for HP, the surprising second life of the TouchPad may indicate promising directions to come.
HP CEO Leo Apotheker defended his company's decision to shelve its WebOS operations as the beginning of a "needed transformation" to allow it to concentrate on future development, rather than signaling impending trouble.
Apotheker, which added the major changes allow it to evolve in software development, dismissed analysts' opinions that HP paid too much money for U.K. software company Autonomy.
"When IBM spun out their PC business, they spun out a money-losing business," Apotheker said. "We are very proud to have a money-making, market-leading business with the best margins in the business. We are going at this from a position of strength."
Late last week, HP scrapped its WebOS system, announced it plans to spin off its profitable PC division, and had a "fire sale" to sell deeply-discounted TouchPad devices.
In addition, HP plans to buy U.K. software maker Autonomy for $10 billion.
HP's decision to spin off its PC division was possibly the most stunning to the stockholders, because the Palo Alto, Calif.-based company is the world's largest PC maker. Apotheker said it is not possible for HP to continue to invest in PCs if it wants to push forward on software development, or even more on mobile devices.
However, Apotheker ordered the TouchPad, HP's first real reach toward competing with Apple's iPad, off the market less than six weeks after its release, indicating the company may have a long way to go before it can see the same success with mobile devices that it has enjoyed with its PCs.
TouchPads are only now in demand after the company dropped its prices down to $100 for a 16-gigabyte model and $150 for the 32-gigabyte unit. And even though customers are now buying out the once-unpopular tablet, the TouchPad operates on WebOS, which HP said last week it will no longer support.
HP may also lose capital with the PC unit spinoff that would be important for future development. The PC unit made $40.1 billion in revenue and $2 billion in operating profit during the last fiscal year, which HP used to fund its other operations, such as TouchPad.
But Apotheker said keeping the PC unit as part of the company hinders development because tech cycles "are much faster than a conglomerate can move in most circumstances."
However, the Autonomy purchase may indicate a possible HP push toward software development that may bring new sources of revenue. Apotheker said Autonomy will allow HP to "skip a generation of technology" and help businesses structure data.
Some analysts take this to mean the Autonomy purchase will allow HP to develop software that will allow companies to do business through Internet cloud services, which may likely be the next online to see incredible growth.
But with HP spinning off its PC unit, many investors worry that the company may be spending money it can't afford with the Autonomy purchase.
Apotheker said HP is paying a "fair price" for Autonomy, because the buyout will allow HP's software sales to climb by at least five percent by 2015 -- another indication HP plans to concentrate on software development in upcoming years.
Microsoft is making an effort to lure away WebOS developers from their unfinished projects, as the company looks to capitalize on the abandoned operating system.
The Redmond, Wash.-based company's senior director of Windows Phone 7 development, Brandon Watson, offered support to WebOS developers with the company's support.
HP recently announced it would discontinue operations and support for WebOS after poor sales of its TouchPad tablet and WebOS phones. The company will have to pay $1 billion in restructuring fees to shut down its tablet and smartphone business.
Watson promised to give developers everything they'd need to be successful on Windows Phones, including free phones and all the necessary tools and training.
Just a few days after reaching out to WebOS developers on Twitter, Watson said he received more than 500 email inquiries, far more than he expected.
The added developer support comes in addition to the other moves the company has made to carve out a bigger piece of the smartphone market. Microsoft plans to launch an updated version of its Windows Phone operating system that fixes many of its critics' earlier complaints, and aims to ensure a smoother user experience.
The company also inked a deal with Nokia, making its Windows Phone OS the smartphone maker's number-one priority. The deal with Nokia will likely improve Microsoft's presence in the market greatly. The company is still the number one smartphone maker in the world by vendor, and will help Microsoft by releasing competitively priced devices in emerging markets in Asia India.
But added developer support from WebOS developers could make Microsoft's OS even more appealing. Apple's App Store remains one of the biggest selling points of the iPhone, and Google's Android OS has been anchored by the success of the Android market.
In order to compete against the two juggernauts, Microsoft -- whose own app store shows promising growth but still hasn't reach its rivals' levels yet -- will need app support, including apps that are exclusive to the Windows platform.
If Microsoft can recruit enough WebOS developers, it may give its mobile app store a boost against its heavy competition, even by courting developers of a soon-to-be-abandoned OS.
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