India's Growing Fast and HP Wants In

Hewlett-Packard (NYSE: HPQ  ) wants back in the mobile game. But instead of releasing a phone on its home turf, the company is targeting India and its massive mobile growth. HP may be making a big gamble jumping back into mobile, but focusing on India is one the smartest moves it can make.

An HP smartphone, no Palm required
HP confirmed earlier this week that it's bringing two tablets to India next month: the 6-inch Slate6 VoiceTab and the 7-inch Slate7 VoiceTab. HP is calling them tablets, though both devices can both make voice calls just like a phone. In an interview with Re/code, HP said the devices will run on Android 4.2, have 16GB of storage, quad-core processors, microSD slots, HD cameras in both front and back, and 3G dual SIM capability.

The move comes two years after former HP CEO Leo Apotheker ended HP's smartphone ambitions, and several years after HP placed its mobile future in the hands of a $1.2 billion acquisition of Palm and webOS. Obviously, that acquisition didn't turn out so well.

HP has hinted for a while that it would eventually get back in the smartphone game. Current CEO Meg Whitman said back in 2012 the company would eventually get back into smartphones, but the company will move slowly so it could "get it right this time."

It seems HP is confident its new devices are the right ones, and it's about to unleash it on one of the fastest growing mobile markets in the world.

India's tipping point
According to recent Mediacells data released to The Guardian, India is expected to surpass the U.S. this year in number of smartphone users and will become the second largest smartphone market in the world. India's smartphone penetration is less than 20% and the country will grow its new smartphone user base by 207 million users this year alone.

Data from IDC shows India's smartphone market grew by 229% in the third quarter of 2013, year over year. Right now, the largest smartphone players in India are Samsung (NASDAQOTH: SSNLF  )  with 33% of the market and local vendor Micromax with 17%. Samsung hasn't shown any signs of slowing down either: The company increased smartphone shipments in the country by 36% in the third quarter of 2013, sequentially.

Absent from IDC's data was any mention of Apple (NASDAQ: AAPL  ) . That certainly doesn't mean the company isn't making inroads in the country, but just like HP, Apple is still in the early stages of entering India. Apple recently started a new initiative to sell the iPhone 4S using monthly installment plans called equated monthly installments.

Apple's advantage over HP, aside from its massively popular products and its uncontested smartphone experience, is that the company has already doubled its shipments to India from 2012 and exceeded one million phone sales last year, according to The New York Times.

An uphill battle
With Samsung and local vendors well established in India and Apple already making great strides, HP will no doubt have its work cut out for it. But it doesn't mean the company can't become a serious competitor. India's massive growth will leave enough space for many vendors to fill in the gaps, especially toward the mid to lower range devices. Apple clearly wants to grab the high-end market as it does in many other counties, and HP could certainly be a great option to users looking for cheaper alternatives, although the company hasn't released pricing information just yet.

HP also specifically chose the phablet section of the market and that could pay off for the company. IDC said the 5- to 7-inch smartphone market in India shows sustained growth, and in the third quarter of 2013 the devices made up about 23% of the overall market by volume.

Considering HP hasn't been selling smartphones for the past several years, it's difficult to speculate how many devices the company will sell. What's clear for investors is that HP has recommitted itself to smartphones and tablets and is starting in a market that has a lot of growth potential. For now, that may be all HP investors can ask for.

Sorry, the top stock for 2014 isn't HP
While HP is kicking off 2014 with an ambitious mobile push in India, there's a different technology stock that could be looking at big gains this year. The Motley Fool's chief investment officer has selected his No. 1 stock for this year and you can find out which one it is in the special free report: "The Motley Fool's Top Stock for 2014." Just click here to access the report and find out the name of this under-the-radar company.

 


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