Hewlett-Packard (NYSE: HPQ) revealed that it will not be offering smartphones based on Microsoft's (Nasdaq: MSFT) upcoming smartphone operating system, Windows Phone 7. Instead, HP will be betting the farm on its own Palm WebOS. Is it time for Microsoft to scrap Windows Phone 7 before it has been released?

Microsoft's big hope to challenge Apple (Nasdaq: AAPL) and Google (Nasdaq: GOOG) in the smartphone market could be dead out of the gate. Just a week after the company announced that it has reached technical preview status for Windows Phone 7 (WP7), HP told CNBC that it will not be using the software for any of its smartphones -- not for consumer phones, and not for business phones.

That move questions Microsoft's opportunity in the smartphone market, even if we heard that Microsoft will be has been and will be giving out 90,000 WP7 phones to its employees. Windows Mobile OS currently represents about 2% of the global phone operating system share, according to AdMob. Kin, which could have reshaped Microsoft's reputation in the phone market, was removed just weeks after the brand's launch. There is just a thread left for Microsoft in the smartphone market, and the dilemma isn't exactly dissolving: Apple is estimated to be shipping somewhere between 60,000 and 90,000 iPhones, and customers are purchasing 160,000 Android phones -- every day.

Now we get HP to join the party with an exclusive commitment to WebOS, which makes sense, given its $1.2 billion investment to acquire Palm. If HP offered a WP7 business phone and a WebOS phone, why would customers commit to WebOS, if HP does not?

HP EVP Todd Bradley told CNBC that it will not be entirely ditching Microsoft in future products that could potentially be a fit for WebOS. For example, Bradley confirmed a Windows 7 tablet. However, it is difficult to ignore that chatter that is coming out of HP, including the blog published by Rahul Sood, HP's gaming business CTO. In his most recent post, Sood points to an HP tablet that was first shown in 2006, which never made it into retail, but may now become a reality because of WebOS.

Sood writes:

"Finally we have a mobile operating system we can be proud of. You know, I'm never one to say something I don't believe -- I never really enjoyed using Windows Mobile, although Mobile 7 looks to be potentially awesome (you'd think after a decade or so it's about time?). I also like Android and Apple iOS ... but WebOS is still ahead in many ways, save that for another blog. I'm glad we finally bought Palm and now the possibilities are truly great.


So game developers, this was HP's vision 3+ years ago. If you could think about using our hardware and future hardware -- think scalable resolution, multiple cameras, fast graphics, awesome screens, touch, accelerometers, GPS, Bluetooth, WIFI, always connected, etc."

Can we expect am enthusiast tablet from HP? Possibly. It may not run Windows 7.

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