HP Commits to PCs, New Smartphones and Ultrabooks

Hewlett-Packard Co. (HP) has decided to keep its PC division in-house. Elsewhere, Nokia Corp. and Microsoft Corp. have new Windows Phone 7 smartphones arriving while vendors begin to enter the Ultrabook fray.

Focal Points:

• In an unsurprising move, HP’s new CEO, Meg Whitman, has decided to reverse the move started by her predecessor to free the computing giant of its PC business. Whitman told analysts in a conference call on the topic that the costs, complexity, and damage to existing supplier and customer relationships "are simply greater than any value that [HP] could create." Whitman further acknowledged that separating the PC business, which had an estimated business cost of valued at approximately $1.5 billion, would have hurt the brand, though damage has certainly already been done on that front. While Whitman has demonstrated that she is willing to rethink earlier strategic decisions and act quickly, questions still remain about the company's intentions in the smartphone and tablet business and what will happen with the webOS platform acquired in 2010 from Palm, Inc. The company did confirm it will re-enter the tablet market on the Microsoft's Windows 8 operating system expected next year, though it is unclear if room remains for other platforms.
• Nokia announced its first two Windows Phone 7.5-based smartphones at a press event in London last week. The flagship Lumia 800 and its less-expensive Lumia 710 counterpart will be available first in Europe and Asia, though CEO Stephen Elop has committed to a range of Nokia Windows phones early in 2012. Fueling speculation of an impending announcement to that effect, Microsoft has sent out an invitation for a Windows Phone event on November 7^th in New York. AT&T Mobility LLC will likely benefit from some of the first offerings as the invitation includes their logo; however, Nokia has also committed to delivering Code Division Multiple Access (CDMA) and fourth-generation Long Term Evolution Advanced (LTE Advanced) phones. The Lumia 800 features the same specs as the Nokia N9 released earlier in the year, including a 1.4 gigahertz (GHz) processor, 3.7 inch screen, 8-megapixel camera, 16 gigabytes (GBs) of memory, access to 25 GBs of free space on Microsoft's Skydrive cloud service, and a free turn-by-turn navigation app.
• The first batch of non-Apple Inc. Ultrabooks, a  has hit the market from vendors including Acer Inc., Asustek Computer Inc., and Lenovo Group Ltd. The Ultrabook category is a newer specification defined by Intel Corp. that incorporates its ultra-low voltage Core processors with integrated graphics and solid state disks (SSDs) in a lightweight package weighing generally less than or around three pounds. Apple previously had the only Ultrabook offerings on the market in the form of its 11-inch and 13-inch Macbook Air models. The current batch of Ultrabooks are less than one-inch thick, feature battery lives of at least five hours, and are priced at $900 or more. Many observers expect Ultrabooks to become the new notebook "sweet spot" within the next three years given perceived "just right" combination of features, portability, and computing power.

Experton Group believes HP’s about-face decision to keep its PC business intact is understandable given community reaction, the obstacles the company would need to tackle, and the need for its newly-minted CEO to act decisively. Though the spin-off was cursed with undeniable baggage since its August announcement, Whitman’s decision to keep PC design and manufacturing in-house was not a foregone conclusion. This initial move from the new CEO is being met with universal praise and seems to suggest that she understands the value derived from offering a full range of computing products, even if some of those businesses – as many might describe the PC business – are loss leaders. Still, Whitman has a long way to go to reverse the damage caused at the industry stalwart by predecessors dating back to Carly Fiorina more than one decade ago.

IT executives should be cautiously optimistic about the company's new lease on life, and at the very least, should take comfort in knowing that the Whitman believes in the company's core values. Though this trial-by-fire will be tough given her inexperience running a computing conglomerate the size of HP, she is easily better for morale and relationship building than her predecessor, Leo Apotheker. Nokia’s launch of Windows-based smartphones in international markets prior to the United States is reasonable given that goodwill towards the firm is better elsewhere. When the new phones arrive stateside, they should have extremely compelling specs and a well-integrated software ecosystem. Unfortunately for Microsoft, it is too late to make a significant market dent as an "also ran" and true killer functionality will be necessary to prevent solutions from becoming a footnote. No matter what price and feature set are ultimately offered, very few – if any – Windows smartphones will sell when Apple iPhone 4 models are available from $99 on contract. The new Ultrabooks are attractive and function well on the whole; however, vendors have an uphill battle in convincing customers to come out in droves. Apple has stood as the single Ultrabook vendor for greater than one year, and, as is common with Apple, built an extremely user-friendly and attractive design that has been universally lauded. The Macbook Air can run the Windows operating system and applications using BootCamp and the new offerings are nearly the same price in a feature-based comparison. IT executives should expect Ultrabooks to become the mainstream notebook purchasing standard over the next three to four years as pricing drops and features improve further, but expect Apple to continue to rule the roost in the short- to mid-term.