This market certainly goes through cycles. The personal computer industry started largely around IBM and a few IBM platforms exploded in the 80s and then consolidated on Microsoft in the 90s. Microsoft grew arrogant and lost touch with its OEM customers and end users last decade and the result is we are back to lots of platforms in new areas like smartphones and tablets and it feels like the 80s again.
WebOS, a promising platform from Palm, almost met its end a few months back due to a combination of poor retail performance on the hardware and what appeared to be a combination of panic and inexperience in its new CEO who was rightfully concerned given he was terminated shortly thereafter. It seemed a sad end for both the CEO and Palm, which had had an interesting and eventually troubled, history.
WebOS comes to the market as damaged goods thanks to this last muck up but it was well regarded technically and the cancelled hardware product generally reviewed better than the Android alternatives in terms of software experience suggesting it might have been second only to Apple’s iOS. So there is potential, but what HP is attempting has only been successful once before with Java and even there financial returns proved to be illusive.
I agree with my friend Tim Bajarin that it deserves another chance, the question I’d like to address is: can it be successful?
OS/2, MacOS, PalmOS: When Licensing Fails
The problem with a hardware company licensing a platform is that competitors generally don’t like to buy a key technology from a company they compete with. This assured that IBM’s OS/2 would fail against Windows even though it was far more advanced at the time and co-developed by Microsoft. Apple tried this and they were so successful that it almost caused Apple to fail; as a result, Steve Jobs killed the effort and put these clone companies out of business putting reality behind the fear. Palm spun out their software as a separate company, and that seemed to work for a while, but they were under resourced and Sony, their only other licensee, made too many mistakes and exited the market leading to their failure.
Sun did license Java successfully but it never generated enough revenue to sustain Sun and that company failed and the distraction that Java represented may have contributed to that failure. This is because it seemed to help convince executive management that switching to a software strategy could be successful and it clearly wasn’t.
However, if you take the funding from the OS/2 effort, the excitement from the MacOS effort, the pricing and flexibility from the Java effort, and the arm’s length part of the Palm effort, you may have what amounts to a template for success. Adequately funded and executed against known successful strategies this could be successful. Let’s go by the numbers:
1. First, you need a competitive product and, for now, WebOS is competitive. It is arguably more secure and reported to be easier to develop for than Android, its closest competitor. It has usability advantages as well, but it also has been relatively static and Android is advancing quickly, so this advantage will need work to maintain.
2. Funding for marketing will need to be significant to both overcome the negative impressions from the catastrophic elimination of the first generation of WebOS tablets and the initial position that the product was going to be killed. This can be done, but it will require some effort to overturn existing impressions.
3. It will need to be arm’s length from HP’s own WebOS hardware products and reporting to the CEO may not be enough. It is out of the division, but smaller companies may not get this distinction and larger companies may not trust the distance. IBM has successfully done this with parts, and Samsung initially did this with Apple (though Android litigation made the effort problematic).
4. They will need to assure the success of the initial licensees. Were a few brave companies to license and then fail it would spell the end of this effort and HP would need to assure that didn’t happen.
5. It will have to have a demonstrated path to profit to support the costs and provide HP folks with the ammunition they need to argue that this effort will be sustained. Profit representations for Android given the massive Apple/Microsoft opportunity cost on search this product helped create may be false and Java never appeared to generate any meaningful profits for Sun. HP has to make money on this platform in order to prove they will be willing to sustain it through another CEO change.
Wrapping Up: WebOS
Google has had issues with Android, particularly with respect to security. Microsoft is making a big play with Windows 8 but it could backfire, suggesting that a third platform might provide a better hedge to either Android or Windows. WebOS could be that perfect platform with better security and better business fundamentals than Google, and a tighter focus on mobile platforms than Microsoft. But, to be successful, it will require a significant focused effort. Given this is tied directly to Meg Whitman, it may get that effort but only if she recognizes that the success of this effort will be tied tightly to the perceptions of her own success much like the Skype acquisition at eBay was. Getting this right would provide a huge boost, and conversely, failure would be very damaging.
President and Principal Analyst, Enderle Group
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