HP Cedes Greatness to Apple

| The Back Page

What happens when you put a software guy in charge of a hardware company? In the case of Leo Apothekar, CEO of HP, he pitches most of his hardware business—along with a chance to be a major player in mobile devices—turning a once-great hardware company into a software and services business in the process.

The Mac Observer reported earlier on Thursday that HP is killing all of its webOS devices, including the TouchPad and various post-Palm smartphones. The company also plans to sell or spin off its consumer PC business.

Listening to the earnings report conference call the company hosted Thursday afternoon, it was clear to me that Mr. Apothekar, a very successful and talented executive from SAP, doesn’t get or care about hardware. He’s more interested in remaking HP into some kind of amalgamation of IBM and SAP than he is in making great physical devices to sell to consumers.

And that’s too bad. I believe that HP’s webOS (which was acquired in the purchase of Palm in April of 2010) offered the best chance of making a whole widget empire that could compete with Apple’s iOS juggernaut.

I believe in the power of the whole widget, and I think the proof in the pudding in the awesome experience offered on the iPhone and iPad. I believe that the Android platform is a mess, and that said “mess” isn’t enough to matter on smartphones, where “good enough” is all that’s needed.

When it comes to tablets, however, demand stems from the ecosystem and the customer experience, and Android isn’t cutting it there. No apps, no unified ecosystem, no content, buggy tablets that vary from device to device, and hardware makers that try to compete on specs as if the tablet were a PC has so far added up to few Android tablets being bought by end-users.

HP could have changed that with webOS and the TouchPad. The company has the clout to forge content deals, and it has the experience to have engineered a unified software and hardware experience that would have let end users find ways to use their TouchPads like Apple’s customers found ways to use their iPads.

Pull QuoteBut it didn’t. It’s really too bad that former Apple VP Jon Rubinstein couldn’t do a better job with the first (and now only) TouchPad, but I would hazard that he had an uphill battle when the man he answered to, CEO Leo Apothekar, was a software guy.

To toot my own horn, I called this back in May when I said that only Amazon and Microsoft had what it took to compete with the iPad. In that piece, I wrote:

HP might be able to offer webOS tablets that will do well in vertical enterprise applications (presentation, remote access to the enterprise-in-the-cloud, inventory management, etc.), but I don’t see the company being a contender in the consumer space, Jon Rubinstein and the other former Apple-employees he’s collected notwithstanding.

I also hope very much that they prove me wrong.

I wish I had been wrong. I want Apple to do well (I own a tiny, all but insignificant stake in the company), but I want it to have to work hard to do so. As a consumer, I want the best products I can get, and the whole widget model produces the best computing devices.

Now, Mr. Apothekar is going to pursue licensing opportunities for webOS, perpetuating the cycle of mediocrity executed with such methodical brutality by Microsoft in the PC business and further perpetrated by Google in the mobile space with Android.

That’s what happens when you put a software guy in charge of a hardware company.

Comments

Nemo

Bryan: Leo Apothekar has an even more profound problem:  He is not so much a software guy as he is the typical short-sighted bean counter.  While profits are important and are how we keep score in business—and certainly Steve Jobs values profits—profits, especially short-term profits, can’t be the sole controlling goal if you are trying to achieve both extraordinary long-term profits and greatness.  Apple has succeeded so magnificently in being an astounding profitable company and a company that makes insanely great products, because Apple is about making the greatest, insanely great, computing devices and their supporting ecosystems, which are sold with the best distribution and marketing and supported by the best customer service.  But to pursue the goals of making insanely great products and achieving exceptional long-terms profits, you must at times be ready to accept short-term losses and even failure.  Pursuing profits as the goal is the road to mediocrity, if not failure. 

Apple hasn’t been an overnight success.  It has worked long and hard to achieve its goals of making great products and obtaining great long-term profitability.  Apple, for example, started developing the iPad in 2003, before the iPhone, which got started later that year.  Yet Jobs and Apple keep after both products for four years for the iPhone and nearly seven years for the iPad before Jobs decided that they were ready to be released, foregoing short-term profits to make sure that its devices, when released, would be the best and provide a great and the best user’s experience.

Leo Apothekar, in constrast, buys the WebOS and apparently insisted on fabulously profitable success a little more than a year later.  And when he doesn’t get it, he does what is typical for the modern CEO:  He focuses not on making great products but on the most profitable lines of business and jettisons the rest.  HP might have failed in smartphones and tablets no matter what it did, but its failure today is the result of Leo Apothekar’s inability to value anything other than profits, which must be achieved in no more than two quarters of performance.

