Monday, August 22, 2011

HP dumps PCs and notebooks for software

Just three short weeks after proudly stating that NZ customers would play 40% more than others for their Touchpad tablet computer, HP has announced that it's pulling out of the hardware game.

Not only is it going to ditch the TouchPad but it's also looking to divest itself of all its PC hardware lines and even its WebOS Smartphone products.

Instead, the company is investing heavily in acquiring software talent and intends to reposition itself as a major player in this field.

Although the company's realisation that the Touchpad was never going to fly must come as a relief to shareholders, the company's stocks still took a hit on the news.

One thing is for sure, if HP had tried to do an Adidas and charge Kiwis 40% more than the rest of the world they would have been held up to ridicule and derision by savvy consumers.

This strategic withdrawal from the PC hardware marketplace is a bold step for HP but not a silly one. Although they still have a significant market-share (17.5% of the US market) it is very clear that, in the face of intense competition from rivals such as Apple, the whole market is undergoing significant change. The company has reported significant decline in its netbook and notebook sales -- clearly a result of the iPad's runaway success.

One of the keys to success in an industry as dynamic as the computer one is knowing when to refocus -- fortunately, HP seems to have done this in time to avoid major embarrassment -- although some claim that the Touchpad was proof that it might have been prudent to make this move just a little sooner than they did.

Right now, only 2% of HP's revenues come from software so this redirection is perhaps a risky decision that wasn't taken lightly, especially when you consider that they're now spending $10bn to buy the UK software company Autonomy to establish more of a foothold.

Observers and commentators will be watching HP's progress and reinvention over the coming months to see just how well this gamble pays off.

The great thing about this industry is that the only constant is change.

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