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HP and the Curse of WebOS

HP ditches its ailing WebOS phones and Touchpad.
August 18, 2011

HP announced today that it will stop making phones and tablets using the WebOS operating system. The company had hoped to use these devices and software to get a leg up in the incredibly competitive mobile devices market.

In an earnings call, HP executives praised the WebOS software, even while admitting the failure of the associated hardware. CEO Leo Apotheker called WebOS “elegant,” and said the company plans to keep the software and perhaps license it. However, CFO Cathie Lesjak followed with numbers illustrating why HP has no choice but to dump its manufacture of WebOS hardware.

“About a year ago, we made a bet on WebOS—that we could create a new ecosystem of apps and devices,” Lesjak said, elaborating that HP was aiming for the number two position in the market (presumably after Apple). Touchpad sales were extremely disappointing, however—and were made even worse when HP had to discount the price of the device by $100. “With such a young ecosystem and poorly received hardware, we could not maintain [the number two] position.”

HP says it’s been losing money on WebOS. According to Lesjak, the company’s corporate investments category, which includes WebOS, earned $266 million in revenue this quarter—but lost $332 million. She added that HP expected an even larger loss in the fourth quarter if it continued to support WebOS, and that really supporting and reviving the hardware would require one to two years of significant investment, “creating risk without clear returns.”

Most people agree that WebOS is a well-designed piece of software that deserves better than the commercial reckoning it’s suffered. That said, HP’s not the first company to struggle to commercialize it. Earlier this year, I wrote:

Palm’s WebOS operating system was the ailing company’s last-ditch effort to reclaim the market it once dominated with its popular PDA. The WebOS operating system uses Web technologies familiar to developers, such as HTML and JavaScript, instead of Objective C, the specialized language used to program apps for Apple’s iPhone. The Palm Pre, which was the first device to feature the operating system, was praised for its design when released in June 2009, but it was a flop in the market, leading to HP’s acquisition of Palm.

Though HP came out strong earlier this year, announcing three major WebOS devices, many were dubious about their potential for success. I wrote:

Despite the many attractive features of WebOS and these three new devices, experts predict that HP faces an uphill battle. Sarah Rotman Epps, a senior analyst with Forrester Research, calls the integration between phone and tablet “a nifty whizbang,” but adds that “it’s unlikely that consumers will buy into the whole phone-tablet ecosystem.”

HP also needs to get developers on board, since apps are a big part of any device’s appeal these days. While WebOS always received accolades for its design, it never attracted the developer firepower of Apple’s iOS or Google’s Android, leaving much of its promise unfulfilled.

Sales turned out to be extremely poor. AllThingsD reported yesterday:

According to one source who has seen internal HP reports, Best Buy has taken delivery of 270,000 TouchPads and has so far managed to sell only 25,000, or less than 10 percent of the units in its inventory. […] TouchPad sales aren’t only failing to catch on at Best Buy, but also at other retailers, including Wal-Mart, Micro Center and Fry’s, says analyst Rich Doherty, head of the Envisioneering Group.

There are still people disappointed by this most recent blow to WebOS. TechCrunch writes:

This news will come as a rather huge punch to the gut for webOS die-hards (myself included, though you can’t say that we couldn’t see it coming), many of whom have stood by the product for years — first in hopes that Palm would eventually launch a device worthy of the rather fantastic operating system, and later in hopes that HP’s acquisition of Palm would be the spark to the fire that just never seemed to light.

HP may not quite be done with WebOS, however. According to Ars Technica:

The company says that it will “continue to explore options to optimize the value of webOS software going forward.” This could be interpreted in a range of ways, from putting webOS on less competitive platforms (the company has indicated in the past its desire to put the OS in items like refrigerators), to even selling it to a competitor.

Even if the company does try to use WebOS in non-traditional devices, a fate as the operating system for a smart refrigerator seems an ignoble end for a promising platform.

Updated at 18:00 EST with details from an HP conference call.

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