One shot and he is done.  Hopefully Leo’s women get a more persistent performance from him.

OldMorris

This is the end of a great hardware company. HP was about excellent engineering. Mayhaps the HP-dna will pass along with the pc division. Nonetheless its a sad day…

geoduck

Well put Bryan.
I was totally gobsmacked when I saw this today. I really believed that after a slow start WebOS would mature, drive Android tablets into the shadows and give Apple some much needed real competition. In another year HP could have had the Apps and the store, and the environment and done very well. It was not a good start but then a fair number of successful products from Apple and others didn’t have a good first six months and went on to be revolutionary. Instead they threw all of it away. Billions down the drain to become a company that makes money but doesn’t change the world.

They coulda been a contendah, coulda been somebody, instead of a service company, which is what they are.

(Apologies to Marlon Brando)

mhikl

Apple?s success has also been supported by the short sightedness of Apothekars of this era. What a different world we would be in if the imaginatively-dead were shown the door and the Jobs were allowed the time, tools and tin to build their wonderful toys. GM almost went the byway having to be saved by poor people through their taxes. And Apple, too, lost its loot, lost its faith (its path) and faced the jaws of death until its rebirth under the very seer shown the door by an ungrateful company.

Jobs is a man more common to the period of Edisons and A.G. Bells. Had the loonies of the times known about derivatives and quarterly profits, we?d still be reading by candle and twittering by pigeon.

It?s a one man race and you?d have to lose all legs, arms and elbows to blow this ride.

Giddy-up, Steve.

Nemo

If HP doesn’t buy them back, what are Best Buy and the other retailers going to do with all of those TouchPads?

S. Mulji

@Nemo

Your initial response you posted on here is spot on.  You clearly explained the problem with the vast majority of modern-day CEO’s.  Best response I’ve seen so far on this topic.

RonMacGuy

If HP doesn?t buy them back, what are Best Buy and the other retailers going to do with all of those TouchPads?

Well, I would probably buy one for $100 or so, for either the kids to play ‘Angry Birds’ and ‘Plants vs. Zombies’ with or to simply hang on my “Failed iPad Competitors” trophy wall-of-shame, along with my Xoom, Gen 1 Samsung Galaxy, and a few others…

grin

“...declining and mostly irrelevant iPad” - God, I just love that ignorant quote!!  Hey, I should put that quote up at the top of my failed iPad competitors trophy wall-of-shame!!

RonMacGuy

Bryan, I do agree with you that I wish you had been wrong with your prediction.  Eventually they will, by pure luck, get a somewhat viable android tablet with a somewhat relevant version of android, but I would have rather HP be the iPad competitor with a more developed and elegant OS.  It really was a sad day yesterday when I read the news…

skipaq

The failure of HP’s mobile initiative is disappointing. More time may have been needed to see if this could be a worthwhile business. But you can hardly fault HP for cutting their losses now.

The bigger news is the decision to spin off or sell the hardware PC business. HP had the largest share of that market. Why did the #1 PC manufacturer make this decision? The profit margins were below 6% and they will focus on the parts of their business that are more profitable. What does this say about the market share argument?

Consider that HP has been watching the Mac gain market share while at the same time maintaining profit margins over 23%. How many PC OEM’s have come and gone over the last couple of decades? All that time the company with the big profits was Microsoft. This business model has been in a decline for about a decade. Would that be true without the Mac and Apple’s way since the return of Steve Jobs?

HP’s decision with their PC business is the bigger story here. Google’s decision to buy Motorola is a hedge against the same happening with Android because they see the same numbers. More interesting will be where they decide to take their new hardware division.

geoduck

A nagging worry.

I’ve seen this sort of thing before. In the 80’s there were all sorts of companies that made PCs with all sorts of OS’s. They fell by the wayside until you had Apple that hung on as a niche product and a bunch of companies that made PCs with Windows. This effective lack of competition and monopoly status led Microsoft to become both abusive and complacent.

Now Apple has become the colossus. Other companies are falling by the wayside. Android for tablets is hanging on as a niche product. HP just threw in the towel. I firmly believe RIM will be sold and disappear within a few years. My fear is that, especially after SJ retires, this will lead Apple to become both abusive and complacent.

