Is HP Dying?

hp has been a mess recently. Its former director Tom Perkins actually said: “I didn’t know there was such a thing as corporate suicide, but now we know that there is. It’s just astonishing.” Wall Street Journal ran a piece about HP’s One Year plan for effectively killing itself, which summarizes everything that went wrong

with HP over the last year. This New York Times piece has even more details.In a nutshell, they fired their former CEO (Mark Hurd) over a sex scandal that didn’t involve sex only to hire a former SAP executive (Leo Apotheker) who was himself involved in a software theft scandal and hasn’t held that position for longer than seven months. The new CEO then proceeded with a confusing series of acts that would apparently have to culminate with a transformation of HP into a business software company like SAP. This involves shelling out 10 billion dollars for a british enterprise software company Autonomy while selling off or separating HP’s PC business.Most prominent was the whole HP TouchPad fiasco though. HP talked about becoming more like Apple with its WebOS powered devices by controlling both an unique OS and the hardware it runs on end-to-end, and HP TouchPad was to be the first great example of this new approach. HP was all upbeat about it and indicated that they would stick with it in the long run by saying that this is not a sprint, but a marathon.Then just over a month after HP TouchPad hit the market to less than stellar sales they give up and announce that they won’t be making any more tablets. What a moment.But this is where things get interesting. Since HP already had hundreds of thousands of TouchPads to get rid off they put it on a fire sale for just $99 ($150 for the 32GB version), instantly turning a tablet that few were interested in into a hit. After all, this is $99 for a tablet made by a top brand, and with decent hardware specs at that, plus a unique new OS that many have lauded for a long time. The fact that customers can’t expect this new platform to be supported and updated didn’t matter as much in face of a price this low.And now strange things are starting to happen. HP announces a giveaway of some paid WebOS apps. Why would they need to do that? Weren’t they killing off the whole thing? Then just today there is speculation that HP TouchPad might be the second (albeit distant second) best selling tablet after Apple’s iPad 2, and HP starts singing a slightly different tune, promising an update to WebOS after all.

So how does this look like to you? If I didn’t know any better, any of the surrounding context about this screw up, I would think that HP TouchPad fire sale was a marketing tactic to get that device into as many hands as possible, providing HP with a leverage of an install base and therefore jumpstart this new platform. All the millions they lost on this fire sale might be considered a long term investment, perhaps something like what Sony and Microsoft commonly do with their consoles.However, we all know this wasn’t planned. In fact, it doesn’t really seem like HP really has a plan. It seems like they’re dealing with things as they come right now, and sometimes get a little lucky.Meanwhile, about 200 000 HP TouchPad users have a second option to jump to as the CyanogenMod team got Android to work on the device. A number of people have pointed out that TouchPad performance issues could be due to weak WebOS optimization, which would suggest that a better built operating system like Android might perform very well on a tablet with these specs, giving HP TouchPad owners a fairly high end tablet experience (at least after the hassle of installing the Android mod) for such a low end price.As for HP itself, I wouldn’t bet anything on whatever they say right now, including that they will support WebOS after all. They don’t seem to be knowing what they’re doing right now so uncertainty is the name of the game. Will this kill HP as a company? I doubt it. It is too big to wither away so easily. At best there may be a painful decline over the coming time (which could be years) until they settle to a niche. That said, sooner or later something’s gotta give. Perhaps shareholders stage a coup to bring the company to order? I don’t know, I’m no business analyst.What I can say is that this is proving to be an interesting show, a potentially insightful case study, and a nice experiment in terms of tablet pricing (as others have suggested). If HP gets its act together, I would expect the optimal way forward to be separating their PC division into an independent subsidiary, and keep the rest of HP experimenting with this new business software plan, with Autonomy at their side.The separate PC division should release a TouchPad 2 with better specs, better optimized WebOS and a price no higher than the first model. Then they should persevere, make it a “marathon” as it was originally supposed to be. They have a few hundreds of thousands of existing customer base now to build on. Essentially, they should make the most of what little positive they got out of this whole ordeal.