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Summary:

The dust has settled from yesterday’s planned HP acquisition of Palm for $1.2 billion, and by most accounts, the deal is a win-win — unless you’re looking at Microsoft’s or Intel’s point of view, as both companies come out a big loser in this deal.

HP’s proposed $1.2 billion acquisition of Palm, is so far being lauded as a win-win: HP, which had only ever dipped a toe in the smartphone space with a few “me-too” devices, will now be able to jump into the deep end of the handset pool. And based on comments from HP executives, Palm will continue to mature the webOS platform it built from the ground up for the Pre and Pixi handsets. But this deal is about more than just smartphones — it’s about multiple devices on a “mobile computing platform”, according to Tom Bradley, EVP of HP’s Personal Systems Group. Such a statement spells trouble for the mobile ambitions of two of computing’s largest incumbents: Microsoft and Intel.

Both are on the outside looking in when it comes to mobile computing. Microsoft had and then lost its smartphone lead when it failed to adapt its Windows Mobile platform to meet the needs of the mobile Internet, allowing younger, more nimble upstarts to create brand-new mobile platforms from scratch and snap up market share. Intel, meanwhile, realizing that its power-hungry processors weren’t equipped to run handheld devices all day long, created the low-voltage Atom CPU in 2008. It’s been tweaking the Atom for use in phones ever since, but few smartphone manufacturers have abandoned power-efficient ARM chips to use Intel’s Atom. Ironically, Intel once powered early Windows Mobile devices with its Xscale ARM chips, but sold that division in 2006 to Marvell for $600 million. So what are Microsoft and Intel doing about slowly getting brushed aside in the mobile space and how will the HP-Palm deal hamper those efforts?

Microsoft is taking a fresh new approach with its mobile operating system for smartphones. Early looks at Windows Phone 7, due out on devices this holiday season, show a clean, touch-friendly user interface that focuses on the mobile activities people engage in most on a phone — social networking updates, email, media consumption and creation, and web browsing. We’ll never know if HP had planned any new smartphones built on Windows Phone 7 — if it did, you can rest assured those plans are already in the trash can.

That’s just one minor way Microsoft is potentially losing out. The bigger elephant in the room is that HP Slate shown off by Steve Ballmer at the Consumer Electronics Show in January. This marks the fourth year that Microsoft has partnered with hardware makers to create a consumer market for a slate device running Windows. The past three years didn’t see many of the UMPCs, or ultra-mobile personal computers, be sold, however, and the few that were bought were created by brands that most consumers here wouldn’t recognize — Samsung being a notable exception. But with the HP name, a Windows-powered slate has instant brand recognition that might get more people to consider such a device. Unfortunately, mobile devices don’t work well with desktop operating systems —  a lesson that wasn’t lost on Apple, which uses the iPhone OS on its iPad tablet.

The burning question now is: Will HP even go forward with the Slate? I suspect it will, only because it’s already invested time, effort and other resources in the device. And trying to quickly re-jigger webOS in the existing slate design would be a challenge due to chip architecture differences — the Slate is powered by an Intel Atom chip — and a screen resolution for which webOS isn’t equipped. But now that HP has its own mobile platform in webOS  it can create a different slate tablet without having to pay anyone else licensing fees. Bradley made this point clear in yesterday’s conference call, saying, “HP plans to release smartphones, tablets and maybe even netbooks using webOS.” And therein lies the rub for Intel.

WebOS isn’t made to run on Intel’s chips that use the x86 architecture, so unless HP decides to port the operating system to run on x86 chips — and I see no good reason why it would — webOS devices will continue to run on ARM chips. That slams the door on a major mobile hardware partner for Intel. Other popular mobile platforms all run on non-Intel chips — Apple, Google, Research in Motion and Symbian all work with the ARM architecture, not with Intel’s. And this isn’t news to Intel; in order to carve out it’s own niche in the mobile space, Intel has partnered with Nokia on the MeeGo operating system for handhelds and netbooks.

With the mobile space already crowded, there may not be room for a MeeGo to save Intel and a lackluster HP Slate effort isn’t what Intel needs right now. And HP certainly won’t be helping Microsoft with its big Windows Phone 7 launch. The way I see it, HP’s gain from the Palm deal is mainly Microsoft’s and Intel’s loss.

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By Kevin C. Tofel

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  1. HP will end up using whatever OS people buy. If the market decides they want Android tablets, HP will put out Android tablets. If the market decides they want Windows they’ll put out Windows tablets. Which is why I think this Palm buyout is pretty much the beginning of the end of webOS. There is very little chance that HP alone will be able to make webOS a tablet standard when every other hardware manufacturer on Earth is promoting Windows and Android mobile devices. Unless HP licenses webOS to other hardware manufacturers the operating system has a very short lived future.

    webOS is not popular with consumers or developers. The applications available for webOS are not compelling to put it mildly. I’ve owned a Pre for the last year and the app selection is disgracefully bad. There is not even a proper document editing application a year after launch.