Some would say that hints of this are already apparent for those that look.

aardman

It is easy to wish that HP gave WebOS a little more time before deciding to ditch it.  But they really had an uphill, maybe even near-vertical, climb ahead of them.

Think of the billions upon billions of (unrecoverable?) dollars that Microsoft spent to bring XBox up to par with Playstation.  That’s the kind of expenditure that Touchpad would need.  And XBox was ‘cheap’ considering MS only needed one killer game title (Halo, was it?) to get some initial traction.  What killer app or feature can Touchpad offer?  And exclusively, to boot?  And HP doesn’t have a cash cow like Windows and Office that Microsoft has.

No this romantic notion that HP should have kept at it like the Edisons of yore conveniently forgets the fact that 99+% of those Edisons ended up failing in their efforts with some even losing their fortunes.  HP has stockholders and the CEO gambles away stockholder wealth at his peril.

HP just had the bad luck of getting caught in the squeeze when the tech industry went through one of its periodic bouts of creative destruction.  It just did not have the talent and skills needed to keep up with Apple and they are wise to put their knife away, back out of this gunfight, and look to join the nearest fist fight.

aardman

I?ve seen this sort of thing before. In the 80?s there were all sorts of companies that made PCs with all sorts of OS?s. They fell by the wayside until you had Apple that hung on as a niche product and a bunch of companies that made PCs with Windows. This effective lack of competition and monopoly status led Microsoft to become both abusive and complacent.

Now Apple has become the colossus. Other companies are falling by the wayside. Android for tablets is hanging on as a niche product. HP just threw in the towel. I firmly believe RIM will be sold and disappear within a few years. My fear is that, especially after SJ retires, this will lead Apple to become both abusive and complacent.

One, hopefully significant difference:  Microsoft, from the beginning, based its success not in making the best products in the world, but in offering good enough products then relying on crafty contracting and deal making to establish a monopoly and cram their mediocre wares down are throats.  Apple on the other hand relies on selling the best products in the world to achieve success.  Hopefully that is imprinted in their DNA and will thus continue for a long time.

Perhaps an indicator about future behavior.  Apple has owned the iPod market for a few years now.  They own it so tightly that we even call it the ‘iPod’ market.  Have they been anything as abusive as Microsoft was in its felonious heyday?

eolake

It’s a pity. You, Bryan, was so highly optimistic about HP and Web OS. And many people liked the Touchpad.

mhikl

Here?s a question: Does Apple need competition? This is not a yes or no question. It needs full answer to a second question, Why?, with detailed explanation. Be specific. This isn?t a Darwinian struggle of incremental steps, luck and chance. It is a struggle of man?s design based upon plan, design, resource and patience. 

Did Apple need competition to develop the all-in-one series of computers, aka the original Mac and the generations of iMacs, the success of which others have attempted to emulate but failed to get a tepid, much less substantial toe-hold into the marketplace?

Did Apple need competition to develop and then rule in the media player market, i.e., the iPod-cum-infrastructure family?

Did Apple need competition to develop the MBA, a product that others have been relegated to begging social assistance from Intel?

Did Apple need competition to design the first smart phone-cum-infastructure, the iPhone, a scenario that very likely will play along a similar history to the iPod family?

So tell me, exactly why is the iPad any different from the first three done-deals and the fourth which, more likely than not, shall follow the road more travelled by and with similar results?

There is a pattern here. It?s not an obscure tacky patten; it ain?t plaid.

I?m a little tired of all the self-righteous pandering to the likes of Bosco, John Dvorak and other agenda driven drivelers on this topic here at TMO.

Stop being pedantic. Get used to it. Celebrate the success. It?s a done-deal.

PS Bosco knows this. Such is the reason his bile is seen ever more infrequently. Only habit drives his last gasps. He has done a Reality Check, and knows the meat is shorn from his pet goose and only the bones need be tossed to the dogs.

PPS I believe such thoughts have been intimated by some editors of this magazine.

Nemo

Dear mhikl:  Apple needed competition to accomplish all of the things that you cite, supra.  Apple didn’t do any of those things in a vacuum but did them all in response to competitors and competitors’ products and in the context of the state of the art of technology that existed.  Steve Jobs admitted as much when he introduced the first iPhone, saying that it was a response to the cells phones that he and others at Apple hated using. 

