Editorial

Editorial: HP's downsizing and Microsoft's Windows

Quick, let's have a show of hands ... how many of you had a HP PC as your very first PC? We can't see what you are doing but if we are betting men we would bet a lot of you reading this have your hands up now. So that makes today's developments even more interesting.

HP surprised the tech industry earlier today when it announced two major changes in its business. It is looking into spinning off its PC division and also plans to shut down its webOS division. In HP's conference call with investors today, HP executives didn't talk much about its plans for the PC business although they hinted that HP's ultimate decision might be to give the PC division another shot. However the fact that HP is thinking about breaking off such a big part of its business could turn out to be a big opportunity for Microsoft.

How so? Well consider that HP currently sells more PCs than any other company worldwide. A recent study from Gartner showed that HP sold close to 14.9 million PCs in the second quarter of 2011, well ahead of the number two PC maker Dell which sold about 10.6 million PCs. Any way you look at it, that's a lot hardware that runs Microsoft's Windows operating system. We think that a big company like Dell, Acer and others might sweep in and take HP's PC business and do well with it, especially if it takes HP's user base and brings in some more innovative PC features and designs.

In today's conference call, HP CEO Leo Apotheker said that the consumer PC market is changing rapidly and he clearly feels that HP can't keep up. He said, "The velocity of change in the personal device marketplace continues to increase as the competitive landscape is growing increasingly more complex especially around the personal computing arena. There’s a clear secular movement in the consumer PC space." But someone else with perhaps more vision than the current team at HP could take that big audience and bring something new to the table, something that will be able to truly compete with Apple's iPad product yet could still have all of the features that the iPad lacks, especially in terms of content creation.

The bigger surprise from HP was its dumping of the webOS business. One thing is for sure; we won't have to deal with those weird HP TouchPad TV commercials anymore with Russell Brand's face on the TouchPad's screen hovering over his real body. In the end HP's webOS powered TouchPad couldn't compete with Apple's iPad just as its Pre smartphones turned into a tiny fraction of the mobile phone industry.

Once again this development is a huge opportunity for Microsoft on two fronts. webOS's demise might be enough of an opening for Microsoft to present its Windows Phone 7 operating system as the true alternative to Android and iOS (yes there's Blackberry as well but RIM seems to be almost as confused as HP is right now). With Nokia pledging to make a huge marketing push for its Windows Phone 7 phones later this fall, it could be a very interesting fall shopping season. We think that Microsoft will benefit a lot from this unexpected development.

Finally, webOS is now pretty much finished as a serious competitor to Microsoft's Windows operating system. Remember when HP hinted that it would install webOS on its PCs by this fall? Yep, that's certainly not happening now. That means Microsoft can concentrate on not just putting Windows 8 inside PCs and laptops but also make it a competing OS for the tablet market as well. With only iOS and Android left as viable tablet operating systems, the time is right for Microsoft to really make a move and make Windows 8 the dominant OS for all three PC hardware platforms.

It's going to be a while, maybe even a year or more, before we know the full effects of HP's big changes. But if Microsoft execs are smart, they will use this development as a big weapon against its biggest rivals in Google and Apple. In the meantime let us take a moment to say, "Good-bye" to the webOS platform, an operating system that had a number of nice features but basically failed not once but twice.

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18 Comments

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I'm curious about one thing that I haven't found an answer to yet: with HP dropping their PC division, are they going to stop making monitors, printers, and other peripherals, too? I would particularly hate to see HP stop making monitors; they make pretty good ones (I love my current glossy 25" 2509b).

Maybe Microsoft should take it over. Then we can finally have Microsoft designed & branded PCs. Full vertical integration finally achieved!

KingCrimson said,
Maybe Microsoft should take it over. Then we can finally have Microsoft designed & branded PCs. Full vertical integration finally achieved!

...And get sued into oblivion by all the whiny crybabies. Would be nice though.

FMH said,
Obama uses an HP PC. Yes we can!

I thought Obama used a Mac for his personal computer? Maybe the gov comp is a HP but I thought he loved Mac?

Stewart Gilligan Griffin said,

I thought Obama used a Mac for his personal computer? Maybe the gov comp is a HP but I thought he loved Mac?

Obama is a BB addict.

Okay - why would nobody be interested in the top PC maker on the planet? Then there are HP's not exactly small government contracts business (and not just the ones with the United States government, either - HP has a good-sized presence in state and local governments, and in education)? The hard part is that it would likely be easier to spin off the PC side of HP, as opposed to selling it outright (Dell would not mind it, as it would give it a leg up on the Acer Group; however, Dell is already #2 in the US, and thus would face antitrust scrutiny). HP these days does not build *bad* PCs in any segment - not desktops, portables. notebooks, netbooks, and then there's HP's *boutique* business. So why would there be no interest, alexalex?

