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2 Ways for HP to Get More Value From Palm

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It's about time I gave Leo Apotheker some credit. As Hewlett-Packard's (NYSE: HPQ  ) CEO, he's taken on what might be the toughest turnaround job in tech. He's finally seeing that, and he's focusing on tools that can help.

"I happen to believe WebOS is a uniquely outstanding operating system, and there's no reason to believe the only hardware that can run it is HP," Apotheker said at The Wall Street Journal's "D9: All Things Digital" conference earlier this month.

Protecting the crown jewel
Smart. Whether or not others besides HP choose to adopt WebOS, the operating system that Mark Hurd overpaid for is the one innovative arrow in the company's quiver. True, the OS accounts for just 4% of the U.S. market. Nevertheless, some techies who've played with it consider it on par with Apple's (Nasdaq: AAPL  ) own designs.

"Despite some issues, WebOS 2.0 is probably neck and neck with iOS4 when it comes to polish and ease of use, and that's a pretty huge thing for Palm," wrote Engadget’s Joshua Topolsky in reviewing the operating system in October. "This isn't just a good OS, it's a great OS, and the updates in this version have made it even better."

What's next for WebOS
HP is hoping that geeky enthusiasm for Palm will level up to broad market enthusiasm once the newest WebOS (the forthcoming 3.0 edition) is paired with fast and functional hardware. That's why Apotheker left open the possibility of a licensing deal with a device design specialist such as HTC.

For now, HP will continue making its own gear. On July 1, HP will introduce its TouchPad tablet in the United States. I'm not expecting blowout sales, if only because there isn't enough that's really different about the TouchPad's hardware specs to make it an attractive alternative to the iPad or any of the new Android tablets.

On the other hand, the larger screen, tight integration with the Pre smartphone, and native support for Microsoft's (Nasdaq: MSFT  ) Exchange and Direct Push technology could make the TouchPad a nice alternative to Research In Motion's (Nasdaq: RIMM  ) PlayBook. Either way, Apotheker seems committed to investing in WebOS devices.

Investing for the long term
Unlike in PCs, where the form factor and hardware design are less noticeable, the size, shape, and function of smartphones and tablets are crucial elements that shoppers consider. We know this because -- if whiz-bang geekery were what sold tablets -- feature-rich 7-inch tablets would have overrun the iPad by now.

So HP needs a great hardware design. The TouchPad takes an important step in the right direction, I think, by including support for a micro USB port, making it easier to attach an external hard drive. Yet there's more to do. Here are two other areas HP might invest in.

1. Court developers. When it comes to smartphones and tablets, coders are committed to Apple and Google (Nasdaq: GOOG  ) and, to a lesser extent, Microsoft, RIM, and Nokia (NYSE: NOK  ) . WebOS isn't high on their priority list, which is a problem. Smartphones and tablets are data-driven devices, and data is delivered by software.

If more compelling software means more sales, then why not invest in making developers wealthy? HP has more than enough capital to start its own seed fund to incentivize coders to write WebOS software. What about funding WebOS-based software business ideas? Or what about offering zero or 1% royalty rates for apps offered through the WebOS application store?

2. Create a Chromebook alternative. At its I/O developer conference last month, Google touted all the ways its forthcoming Chromebook could disrupt the traditional PC buying model. Why not adopt the same pitch?

WebOS is a Web-based operating system, after all, and is similarly lightweight. HP, meanwhile, has the storage and portable printing technology necessary to turn a TouchPad into a pretty interesting corporate laptop replacement. Mix in professional services, and you have the beginnings of a consultative business whereby HP would outfit mobile workforces with leased TouchPads.

It's not too late to get creative
I’ve been critical of HP for not acting quickly or forcefully enough in the face of significant threats from Apple and IBM (NYSE: IBM  ) , among others. Yet if the history of tech proves anything, it's that the industry loves comeback stories. HP is that kind of story right now, with WebOS offering it one last shot at redemption.

Of course, HP isn't the only company looking to profit from the rise of Web-based computing. Take a minute to watch this free video right now, and you'll walk away with a stock idea from our Motley Fool Rule Breakers scorecard and a richer understanding of how the Web is changing everything.

Fool contributor Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team. He owned shares of Apple, Google, and IBM at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. You can also get his insights delivered directly to your RSS reader.

The Motley Fool owns shares of IBM, Microsoft, Apple, and Google. Motley Fool newsletter services have recommended buying shares of Google, Microsoft, and Apple, creating a bull call spread position in Apple, and creating a diagonal call position in Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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  • Report this Comment On June 12, 2011, at 12:57 AM, baldheadeddork wrote:

    I think HP is pretty much screwed on WebOS. It is a great mobile OS, but which hardware makers are going to want to pay a direct competitor to use it? It's one thing to pay a software company for an OS, but why would Dell or Sony do anything that would make HP stronger?

    Phone manufacturers aren't direct competitors so there may a sliver of an opening there. But it's closing fast, if it isn't gone already.

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