HP not willing to make the investments needed to drive webOS to greater marketshare
When HP bought Palm, they set their sights on the mobile market and getting a #2 marketshare position in the tablet market behind the iPad. HP spent $1.2 billion on Palm, and immediately started development on the TouchPad, as well as gearing up to introduce the Veer and Pre3. We’re wondering if the Pre3 is ever going to see the light of day outside of Britain, as HP is planning to shut down webOS device operations by Q4 2011 (unclear if that means calendar or fiscal – fiscal would be sooner).
So the question is, after launching the TouchPad less than two months ago and investing what has to have been several hundred million additional dollars in webOS, why cut it off now? According to HP CEO Leo Apotheker on today's Q3 conference call, HP crunched the numbers again and looked at what it would take for webOS to gain acceptance (billions of dollars in R&D, carrier deals, and marketing) and decided it wasn’t worth it. While webOS could do well with HP’s massive money bags behind them, they weren’t willing to risk all of that money on “could.”
This also helps HP align themselves better with their plan to somehow spin off their Personal Systems Group. HP is undergoing a “significant transformation” from the world’s largest computer maker to an enterprise software and services company with a printer side business. Is this a good thing for webOS? Absolutely not, and it doesn’t reflect well on HP’s willingness to stomach risk.
Update: CFO Cathie Lesjak's exact words on the investment vs. risk:
"To make this investment a financial success would require significant investments over the next one to two years, creating risk without clear returns. Therefore we have decided to shut down operations around webOS devices and will be exploring strategic alternatives to optimize the value of the software platform and development capability."