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April 30, 2010

HP reaches out to Palm a new environment

HP announced its plan to purchase the people and assets of Palm for $1.2 billion, reminding me of another  grab from the past. That acquisition of Compaq more than eight years ago signaled the end of HP's 3000 futures, even while the company took on new environments. Embracing Palm seems an echo of that strategy (buying innovation that was being thumped in the market) and it marks a notable turn on HP's course.

Hewlett-Packard is purchasing an operating system, one that's not open or an industry standard. You have to go a very long way back to find that sort of play. In fact, it's that very Compaq deal that marks the last time HP acquired an OS or two.

In this week's case it's WebOS, widely praised but under-adopted, developed by top talent and well-loved by the modest base of users who use it for their Palm Pre smartphones. “Palm’s innovative operating system provides an ideal platform to expand HP’s mobility strategy and create a unique HP experience spanning multiple mobile connected devices,” said Todd Bradley, executive vice president of HP's Personal Systems Group. “And, Palm possesses significant IP assets and has a highly skilled team."

Eight years ago HP's acquisitions were OpenVMS as well as the NonStop environment, a pair of operating systems that had built loyalty and ardor among IT pros. Like WebOS, they weren't growing. HP didn't pursue Compaq for these environments, but it didn't cut them off like MPE/iX, either.

The history of acquired software is not a pretty one for HP, however, from the Allbase relational database for the 3000 in the 1980s right up to the Mercury Interactive test software purchase in 2006 for $4.5 billion. OpenVMS and NonStop at least had critical mass when HP took them in. WebOS has technical superiority over other mobile environments. Adding it to the HP portfolio shows that control of technology is becoming important in mobile computing, at least. It's a start, or maybe a return to the days when Invented in Here was an asset HP knew how to sell.

It's been easy to believe that HP was getting out of the OS business with its enterprise embrace of Windows and Linux. Perhaps the Palm deal is a sign that HP wants technology that it can control once again. It used to be the only way to turn a profit, win new customers and build loyalty.

Windows changed all that for HP, but it's had to swallow the development and investment decisions of Microsoft or chase the Linux evolutions to reduce its appetite for en-suite operating systems. The smartphone and mobile environments count far more devices than the typical HP-UX customer, and HP's had to make its profits with its proprietary Unix by selling it to massive companies. Some say that Global 400 is where most profits lie in IT, but you'll get an argument from Apple Computer -- which has little presence in such markets but was only $2 billion behind HP on profits while Apple sold nearly $80 billion less. None of it was in the ultra-profitable services business, either.

The purchase of Palm won't close until the end of HP's Q3, but at least the HP acquisition of WebOS may stem the brain-drain of engineers leaving the on-its-heels Palm. In the mobile marketplace, much was whispered and even promoted by HP of an HP Slate tablet. The Slate was to run Windows 7, and some saw that OS as the ankle weights that would keep the mobile device from leaping into competition with Apple. HP insists that its relationship with Microsoft is strong as ever in the face of the Palm pickup. But for mobile, Windows can't compete. WebOS is full of promise but lacking an App Store, so critical mass is the element HP must concoct to make its $1.2 billion pay off.

Of larger value: The ideal that HP should own OS intellectual property, environments it should enhance and propel into new customers' enterprises. HP-UX sites might be glad the Palm deal cleared the HP boardroom, a place where eight years ago HP's steady but slow-growing MPE/iX didn't make the casting call for the future.

Duane Percox, whose company QSS has moved among MPE/iX, HP-UX and Linux environments while it sells K-12 apps, thinks the Palm deal will prove interesting as HP assimilates the new tech. Some community members talked up the idea of buying WebOS to kill off a competitor to Apple's iPhone. Percox, who's been in IT for 30 years, said buying an OS holds a lot more promise than hospice care.

The best way to wipe out WebOS was for Palm to do a lousy marketing job and to place the Pre with Sprint. Based on the numbers it appears that Palm already tanked so no need to worry about HP messing it up.

So, why would HP buy something with so little market share that appears to be going backwards? The same reason Steve Jobs doesn't like Flash on the iPhone/iPad. Think about it...

• HP has mobile devices that are dependent on Microsoft.
• Android is technology that HP can't control
• WebOS gives HP a platform to create a controllable solution that offers the best possible user experience vs. the iPhone/iPad

Now, add to the mix the fact that ex-Palm and Apple heavy hitters now work at HP, and you start to see some interesting possibilities. Can HP execute and pull this off? Only time will tell, but it should be an interesting ride.

The cultures of the Personal Systems Group (new owners of WebOS, come the summertime) and Palm are disparate as any $1.2 billion and $35 billion entities could be. You can start with the fact that reports say nearly all Palm employees are using Apple systems, owning to the company's leaders coming out of Apple. HP's had a culture disconnect like this in a past that impacted the 3000. Compaq was known as HP Red, the old Hewlett-Packard as HP Blue. In the end, the Red overtook the Blue and pulled HP's $22 billion Compaq deal into growth and profits, given about four-plus years.

Perhaps Palm will have a hand in the rise of the unique value of the OS at HP. That concept would deal HP's Unix users a lift that could help if the Business Critical System Integrity numbers fail to grow. For those who understand that the 3000's treasures lie in MPE/iX, it's good to see HP go after an operating system.

03:50 PM in News Outta HP, Newsmakers | Permalink

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