Why HP’s Hasty, Bumbling Decision To Dump Mobile Hardware May Doom WebOS

Webos Phones

It’s never pretty to watch a big tech company scramble for direction (that is, unless you compete against that company). HP (NYSE: HPQ) is currently trying to wind down a mobile business that it hardly launched while at the same time trying to convince the world that it has a truly valuable mobile business, and that schizophrenia makes it harder and harder to understand what lies in store for WebOS, its developers, and its potential partners.

HP CEO Leo Apotheker is not a mobile guy, that is for sure, but he forged a reputation as a solid leader through transition at SAP. Knowing that, how did HP manage to botch this transitional phase in its mobile strategy? It’s pretty obvious that HP’s mobile division had no idea that the company was about to get out of the tablet hardware business until the day it was announced, making new WebOS leader Stephen DeWitt look quite foolish in the process for stating just weeks earlier that HP was about to “go big” on mobile.

Let’s be brutally honest about WebOS: it’s just not cutting it as a modern mobile operating system despite its critical-darling status, and no one has advanced a credible plan for how make it work. First Palm, and then HP have tried to get wireless carriers and consumers to think of WebOS as an iOS competitor but the numbers speak for themselves: according to Nielsen’s latest figures more people are using smartphones running Windows Mobile, which Microsoft (NSDQ: MSFT) has virtually abandoned, than WebOS. The only way HP could stimulate demand for WebOS was to sell TouchPads at an unsustainable price that would cost it nearly $200 per unit sold.

So it’s not all that surprising that HP would take a long hard look at its mobile assets–especially an HP led by a career enterprise software guy–and decide to punt when faced with fourth and long. However, serious damage is being done to WebOS as HP stumbles its way through August.

Consider the following:

–Even though people weren’t responding to the TouchPad or Veer, HP’s decision imposed a ceiling on how many people WebOS developers can reach. And even after the fire sale, it’s nowhere near the amount of people they can reach by focusing on iOS, Android, or even BlackBerry. Why would anyone building out a mobile strategy invest in WebOS development right now? At least an intact hardware department offered the promise of future sales, and the limited production run promised earlier in the week seems to have more to do with clearing a component backlog than a response to TouchPad mania.

–HP had an opportunity to sharpen its pitch for WebOS as a licensing alternative to Android and its patent problems in the wake of Google’s decision to purchase Motorola (NYSE: MMI), but it instead went ahead with its WebOS hardware announcement just days after Google’s bombshell. It will now have to pursue licensing deals with companies who might wonder why they should consider building hardware around an operating system that one of the largest hardware vendors in the world no longer wants to touch.

–Is WebOS for sale, or are WebOS licenses for sale? Why would I discuss taking a license to an operating system that might be owned by a different corporation in six months? Why would I buy an unpopular operating system when I can license Android or Windows Phone 7 unless I’m only in it for the patents?

The biggest head-scratcher of the last two weeks is why HP rushed out this shift in its mobile strategy, catching partners and consumers by surprise just six weeks after the TouchPad launch. On the conference call announcing HP’s reorganization, Apotheker said the company thought so highly of WebOS that “we are exploring options for how best to optimize the value of WebOS software going forward,” but HP had been exploring those options before the TouchPad even launched.

There are only a small number of realistic suitors for WebOS or WebOS licenses. It’s hard to believe HP couldn’t have worked out a deal with one of them before taking this drastic step and plunging WebOS into a self-induced period of fear, uncertainty, and doubt. There has to be someone interested in HP’s mobile patents during a year in which the value of mobile patents has skyrocketed, so some sort of deal will likely happen.

But if WebOS is really to survive as a going concern in the mobile world, HP has not done it any favors over the last two weeks.

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