PGHammer said,
Okay - why would nobody be interested in the top PC maker on the planet? Then there are HP's not exactly small government contracts business (and not just the ones with the United States government, either - HP has a good-sized presence in state and local governments, and in education)? The hard part is that it would likely be easier to spin off the PC side of HP, as opposed to selling it outright (Dell would not mind it, as it would give it a leg up on the Acer Group; however, Dell is already #2 in the US, and thus would face antitrust scrutiny). HP these days does not build *bad* PCs in any segment - not desktops, portables. notebooks, netbooks, and then there's HP's *boutique* business. So why would there be no interest, alexalex?

Maybe cause they sell crapy products?, most people who have owned an HP Laptop in the past 4 years have seen them die of 2 main reasons the battery, and the amazingly bad designed motherboards than HP doesnt care to admit it was their fault.
maybe with all those people not buying HP PC's in the future may very well affect the company in the next 5 years.

Let say that no one will be interested in HP's PC division. That's 80 million less Windows PCs each year, add to that the 20% drop in sales of Windows PCs in western Europe (Gartner), it means loss of 150 Millions Windows licenses for Microsoft.

alexalex
Let say that no one will be interested in HP's PC division. That's 80 million less Windows PCs each year, add to that the 20% drop in sales of Windows PCs in western Europe (Gartner), it means loss of 150 Millions Windows licenses for Microsoft.

How on earth do you come to the conclusion that there will be 80 million less pc's sold if HP gets rid of it's pc division?
People will still buy just as many computers, it's just that 80 million more won't be badged HP - so the wild stab in the dark claiming 150 million less Windows licenses is just utter rubbish / wishfull MS-hater thinking.

alexalex said,
Let say that no one will be interested in HP's PC division. That's 80 million less Windows PCs each year, add to that the 20% drop in sales of Windows PCs in western Europe (Gartner), it means loss of 150 Millions Windows licenses for Microsoft.

Lol in 2010, Windows 7 was installed on 77% of all new PCs that shipped. In 2011, Windows 7 was installed on 94% of all new bought PCs. This means two things: that Windows 7 has given a new unparalled momentum for the PC industry and for Microsoft, and that Mac shipment percentages must have decreased in 2011. Who knows, if Windows 7 continues to be installed on 94% of all PCs worldwide, then the global Windows market share could go from 90% back up to 94%, pushing out Mac OSX. It seems that way so far.

So, I don't think it's wise to say that Windows is at risk of going anywhere anytime soon.

That's that poorest case I've ever heard. As has been said, you are assuming none of the other PC makers would swoop in to fill that void. There are still so many PC makers, not to mention the DYI sources like TigerDirect, that as long as the demand remains the same for Windows-based PCs (and there's no reason to believe it won't) there WILL be makers to respond to that demand.

alexalex said,
Let say that no one will be interested in HP's PC division. That's 80 million less Windows PCs each year, add to that the 20% drop in sales of Windows PCs in western Europe (Gartner), it means loss of 150 Millions Windows licenses for Microsoft.

Why are you always so blinded by the real facts? This doesn't mean people will go OMG HP is gone windows is dead I'm going Mac! it just means they have one less choice and will probably go to dell, acer, toshiba, samsung, sony..... or any of the thousand other PC makers out there...

alexalex said,
Let say that no one will be interested in HP's PC division. That's 80 million less Windows PCs each year, add to that the 20% drop in sales of Windows PCs in western Europe (Gartner), it means loss of 150 Millions Windows licenses for Microsoft.

Wow. Do you even think before you troll?

WebOS had potential but not a large user base.
Last week has been crazy for the tech world with all these shocking (to say the least) announcements.

I just wish Apple and MSFT would stop hindering Android's development/sales.
With Motorola Mobility under Google, only HTC and Samsung (and LG, ZTE, etc.) remain to be 'freelancers'. I want to see how this changes the mobile scene in the World.

If Microsoft could acquire HP's PC division, it might make things more interesting but that would leave Dell, Acer, ASUS, etc. hanging with no real alternatives.

Ishanx said,
WebOS had potential but not a large user base.
Last week has been crazy for the tech world with all these shocking (to say the least) announcements.

I just wish Apple and MSFT would stop hindering Android's development/sales.
With Motorola Mobility under Google, only HTC and Samsung (and LG, ZTE, etc.) remain to be 'freelancers'. I want to see how this changes the mobile scene in the World.

If Microsoft could acquire HP's PC division, it might make things more interesting but that would leave Dell, Acer, ASUS, etc. hanging with no real alternatives.

Honestly the things hindering Android development have nothing to do with iOS and MS. Droid is selling like crazy, its issues are the ludicris hardware fragmentation and inability to upgrade OS versions on them.

The app store and status of apps on android is also a huge cluster. Stop blaming the other 2 for google own decisions.

zeroomegazx said,

Honestly the things hindering Android development have nothing to do with iOS and MS. Droid is selling like crazy, its issues are the ludicris hardware fragmentation and inability to upgrade OS versions on them.

The app store and status of apps on android is also a huge cluster. Stop blaming the other 2 for google own decisions.

Totally agree. Why anyone would buy into such a fragmented platform is beyond me.