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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