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HP's Lack of Invention is Why webOS Failed

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I cannot remember a time when I would have considered HP an emotionally charged company. As far as excitement goes, HP is about as arousing as a toothpick. Today, however, is different.

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I believe it would be fair to say that investors do not approve, or, at the very least, do not especially like HP's new plan how the company plans to sail into the future. The company said that it be trying to sell its personal computer business, which is a major revenue source for HP. This was questioned not just outside of HP in the investor community, but especially by the services guys inside HP who never missed a chance to trash HP's interest in building consumer PCs. Of course, there was also news that HP canceled its webOShardware devices and is now leaving the future of the software in question, which essentially will cost HP at least about $2.5 billion to get rid of one of the greatest opportunities it had in a long time and is now left with the only choice to kill whatever is left of Palm, the company that pioneered mobile devices as we know them today. HP is served a broadside from the financial community today, with the most critical piece being Jeff Reeves' article that compares HP to the "worst of corporate America." I would not be so dramatic, but he has a point and there is much in this claim why webOS failed inside HP.WebOS failed for the very same reasons why VoodooPC failed as part of HP as well, for example. HP today: Invent? A few months ago, we heard HP CEO Leo Apotheker saying that he would hope that HP could be as cool as Apple is today. However, realistically, what is HP today and what do we think it will be without webOS and the PC business? A printer manufacturer? An enterprise services company that uses fancy names for trivial technologies described in Powerpoint presentations that put the company's clients to sleep in a matter of minutes? Even in its enterprise business, HP seems to have lost its fire and we know that the company has been searching for direction for some time. A direction that has changed course several times since CEOs Carly Fiorina, Mark Hurd and now Leo Apotheker. In servers, HP always had issues going after IBM and it was the profitability of IBM services that drove HP into this market as well. Yet HP never achieved the high profile and reputation of IBM in this market and could only grow its reach via substantial acquisitions, such as Autonomy now. It is not difficult to see that HP will be moving much more into the enterprise market and services than ever before. However, even in

that space, HP may have problems at the very core as the company is turning into a giant that is the opposite of being nimble. Its perennial rival IBM may be larger than HP, but it does much better job at being perceived as an innovation driver across all of its business segments -- for example, with chips that are built using neuronlike structures. HP has its famous labs as well, but, honestly, when was the last time you heard about a significant innovation that has come out of HP? You can take this innovation game even further and look at the patent space. HP filed 2 patent applications with the U.S. PTO this week, IBM filed 44 and Samsung filed 98. On an average week, Samsung is filing for 130 new patents every week, IBM for about 120 and HP for about 15. The activity coming out of HP does not reflect the size of the company. If the number of filed patents that protect any innovation in fact are a sign for the innovative power of a company, then I would claim that "invent" is not be the best word to describe HP anymore. A Colossal Mistake: webOS The acquisition of Palm and webOS was an interesting move. For pocket change ($1.2 billion), HP bought itself an ailing, but very capable platform that could have changed the face of HP. WebOS was the foundation of a platform that screamed "innovation" much more than anything else HP has in its product portfolio today. There was initial enthusiasm for webOS and an opportunity that connected nicely to HP's position as leading PC manufacturer -- its aspirations as a smartphone company as well as the emerging tablet market that so heavily depends on a functioning platform. HP had the resources to build webOS into something great. What HP did not have was time and passion. HP gave the Touchpad 49 days to succeed or fail. 49 painful days that jailed a fantastic OS in barely adequate and over-emphasized hardware. 49 days that proved that consumers will not just buy a $500 tablet because we all suddenly think that they are the best thing since sliced bread. In Leo Apotheker's more pragmatic words: "Our WebOS devices have not gained enough traction in the marketplace with consumers and we see too long a ramp up in the market share. Due to market dynamics, significant competition and a rapidly changing environment and this week's news only reiterates the speed and nature of this change, continuing to execute our current device approach in this market space is no longer in the best interest of HP and HP's shareholders. Therefore, we have made the difficult but necessary decision to shut down the webOS hardware provisions within Q4 2011." What Apotheker failed to mention is that it was not "market dynamics, significant competition and a rapidly changing environment" that killed webOShardware - it was HP. When HP acquired webOS with Palm, it was clear that this was a very fragile foundation for a new and highly marketed environment that required as much brainpower as risky and substantial monetary investments. The Touchpad was the first attempt. Like all Android tablets on the market today, the Touchpad lacked the reasoning, vision and passion that makes the iPad so successful. HP did not courtwebOS developers. Instead of a truly unique tablet, it produced an iPad copycat and sold it for the same price as the original. What reason would consumers have to buy the Touchpad over the iPad, if there are fewer apps, if there is a questionable future, if there is no platform integration, if there are no compelling phones, and if the iPad carries the innovation mindshare and all bragging rights? Releasing the Touchpad in its current form was driven by negligent market and consumer research at the very least.

