H-P's Big Week

Hewlett-Packard (NYSE: HPQ  ) and new CEO Leo Apotheker's improbable journey to one day make H-P as cool as Apple (Nasdaq: AAPL  ) in consumers' eyes begins this week. Today's unveiling of a new tablet and smartphones lets H-P showcase its plans for its $1.2 billion acquisition of Palm and the webOS operating system. The Apple-style event launch introduction to these new devices will certainly create much-needed publicity for H-P, but many analysts doubt that the company will be able to make any headway into this rapidly growing market.

Much less heralded, but still also very important, is theTouchSmart PC line update H-P announced Monday, as the company aims to link its market-leading PC business to the rapid acceleration of tablet usage. Shares aren't as cheap as they were when I highlighted the company just a few weeks ago, but H-P's still a value play, especially if these products gain traction and Apotheker can help make the company "cool."

Pre-iPad tablets
Many iPad owners and those in the cult of Steve Jobs probably don't remember, but not too long ago, their fearless leader joked about tablets as H-P attempted to bring its touchscreen TouchSmart desktops to homes and businesses. Admittedly, it did take H-P a while to make a model that was really attractive for a conference room, living room, or even a retail store, but these updated versions look ready to contend.  

The device has a reclining display that tilts up to 60 degrees, making it much easier to use than previous models, and allowing users the functionality of a tablet. These TouchSmart devices are particularly popular with retail chains. For example, women's apparel chain Chico's FAS installed TouchSmart in more than 1,000 locations for training and management purposes.  In addition, the new TouchSmart devices have a simple function that wirelessly allows users to link the screen of any desktop or laptop to the TouchSmart, essentially giving any network device a touchscreen interface.

Unfortunately, H-P's TouchSmart devices still rely on Microsoft's (Nasdaq: MSFT  ) Windows 7 OS, which makes integration with H-P's mobile webOS products a problem. Using different operating systems impedes a seamless device experience, and it could affect how consumers and businesses accept the new products.

A strategic opportunity
Prior to its acquisition by H-P, Palm released webOS amid much fanfare in the tech community in 2009. However, mainstream acceptance never caught on; consumers weren't quite ready to buy a product from the beleaguered company. Happily, much of the team that developed the operating system still remains in place, now nestled in the much more capable and cash-rich arms of H-P. This significant upgrade in marketing and hardware resources gives the operating system a giant leg up on its previous incarnation as the Palm Pre.

Still, H-P's mobile ambitions face one overwhelming challenge: The company is essentially starting from scratch against virtually all of its competition. Apple has at least 300,000 apps for its iOS operating system, and Google's (Nasdaq: GOOG  ) Android operating system is receiving nearly 30,000 new apps a month. Research In Motion (Nasdaq: RIMM  ) and Microsoft are also fighting for some of this space. Microsoft made attaining key apps a cornerstone of its Windows Phone 7 launch, and RIM is marketing its apps as "Super Apps" in a new national advertising campaign. As a result, H-P has a lot of catching up to do -- with few developers poised to come to its aid.

Android device manufacturers like Samsung and Motorola (NYSE: MMI  ) have the advantage of a built-in ecosystem of apps, but for consumers, it can be hard to tell the handsets apart. WebOS could serve as an important differentiating factor for H-P, since its phones will be the only devices with this operating system. This much-smaller ecosystem also creates an opportunity for apps that might get lost in the shuffle of the hundreds of thousands offered on Apple and Google's operating systems.

An uphill battle
While most believe that H-P's foray into the mobile space is coming a little too late to make an impact, its webOS operating system, coupled with its leadership in enterprise hardware, creates significant opportunity for the company to make up ground. While H-P will likely continue to use Windows as the operating system for its PCs for some time, the success of webOS will allow H-P to improve functionality across the majority of its other devices, creating a more seamless and Apple-esque experience. It certainly won't be easy, and few people expect H-P to be a significant player in the mobile market, but I think Apotheker and his team might surprise us yet.

Andrew Bond owns no shares in the companies listed. Apple is a Motley Fool Stock Advisor recommendation. The Fool has written puts on Apple. Motley Fool Options has recommended a diagonal call position on Microsoft. Google and Microsoft are Motley Fool Inside Value picks. Google is a Motley Fool Rule Breakers recommendation. The Fool owns shares of Apple, Google, and Microsoft. You can follow Andrew on Twitter @Bond0 or on his RSS feed. Try any of our Foolish newsletters today, free for 30 days. The Fool has a disclosure policy.


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  • Report this Comment On February 09, 2011, at 5:40 PM, zboxiii wrote:

    Leo said that they wouldn't make product announcements unless they were ready to ship. Now they say they won't be able to sell these until "summer." I wonder what kind of head start the iPad will have by then.

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