An Android Laptop? What Is Hewlett-Packard Company Thinking?

As the market for tablets has grown, reaching nearly 200 million unit sales in 2013, PC companies have struggled to adapt to a changing market. Sales of traditional PCs fell by 10% in 2013, and this has led companies like Hewlett-Packard (HPQ +8.05%), Lenovo, and Asus (NASDAQOTH: AKCPF) to experiment with new types of products. Lenovo's Yoga line of laptops, where the screen can rotate all the way back for a tablet-like experience, has received good reviews, and Asus has a hit on its hands with the Transformer Book T100, a 10" Windows 8 tablet with a keyboard dock. All three companies have also jumped on the Chromebook bandwagon, designing laptops that sell for as low as $199 and run Google's Chrome OS.

But it's hard not to get the sense that some of these companies are throwing spaghetti at the wall and seeing what sticks. Even before Computex, an annual conference in Taipei, has officially gotten under way, there have already been a slew of new product announcements, with two of the most bizarre coming from Asus and HP. Asus' Transformer Book V is an attempt to integrate five different form factors into one device. It's a Windows 8 laptop with a detachable tablet, but it also comes with an Android smartphone that can be docked with the tablet, transforming the device into either an Android tablet or an Android laptop.

Source: Asus.

While Asus' Transformer Book V attempts to make everyone happy, HP's SlateBook, an Android powered laptop, is, as far as I can tell, HP's best attempt yet to make a product that no one wants. 

Source: HP.

What is HP thinking?
For a long time, the only option when buying a laptop was either a Windows device or a MacBook. Chromebooks have changed that, offering an inexpensive alternative to low-end Windows laptops. HP offers plenty of Chromebooks, like the HP Chromebook 11, which sells for $225 on Amazon.com at the moment, and other companies sell Chromebooks for as low as $199.

Chromebooks cater to users who do everything in a web browser, of which there are apparently quite a few. Chromebooks now represent as much as 25% of the market for low-cost laptops in the U.S., according to NPD, and they've proven popular in the education market. The draw is their low cost and their simplicity, and the sacrifice of limited functionality compared to a Windows laptop is one many users are willing to make.

One benefit that Android has over ChromeOS is that Android has an enormous number of apps available. The problem with putting Android on a 14" laptop, however, is that these apps were designed for smaller screens. How they translate to a much larger screen remains to be seen, and the inability to view more than one app at a time wastes the potential of a 1080p screen.

The price is also a big issue:

Not only is the SlateBook more expensive than basically all Chromebooks available, there are also some Windows laptops that undercut the $429 price tag. It's really not clear who this device is for. 

This won't help turn around HP's PC business
In the most recent quarter, HP's PC segment actually grew, with revenue rising by 7% year over year. But the end-of-support date for Windows XP was likely the driver, given that this growth was solely the result of a 12% rise in commercial revenue. Sales to consumers actually fell by 2%, and operating margin in the segment has fallen from around 5.5% two years ago to just 3.5% today.

In 2013, Lenovo overtook HP as the largest PC manufacturer in the world, and an expensive Android laptop certainly isn't going to turn things around. HP's PC market share peaked in 2009 at 19.1% of the global PC market, declining to 16.2% in 2013.

While it's hard to pinpoint exactly why HP lost so much share, one reason is poor quality control. A study done by SquareTrade back in 2009, which ranked the major PC manufacturers based on malfunction rate, put HP dead last. Over a three-year period, SquareTrade estimated that a little more than a quarter of HP laptops would fail, compared to just 15.6% for Asus. The second-worst company, Acer, has also seen its market share decline, falling from 12.9% and the No. 2 spot in 2009 to 8.1% and the No. 4 spot in 2013.

The bottom line
HP has watched its dominance of the PC market collapse over the past five years, and if an Android laptop priced well above most Chromebooks and even some Windows laptops is HP's best idea, I don't like its chances. HP isn't exactly known for quality, and its brand doesn't mean nearly as much as it used to. If the company's goal is to appeal to younger consumers who primarily use Android devices, the HP brand is a headwind, along with the fact that Android on a laptop makes little sense to begin with.