HP’s tablet strategy – A couple of pages to borrow from Amazon’s book

HP is the world’s largest PC maker and it has been holding that position for quite sometime. However, their attempts to enter the tablet market which is looked as a natural evolution to PC market, were futile. Let’s list HP’s attempts in this direction. HP has initially started working on a tablet that runs Windows mobile OS. This initiative was abandoned after failing badly at it. They bought Palm in the hopes that Palm’s WebOS could be a good alternative to other mobile OS’es like iOS and Android. Even though WebOS received good reviews from critics, it never gave a decent fight to the two most popular OS’es. HP released the Touchpad with WebOS before it finally discontinued its production. All in all, it has been a very bitter experience to HP.

When an ecosystem starts adopting a new technology, the leaders of old technologies of that ecosystem often make lazy and late decisions. As a result, they lose the edge in their core businesses. That’s what is the fate of HP today. However, there is counter example to this opinion. When the world started adopting the client-server architecture by abandoning the mainframes, IBM made it up well. They retained their leadership in servers business until today. The market leaders must lead the new developments if they wish to remain leaders. However, HP failed at it and now its own presence in hardware field has become questionable. Of course, we don’t see this happen in a year or two. But, that’s what is going to happen eventually if HP fail to respond properly and quickly.

May be HP can try out a new strategy with their Touchpads. Instead of developing and using its own WebOS or a new OS, they should start using Windows Phone OS or Android. Developing an Operating System has never been HP’s expertise nor its strength. Of course HP-UX is one exception. However, it is NOT a mainstream OS. Therefore, it makes sense to leave that part to the experts – Microsoft or Google. The problem with this approach is low profit margins. The hardware market has been so┬ácommoditized that achieving more than 10% profit margin has become a daunting challenge. Most of the profits are taken by the software providers such as Microsoft. In fact, Amazon was quoted to lose money on their Kindle fire devices. In other words, Kindle Fire is sold at a discounted price which is less than the manufacturing cost. Then why do I suggest HP to go that route? Let’s see here.

HP’s obvious strength lies in designing hardware that performs better. They have been manufacturing PCs for decades now. So it’s highly possible that they can come up with better hardware than Amazon Kindle‘s or Google Nexus tab’s. As a result, they can even charge a premium on it. That means, instead of selling it at $199, they can sell it at a higher price so that they see a decent margin on hardware. Is that all for HP in it? No. We are NOT done yet.

If Amazon has been losing money on Kindle Fire, why is it still willing to produce this device. Where they get the money from? They get the money by selling the content like Music, Videos and Books/Magazines/News Paper subscriptions. HP can do something similar to it. HP can let Microsoft take the burden of promoting Windows App Store. HP can leverage Windows App store or they can have their own Windows mobile app store just the way Amazon developed Android app store. To compete with Amazon, HP can acquire an online book retailer – like Barnes & Noble, an online music provider – like Pandora/Spotify and Netflix for online video streaming.

Of course, HP won’t get all the functionality with the mere acquisitions. They need to alter or enhance/extend the already existed platforms in these companies. For example, Pandora/Spotify don’t sell the music as the way Apple iTunes does. So HP needs to work on extending the company’s platform and its partnerships with the content producers. I believe, by making these acquisitions and integrating them into the HP Windows Mobile App Store could bring HP back in to the play. Even though success cannot be guaranteed, it’s better to try something instead of not trying anything.