When Apple innovates, it is responding to the current state of the art and is addressing problems or exploiting opportunities that others haven’t solved or exploited.  So, yes Apple very much needs competition and depends upon it to provide opportunities, to provide the context for its successful innovation, and yes, to keep pushing it, for without that competitive context and push Apple’s leaders would be relying solely on their moral character and wisdom to continue to relentlessly innovate in a vacuum, when that innovation would be unnecessary and, thus, would yield no return, and no one has that degree of character and wisdom.

mhikl

Nemo, absolutely. We do respond to our environment. Edison would not have designed the lightbulb had he been blind and Bell would not have designed the telephone nor met his wife had his mother’s ears worked. This will be a ramble but I have chores to do.

So how was Apple responding to the environment of competition when it began designing the iPod?

When Steve looked over all that was made, he saw that it was not good! Then Steve said, ‘Let there be an iPod and let it be magical and delight all who use it.’ And there was the iPod and it got better and it came to rule the universe of media players, giving delight to all.

There were echoes about. The iPod didn’t have to be. Life could have struggled on with the innovations of the time. It wasn’t just a Darwinian usurper. It was a step back from the plank while the others continued to tread about in the waters. And then Apple redesigned the whole landscape leaving the rest to sink. Now that is moxie. That is re-inventing the environment instead of just responding to it.

Weren’t people happy with their netbooks, or happy enough to buy them by the truckloads? Apple didn’t even try to compete, try to improve that venue. It did not respond to the environment of the time in a copy cat way. Instead, Apple started from scratch and began to design the iPad. It did the same with the MBA. The rest is history and others will probable choose to copy Apple and probably not in a profoundly innovative way. Apple doesn’t seem to need the tinker of others to improve its products.

So you are right, that Apple responded to the environment but when Apple shows brilliance is when it steps beyond the environment of the time and that is what makes it so special. Sometimes, Nemo, it does almost seem spiritual, and too good to be true. Steve reminds me of the socially inept Mozart, only slightly better potty-trained. Those of his time who realised Mozart’s genius stood in awe. Others needed their ears cleaned.

To hope for worthy Apple competitors seems a waste. What we need are more companies like Apple who don’t just copy or tinker or assume the mantra to good-enought or do-as-well or do-cheaper, or do-slightly-better than some others at the same chore. We need truly creative, innovative ball busters who come up with original ways to make our sojourn on this good earth better. Technology today offers that possibility. Dare I add “as never before”?

I believe this is Apple’s goal. It should be the desire of every human and every company on this planet. We don’t have to pollute our environment with more of the same. It makes me cringe to see people leaving dollar-store-at-hearts with discardables that just sort-of-work. We need to step out of the shadows, to take great steps, great leaps forward. That is our Apple.

Namaste,
mhikl

mhikl

Rats, I forgot to add, Nemo. Thank you for responding to my question. It is only through discussion that we can truly learn?for me, anyways. This is an important topic and one where answers are to be found in no easy box. Already I have arguments agin my own points. Short time from now I will look back and say, but . . ., why didn’t I say . . . now that was dumb . . .

I know I come through as a blowhard at times but I truly don’t mean to. I would like to take a moment to thank Bosco for this. He stands to his agenda and never wavers. And he does a very worthy job. Such an example has given me the nerve to do the same for Apple, to whom I stand in awe. Not that I don’t see some soil to its pants*, but that is what the cleaners is for. Don’t get me started on how pissed I am with my MB.

* My little guy does much the same, but I still love him.

RonMacGuy

I?m a little tired of all the self-righteous pandering…

You’re right mhikl.  You know, I have a dream.  I hope some day it comes true.  My dream is that some day Bosco will learn how wonderful and absolutely liberating it is to type three little words on TMO:  ‘I was wrong.’  We’ve all admitted it.  I have.  You have.  Bryan has.  It’s not so hard to type, and it makes you feel so normal and human again after you type it.  ‘I was wrong’.

Bosco, is the iPad really “declining and mostly irrelevant” like you said in January?  Come on, please?  We will still respect you if you say you were wrong.  Try it!!  We’re all cheering you on!!  You can do it!!  iPad too hard to say it to?  How about iPhone becoming 10%-15% market share by end of 2011.  Surely you can admit it on that one.  You’ll feel better after it, I promise.  We won’t laugh, we’ll just thank you for admitting it and move on.

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