When the chairman/CEO/president of Hewlett-Packard Co. (NYSE: HPQ) said that his company wasn’t buying Palm Inc. (NASDAQ: PALM) in order “to be in the smart phone business,” did this mean that HP was going to abandon the smartphone market as soon as it completes its acquisition of Palm? Doesn’t the company want to fight it out with Apple Inc. (NASDAQ: AAPL) and Research in Motion Ltd. (NASDAQ: RIMM) and Motorola Inc. (NYSE: MOT
) for handset supremacy or with Google Inc. (NYSE: GOOG) for operating system bragging rights?
Well, no, according to a later clarification issued by HP’s PR folks. HP is buying Palm because it foresees “an array of interconnected devices, including tablets, printers, and, of course, smart phones.” Uh, what about PCs? Is HP going to get out of the PC business as well? Just kidding.
There’s little doubt that smartphones are booming. According to a presentation by Morgan Stanley’s Mary Meeker, smartphone shipments will surpass combined PC and notebook shipments in 2012.
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Smartphone shipments in North America are expected to surpass feature phone shipments in 2011. By 2013, North American shipments of smartphones are forecast to hit 154 million units to just 34 million feature phones.
The driver for this boom will be the integration of a myriad of devices on the mobile Internet. Tablets, smartphones, e-readers, MP3 players, and GPS systems are getting smaller and cheaper with better user interfaces and more services. That all adds up to a move toward more seamless interaction among devices as users embrace the brave new world of total connectedness.
Once it completes its acquisition of Palm, HP will find itself off the sidelines and in the game, but in a very small way.
What HP hopes to do is leverage its position among business customers to rev up sales of its smartphones in a market that it sees as worth some $45 billion. The company will have the pieces in place to develop a common interface to a common set of services across a wide variety of devices.
That’s easier said than done, of course, but none of the other big players, like IBM Corp. (NYSE: IBM) or Oracle Corp. (NASDAQ: ORCL) or SAP AG (NYSE: SAP) has pushed this particular envelope. HP sees a shift in business computing to more mobile devices and it is willing to gamble that Palm and its WebOS will produce a winning platform.
An analyst at Kaufman Brothers told MarketWatch that HP has a lot to gain from buying Palm. “A lot of companies can’t afford to make this bet,” he said, and added, “If it doesn’t work, it’s not the end of the world. It just a month’s cash flow.”
HP sees an opportunity and it has seized it with both hands. Now we’ll see if it can hang on.
