PCs and Smartphone Businesses in Flux

Hewlett-Packard, Co. announced it is abandoning its webOS strategy while simultaneously looking to spin off its PC business in favor of increasing its enterprise computing strength. Elsewhere, Apple Inc. remains atop the list of desirable tablet devices and claims sales of three out of every four sold. Lastly, Lenovo Group Ltd. shrugs off claims that the PC is dead.

Focal Points:

• After dismal sales of both old and new hardware based on the webOS platform, HP announced it would discontinue manufacturing the devices and developing new versions. The company bought the progenitor of webOS, beleaguered smartphone vendor Palm, Inc., for $1.2 billion in April of 2010. The company's new Apple iPad competitor, the HP TouchPad, was launched on July 1 and is being offered at "fire sale" pricing of $99 and $149 for 16 GB and 32 GB models, respectively.  Now flying off the shelves and difficult to find in stores and through online vendors, TouchPads were originally priced in the $500 - $600 range. Retailers including Best Buy Co., Inc. were demanding HP take the back large quantities of the unsold devices. The top seller of PCs also declared its intention to either spin off or sell its PC business as the company aims to move away from the low-margin business. To help its renewed enterprise focus, HP announced it will acquire enterprise software vendor Autonomy Corp.  
• HP's departure from the tablet business is a boon to tablet-dominating Apple, whose iPad commands nearly 75 percent of the market. IHS Inc.'s iSuppli research division revised its estimates for iPad sales from 43.7 million to 44.2 million for 2011 and total sales from 58.9 million to 60 million. The company further states that whatever supply shortages the company experienced earlier after its March launch have since been fixed and that its "one-horse race" market dominance should continue through 2013. This claim is supported recent findings from Robert W. Baird & Co., Inc. wherein 500 plus respondents claimed the iPad to be the most desirable tablet on the market by a huge margin. While nearly 95 percent of respondents said they would consider an iPad, each of the other devices considered failed to garner more than 10 percent interest.
• In the wake of the PC's slow decline and in "commemoration" of the 30^th anniversary of the IBM Corp. PC, the company’s Middle East and Africa CTO, Mark Dean, has posted some harsh words on his blog. While he acknowledged that the PC will remain highly used, he stated that they are "no longer at the edge of computing" and that his primary computing device is now a tablet. Lenovo chairman Liu Chuanzhi, which bought IBM's PC business in 2005, remains bullish on the market having changed its market strategy and built out vendor relationships. The company's sales outpaced the market for the ninth consecutive quarter, as its PC shipments rose more than 23 percent as worldwide demand rose 2.7 percent. The company recently acquired German electronics manufacturer Medion AG, has a joint venture with NEC Corp., and improved its channel strategy to reduce reseller competition.

Experton Group believes despite HP's claims of continuing to support and improve the webOS marketplace, the company will invest in the webOS ecosystem as little as possible as it either morphs the platform into a more enterprise-focused solution or sells it off altogether. While this claim is somewhat responsible for the huge interest in TouchPad inventory, consumers are largely clamoring for the unsold units in response to the unbeatable tablet price. The tablet market is quickly becoming a race of only Apple and Google, Inc.’s Android as sales of Research in Motion, Ltd.’s PlayBook tablet are lackluster. Software developer support with compelling applications is critical for tablet sales and only Apple and Google have been able to encourage an ecosystem with robust interest and support.

IT executives adopting enterprise tablet strategies will find the most consistent and easiest-to-support experience with Apple iPads for the foreseeable future, and should keep their distance from tablet platforms with unknown futures. Market competition in the PC market is becoming increasingly aggressive as vendors eat further into margins to increase position. Lenovo has hit the mark lately by putting greater distance between and adding more appeal to both its consumer and enterprise product lines. Much of the company’s success is attributable to sales in Asia and emerging markets; however, the company is performing strongly globally. Tablets and smartphones are attractive complements to traditional PCs, but IT executives can expect for the PC to remain the primary interface for corporate computing throughout this decade at least.  For software compatibility and computing power, the PC remains the best value available.