HP had tremendous opportunities with webOS. It could have given the software away for free to invite developers. It could have create a huge platform spanning from PCs, appliances, smartphones to tablets. What is left is webOS with nowhere to go. There is talk that HP may try to license it to HTC or Samsung. I am not quite sure what HTC would do with webOS. HP calls this strategy now "optimizing the value ofWebOS" after it virtually killed it with sub-par hardware. Failure by design HP has always had trouble integrating young companies and new ideas into an aging corporate structure that may not be so competitive anymore. Rahul Sood from VoodooPC left HP's PC business earlier this year and joined Microsoft. VoodooPC, at least temporarily, gave HP the perception of being an enormously innovative company that took a playful and risky approach to set trends and not follow them. WebOS is a deeply emotional product that failed inside HP most likely because of the same reasons companies like VoodooPC failed. Unless HP recognizes the opportunities it is given, unless it returns to the roots of innovation and becomes much more nimble and passionate than it is today, HP is simply stuck in a time that is slowly fading away. Apple is the poster child of what passion for its legacy and products can do for a company. HP needs to embrace the same spirit that is driving companies such as Apple and Google, whether it deals with business or home users. WebOS represented the passion that HP so desperately needs. The strong reaction of investors that sent HP's stock down 20% to a six-year low may only be one indicator of HP's shaky future. Hp cannot afford to miss many opportunities such as webOS. http://www.tomshardware.com/news/webos-failure-by-design-hp-touchpad-palm-voodoopc,13261.html E-mail | Print | Comments | Request Reprints | E-Mail Newsletters | My Yahoo! | RSS

Silicon Insider

Hewlett-Packard's Failure To Communicate

For God's sakes, Carly, you could have just told us why! The battle over the proposed merger of Hewlett-Packard (nyse: HWP -news - people ) and Compaq Computer (nyse: CPQ - news - people ) has now reached the sulfurous stage--that moment in a family feud (and, at HP, this is most definitely about family) when words are said and actions done that can never, ever be taken back. You can read those words in your daily newspaper. It began when Chief Executive Carly Fiorina and HP's management, already suffering pushback from analysts and their own employees over the merger, suddenly were blindsided by a revolt by the company's largest private shareholders: the children and grandchildren of the two founders. Since then, most of the nastiness has come from the side of HP management. It began with an ad