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    1. Hmmmm….. so are you essentially saying that HP wasted $1.2 billion?

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      1. I wouldn’t say it was wasted. The Palm patents alone will protect them from a lawsuit happy Apple. If HP put out an Android tablet for example, Apple could go after HP just as aggressively as they are going after HTC right now. Looking at the positive reaction to the latest Dell Android and Windows phones unveiled I do think that HP has made an error by going with Palm hardware and software.

        I think HP will put out a webOS tablet 12-18 months from now. HP will fund the new Palm phone that is probably already done and ready to go out the door. I don’t think HP’s funding will change the dynamics that are already in place though. The webOS developer community is too small compared to Android and Windows. The existing app catalog on webOS is not compelling. webOS is still limited to a single hardware manufacturer and HP has pledged to continue supporting the competing Windows OS. It’s hard for me to see a path for success for webOS. This buyout keeps webOS alive, but probably not for that much longer.

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      2. WebOS is the main reason HP bought PALM. The developers will start making apps once the platform scales. Even with lackluster marketing,the two phones are gaining momentum by spreading across the carriers. Come July 2010 , PALM phones are available on all major carriers in Europe and North America ( Verizon,ATT, Sprint, Bell mobile in canada, Voda,O2, SFR, Telefonica). It is laughable to say that HP bought PALM for patents. If they wanted patents they do not need to pay the premium. Every HP official since the deal stressed on the importance of the “PALM Team”. WebOS is the real deal, and HP paid for both webOS and the Ex APPLE-PALM team.

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    2. IMHO, you are oversimplifying and making a large company sound like a nimble player who will change something as fundamental as OSes on the fly. their entire strategy has to be cohesive and thought through. Once you go down a path, you just dont make a hard right turn, unless its a really huge deal. that realization takes years.

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  2. This will give HP access to use Palm’s touch screen technology used in their PDAs and use in their (HP) tablets.

    It’s good to see Palm acquired by HP and not just dissolve as a company and become a footnote in technology history.

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  3. I would love to see webOS in HP devices.this surely would make the smartphone market more competitive.

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  4. This analysis is correct. The HP-Palm deal is part of a seismic shift in computing, from desktop to ultra-portable, from x86 to ARM processors, from mice and trackpads to capacitive multi-touch.

    It should be obvious to everyone that Microsoft has failed in this new era of computing. HP knows it, and has abandoned Microsoft’s Windows Phone 7 in favor of the technically superior webOS.

    Windows Phone 7 will be uncompetitive on both phones and slates, and be riddled with technical limitations. It is of zero interest to the enterprise, which probably sparks HP’s move to push webOS as a business platform.

    While Microsoft’s WP7 will be an industry joke, unable to multitask and unable to copy/paste, HP’s webOS will be the best multitasking mobile OS in existence. It offers HP everything that Microsoft lacks.

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  5. Kevin, good analysis. If anything Intel is the real loser here. Microsoft makes ten different things so the loss is not that big. Intel totally missed the mobile chip wave. Partnering them with Nokia wouldn’t help. If they are smart they should work with HP in porting WebOS on their chips plus make them energy efficient.

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  6. This is ia smart move by HP to basically acquire their own Operating system
    The challenge will be to move very fast and intergrate this new OS into their HP decises such as the slate, they will have to move fast as the market leaders on the smart phone side are far ahead of the game. I am sure HP will be coming out with a winning combination on this acquisition, they have nothing to loose but more to gain

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    1. How is it a smart move for HP to acquire their own OS, when they are the number 1 provider of Windows computers in the world? The move doesn’t make sense, it puts HP at odds with the partners that they are dependent upon (Intel, Microsoft) and it puts that at a disadvantage to competitors like Dell who are putting out Android and Windows phones and tablets. HP will be stuck throwing money into making proprietary hardware. How well did that strategy work out for Palm? What has changed in the equation other than more money to waste on a failed strategy?

      Google and Microsoft will crush any competition from HP. And HP will be complicit in crushing webOS because their bread is buttered with Intel and Microsoft. Every device that Palm develops for HP will be a token pet project. Anyone who thinks webOS is going to take down Windows is dreaming. Windows 7 is the most successful and fastest selling operating system ever released. There are no signs that Microsoft’s empire is in danger.

      Anyone who thinks HP fighting Intel and Windows is good business for the company has no fiscal sense.

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      1. You have a valid point about dealing with partners. HP has to deal with both Intel and Microsoft in the PC world. The mobile and Tablet business is different. They have risk loosing the mobile and tablet market if they wait for Microsoft and Intel to deliver. While Apple did not create the segment, they perfected it. HP doesn’t want to sit on the bench while Apple sells millions of these. Besides HP realized that marrying hardware and software is the only way to give customers superior experience.

