HP CEO Mark Hurd and the Palm Smartphone Controversy

HP’s CEO Mark Hurd answered some questions at a recent meeting that stirred up quite a bit of controversy in the Palm community. I won’t take the time to quote him here; that’s already been done to death.

Instead, I thought I’d post some conclusions that I’ve arrived at after listening to the audio from the actual meeting (available here). I wouldn’t be surprised to see some clarification come from HP and/or Palm in the next few days, and if so then I’ll come back and update this post. The interesting bits start at around the 18:30 mark.

As I listened to the actual audio and heard the actual question that prompted the whole mess, I noticed that Hurd was being asked by investors (to paraphrase): "HP has been utilizing a cost-cutting strategy for years to improve margins and return value to shareholders. How do you reconcile this strategy with your spending money on things like the 3COM and Palm acquisitions?"

So, Hurd was answering specifically within that context. And what he said about Palm was that they’re not spending billions of dollars to compete in the smartphone business. They’re spending the money to own the mobile OS and therefore have a lower cost of goods sold on all of the interconnected devices that HP makes and can make, which includes smartphones, Web-connected printers, slates, and small form factor devices at the low-end of the PC range. In other words, because they’ll own the OS they won’t have to spend money licensing it (set aside Android, which would also be free but outside of HP’s control).

Then, he went on to say how great it will be that with webOS they will also be able to provide a consistent experience across all of these devices connected to the same back-end services, and all controlled by HP. That’s a great value proposition.

In other words, Hurd was justifying the spending relative to HP’s cost-cutting strategy. The "journalists" who reported the story just didn’t put the quote into context–probably on purpose, to create controversy. And really, the funny thing is this doesn’t say anything about HP’s actual smartphone strategy. Hurd just said they’ll have smartphones as part of a wider range of interconnected products, but nothing about what kind of smartphones, who they’ll target, and who they’ll compete against.

Now, when I say that Hurd didn’t define HP’s smartphone strategy, that leaves open the possibility that smartphones just won’t be that important to HP. However, I don’t see it that way. I think it simply means that smartphones won’t be more important than the myriad other interconnected devices that HP makes today and can make going forward. They won’t be more important than connected printers, slates, netbooks, and everything else that’s made by this $120 billion a year company, such as networking products and services and PCs. And when the CEO talks about a specific product category, it should be remembered that he’s not actually the one running every show.

Each business unit within HP has their own leadership that determines how they make specific products. For smartphones and likely webOS as an operating system that’s provided to other HP business units, that leader is Jon Rubenstein. And we know where he stands on making innovative, industry-leading devices.

And so, there’s no more nor less reason to be optimistic about the future of Palm and webOS than there was before Hurd’s statements. And it’s bothersome that a quote was taken so completely out of context—but, we fans of the platform should try to keep in mind that this is how things are going to go for the next few months. We’ll not get anything specific until after the acquisition goes final at the end of July, and so patience is certainly recommended.

Here’s a video where Hurd says basically the same things, but in a different context. And again, there’s nothing from this video (the video doesn’t want to embed, so just click on the link) to imply that HP will not be making great webOS smartphones. It’s just that great webOS smartphones aren’t the only things that HP will be making.

UPDATE: HP has, of course, clarified Hurd’s statements with this one (from Engadget, who started this whole thing):

When we look at the market, we see an array of interconnected devices, including tablets, printers, and of course, smartphones. We believe webOS can become the backbone for many of HP’s small form factor devices, and we expect to expand webOS’s footprint beyond just the smartphone market, all while leveraging our financial strength, scale, and global reach to grow in smartphones.

So, that’s over.

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  1. [...] business.” He might and probably did mean some other things as well when he said this (and I’ve written about this elsewhere), but the notion that Palm doesn’t have to give HP a dominant position in smartphones is [...]

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