quoting the late David Packard in apparent agreement with the idea of the merger. This, following a multiyear effort by Fiorina to aggrandize H and P's symbols (notably the founding garage) led to an angry response by David Packard Jr. that his father would never had countenanced the company's growth through such a massive acquisition. Especially not with a culture so alien to the legendary HP Way. It has only gotten worse. Though the odds still seem in management's favor, Carly and company nevertheless feel scared enough to resort to ad hominem attacks, most notably describing board member Walter Hewlett, who is leading the revolt, as a mere "academic"--read: dotty, eccentric, with fringe (and probably dangerous) ideas about how capitalism really works. Hewlett has responded with angry national print ads saying, "A $25 billion mistake is not the HP Way." No matter how events play out from here, it is unlikely that this schism will ever be healed. If the proxy vote fails next month, Carly will resign; if it passes, one can easily imagine the two families beginning the long process of liquidating their ownership in HP. Either way the vote goes, there will also be one other victim: the HP Way. Its preservation was the real reason for the founding families' revolt. Put simply, the Hewletts and Packards, along with thousands of other employees past and present, believe that the Way--the company's unique and influential culture--is HP's most important asset...and that it would be destroyed by the merger. On the other side, Fiorina and her staff appear to believe that the HP Way is an anachronism of a different, slower time; and that, for the company to survive and succeed in the future, it must be driven purely by a rational business strategy--not some metaphysical mumbo jumbo left over from the good old days. The current situation is now fraught with ironies. For example, after all of the layoffs, organizational changes, assertion of executive hierarchies and the destruction of traditional company rules of behavior, the HP Way that the old-timers are fighting to save is probably already dead. Meanwhile, though Fiorina and her team appear not to believe in the Way, they are now reduced to appealing to it--or its memory--in order to get enough shareholder votes to win. If you read between the lines, what this means is that, contra-Carly, the HP Way really did exist, it remains as powerful and useful as ever, and its last use will be to destroy itself forever. But the most tragic irony of all is this: Had Carly Fiorina believed in the HP Way, had she followed its dictates, none of this nightmare need have happened. You see, the heart of the HP Way is the notion of trust--and the ultimate manifestation of that trust is in open communication from the top of the firm to the bottom. And this is where Carly has failed as the CEO of Hewlett-Packard. In particular, I daresay that if you ask the average HP employee, or shareholding retiree--or even a business reporter who covers the computer industry--exactly why the HP-Compaq merger would be a good deal, the only answer you'll get is that the managements of the two companies think so. Just take a look at the company's new two-page ad. It lists HP's current market positions and assets on the left page, and then, on the right page, how the Compaq merger will make the combined company No. 1 in several businesses, including PCs. This ad raises as many questions as it answers. After all, IBM (nyse:IBM - news - people ) was the

biggest computer maker in the world. It blew up. Ditto Atari in videogames. And Texas Instruments (nyse: TXN- news - people ) in chips. And Wang in workstations. And Apple(nasdaq: AAPL - news - people ) in personal computing. And Tektronix(nyse: TEK - news people ) in test and measurement instruments. In technology, being number one doesn't mean a damn thing unless it is powered, as with Microsoft (nasdaq: MSFT - news - people ), Intel(nasdaq: INTC news - people ) and Oracle (nasdaq: ORCL - news -people ), by a dynamic corporate strategy and the ability to execute it. But on those latter topics, Carly Fiorina is all but mute. Just trust me, she seems to be saying, I know what I'm doing. What we have here, to quote Strother Martin, is a failure to communicate. And this failure by Fiorina has been disastrous: It may even wreck a great company and destroy her own career. By remaining secretive, and in the process showing contempt for the intelligence of her own employees, Carly began to sew doubt in the very people she needed to close the deal. They began to ask themselves if she had a plan at all, or whether this was merely self-aggrandizement at the cost of a great company. Coming on the heels of growing concern over her autocratic management style, the families felt they had no choice but to fight for their fathers' firm. As it happens, Carly does seem to have a strategy, but you have to dig deeply into some of her industry speeches to find clues to it. It goes like this: The information technology industry is undergoing a period not only of consolidation, but standardization, around specific architectures like Itanium, UNIX, Linux and NT. During such periods, competitive advantage goes to those firms that can bring to bear the maximum amount of research and development, sales, marketing and other economies of scale. With the merger, HP will have that scale, and that in turn will help it dominate such high-margin emerging markets as digital imaging and digital publishing. Did you know this was Fiorina's strategy? It's nice to finally hear it, isn't it? I think she is completely wrong, but I'm happy to know that at least she's got a plan. I certainly wouldn't have gleaned that from the advertisements. I can't helping thinking that had Carly Fiorina last autumn thoughtfully presented, in detail, her reasons for pursuing the merger, none of this acrimony would have occurred--she might have even had her cake (Compaq) and eaten it (minus the collapse of morale and the family mutiny) too. But then, she would have to trust the intelligence of her employees and shareholders. In other words, she would have to believe in the tenets of the HP Way.
http://www.forbes.com/2002/02/14/0214malone.html