        Intel is the biggest loser.For all its brainy power, Intel is missing on many things lately ( last few years). They totally screwed up that mobile division before selling to Marvell. Somehow they got Steve Jobs to let their chips on the Macs. Now they are having good time with Atom processor but no compelling offering from them in mobile market.

        With Apple doing its own processors, Google working with ARM,nVidia and Samsung , Intel has only Nokia who are still figuring out how to write a decent operating system. So the big loser is Intel.

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  7. Kevin,

    I think you’re overstating how much effort would be required to have WebOS run on an Atom powered phone, tablet, or netbook. If you download the WebOS SDK, it includes a virtual machine of WebOS that you can run inside of VirtualBox on an x86 machine. So just to be clear, it’s using virtualization and not emulating an ARM machine. Jon Stokes of Ars Technica makes this point here: http://arstechnica.com/gadgets/news/2010/04/phones-tablets-netbooks-taking-stock-of-the-hppalm-deal.ars

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    1. Agreed, it is certainly possible that HP could run webOS on an x86 platform. But just because they can doesn’t mean they will — it has to make sense and I don’t see the sense of moving away from ARM in favor of current x86 solutions. An arguable opinion, of course.

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      1. You don’t think Intel will be competitive in the mobile CPU market? I don’t see Intel rolling over for ARM. ARM is doing great right now, but Atom hasn’t exactly been a failure. Intel hasn’t seen fit to put their full resources behind mobile computing, but once they do I think ARM will have a serious challenge. I don’t know much, but I know betting against Wintel is a dumb bet. Palm products from HP will be few and far between just like Voodoo.

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  8. Yup. Wintel is cracking before our eyes. This is the big story in tech. As world moves mobile, Wintel less and less relevant. Already there are 9 (yes count em 9 mobile OS’s). These include Apple, RIMM, Palm/HP, Samsung Bada, Symbian, Meego, Android, Linux, and Windows Phone 7. Also let’s not forget when Google Chrome OS will launch later this year. That would put it at 10. This is going to end ugly for a bunch of these OS’s. No way the market and developers support this many. Also, basically all of these run ARM. Wintel will be slowly squeezed to become less relevant.

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  9. One interesting development is that Microsoft just canceled its in-house Courier Tablet project. Why would Microsoft canceled a development on a product in such a fast growing category in which it current has little presence?

    My guess is that Redmond has come to the realization that it needs to shore up as many partnerships as possible. HP’s acquisition of Palm only drove home the point. Could it be that Microsoft has decided to throw it’s full weight behind the HP tablet, something the Courier would’ve ultimately competed with, and at the same time strengthen it’s ties with HP?

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    1. We just talked about the Courier cancellation on our podcast a few hours ago. As innovative as it looked, I’m not sure it had a use case to justify it.

      Even more interesting, I just heard that HP may be pulling the plug on the Windows 7 slate. Waiting to hear or see confirmation of that. If true, it illustrates exactly why I see Microsoft and Intel both getting a virtual black eye on the HP – Palm deal.

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      1. Kevin, are you sure you heard it right about pulling the plug on slate ? Hmm, that is one big decision. Probably makes sense. Win7 is not made for a touchscreen device. Period.

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      2. HP is not pulling the plug on the Slate. That is pure nonsense. People are so silly.

        The Courier was a rendered concept video. The HP Slate is a very real product that is coming to market within the next few months. Microsoft pulled the plug on Courier before investing the money to make it a real product. HP has already spent 5 years developing the HP Slate software and hardware with many partners. Microsoft never even confirmed the Courier’s existence while HP has spent the last few months marketing the HP Slate. There is no way that HP is going to stop making the Slate. A webOS tablet will take at least a year to get to market.

        The Courier would have been dumb because it didn’t run Windows 7 or Windows Phone 7. It would have been a 3rd operating system for Microsoft to support and Microsoft would have had to make the hardware themselves. Courier didn’t fit into Microsoft’s plans. It makes more sense for MS to be promoting Windows Phone and Windows 7 tablets that other companies are making the hardware for.

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      3. I’m pretty sure Windows 7 was designed with touchscreen devices in mind:

        http://cnettv.cnet.com/touch-screen-features-windows-7/9742-1_53-50074521.html

        It’s not like MS wasn’t aware that tablets were the future and that Vista wasn’t meeting the needs of Tablet PC users. They went back to the drawing board with Windows 7 and made sure that multitouch controls were built into the OS. They even included a “touch pack” for Tablet PCs. Touch Screen controls was one of the biggest upgrades of Windows 7 over Vista.

        When you look at Surface, Windows 7, Zune HD, Courier, Phone 7 and even Project Natal you realize that Microsoft has been obsessed with touch based controls for the past 18 months on all of their devices.

        http://www.youtube.com/watch?v=WBtEhQqS1dw

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  10. Nice to see Palm acquired by HP

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  11. Aaron Johnson (CyKiller) Thursday, April 29, 2010

    I think most are missing the point with what can be done with the webOS operating system. Concerning MS and Intel – it isn’t getting any worst for them at all. HP will use webOS as a platform in the mobile touch space and then top layer it on touchscreens PC marktet with MICROSOFT WINDOWS using INTEL CHIPS. Currently netbook \ slate devices using windows 7 do a pad job comparing to a consumer electronic when its full techy (learning curve) device. Top layering the UI differiates big netbook tablet makers like Lenovo \ Bumptop option for ideapad, HP slate, or WePad etc… all try to couple Win 7 with good touch scheme to manipulate windows for the market. All have failed in my opinion and Bumptop is more of a show off layer than productive and innovative UI couple to Win 7 nettablets \ slates. WebOS is a different story and is a blend for prospering for HP, Intel, and MS – believe me – nothing changes at all for either of the companies. Change the articles heading please!!

    CyKiller

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    1. You’re expecting a Linux shell made for ARM to run atop Windows in x86? Just making sure I understand.

      Top layering the OS, or putting a touch friendly UI over Windows has been tried many times, and has failed the same number of times. Microsoft themselves tried twice with two Origami Experience software packages for Windows slate UMPC’s. It doesn’t work. No desktop operating system crammed into a mobile device has.

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      1. Aaron Johnson (Cykiller) Friday, April 30, 2010

        I agree that most up to this date have done a bad job but I am not talking about your implementation – I am talking about reinventing webOS for the PC space to only allow for software stack to replace HP’s touchsmart and mediasmart. HP has always put effort into the touch-friendly MediaSmart and TouchSmart software layers to compensate for Windows’ deficiencies. This will improve their windows offering by killing the deficiencies of windows, using the skeletal system only and coupling it with the new created webOS UI layer for their x86+MS WinOS units. You can look at the Lenovo iDeaPad offering, HP explained software layers above, wePad, bumptop licensing their software for this purpose – all failing. HP using webOS as a software stack windows (techy devices)…..adds a lot of ease of usage for users and gives Palm webOS chance to gain notability for the platform by creating a frame for developers to transition their windows applications into card view.

        webOS is already so great, I think HP’s R&D resources will produce and incorporate the platform in so many different ways to improve their line of products. In my opinion Intel and Microsoft can be kept happy by simply treating webOS for x86 not as a full OS but as a software stack to windows. When you think of it this way you start to understand why this will not effect any relationship or business in the PC space at all. In the mobile space – HP just made itself stronger…..they owned only a tenth of 1% of the market with their iPaq line. It is not they were doing any justice to the mobile OS selection only selling 100K units over its lifetime. It is an enhancement to the company in so many different ways and if implemented correctly it can be a game changer for HP+Palm…..all while keep current relationships solid.

        CyKiller

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      2. Aaron Johnson (CyKiller) Friday, April 30, 2010

        I agree that most up to this date have done a bad job but I am not talking about your implementation – I am talking about reinventing webOS for the PC space to only allow for software stack to replace HP’s touchsmart and mediasmart. HP has always put effort into the touch-friendly MediaSmart and TouchSmart software layers to compensate for Windows’ deficiencies. This will improve their windows offering by killing the deficiencies of windows, using the skeletal system only and coupling it with the new created webOS UI layer for their x86+MS WinOS units. You can look at the Lenovo iDeaPad offering, HP explained software layers above, wePad, bumptop licensing their software for this purpose – all failing. HP using webOS as a software stack windows (techy devices)…..adds a lot of ease of usage for users and gives Palm webOS chance to gain notability for the platform by creating a frame for developers to transition their windows applications into card view.

        webOS is already so great, I think HP’s R&D resources will produce and incorporate the platform in so many different ways to improve their line of products. In my opinion Intel and Microsoft can be kept happy by simply treating webOS for x86 not as a full OS but as a software stack to windows. When you think of it this way you start to understand why this will not affect any relationship or business in the PC space at all. In the mobile space – HP just made itself stronger…..they owned only one tenth of 1% of the market with their iPaq line. It is not like they were doing any justice in mobile OS selection or sales by only selling 100K units over its lifetime. It is an enhancement to the company in so many different ways and if implemented correctly it can be a game changer for HP+Palm…..all while keep current relationships solid.

        CyKiller

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  12. HP needs to follow lessons of a master. Tablet Wars: http://goo.gl/fb/8gcjq

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  13. [...] Android, and HP should prove that with its first effort. With Palm, HP’s can do this without input from Intel or Microsoft. HP [...]

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