Hewlett-Packard HPQ-N CEO Mark Hurd has nixed suggestions that he bought Palm to get into the smartphone business, and will instead use the phone maker's IP to bolster its mobile device strategy.
There has been speculation that HP's bold $1.2-billion (U.S.) acquisition of beleaguered Palm ADBE-Q could turn it into a serious player in the smartphone market, although Hurd clearly has other ideas.
Speaking at the Bank of America Merrill Lynch technology conference this week, Hurd explained that the deal was driven by Palm's IP, not its phones.
Confronted with stiff competition from Apple's AAPL-Q iPhone and Research In Motion's RIMM-Q Blackberry, the HP chief may be tempering investors' expectations of a smartphone boom.
HP isn't going to "spend billions of dollars trying to go into the smartphone business," he said, according to tech site ZDNet. "That doesn't in any way make any sense."
The CEO explained that Palm's popular WebOS operating system was the big attraction for HP.
"The WebOS is one of the two ground-up pieces of software that is built as a web operating environment," he said, adding that HP is pushing millions of small Web-connected devices. "Imagine that being a web-connected environment where now you can get a common look and feel and a common set of services laid against that environment."
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With multitasking capabilities, WebOS is a viable alternative to Apple's iPhone OS and Google's GOOG-Q Android software. Unsurprisingly, the operating system is seen as the jewel in Palm's crown, and there has already been chatter that WebOS could oust Microsoft's MSFT-Q Windows 7 from HP's forthcoming tablet, dubbed the Slate.
HP said that it plans to continue as a Microsoft strategic partner during a conference call to discuss the Palm deal, although did not get into specifics of its tablet strategy. The tech giant is nonetheless eyeing WebOS as a way to deliver cloud-based services to users such as online backup and messaging services.
There has been a big question mark, however, hanging over HP's ability to challenge companies such as Apple in the smartphone space. Even with Palm in its armory, the No. 1 PC maker lacks Apple's reputation for cutting-edge design, something that's key in a market driven by the vagaries of popular culture.
HP has been selling smartphones for some years, although its iPAQ offerings have barely caused a ripple compared to the iconic iPhone and the popular Blackberry. With HP undergoing a major restructuring effort, Hurd is apparently reining in investor expectations that the company will mount a massive smartphone challenge.
"When we look at the market, we see an array of interconnected devices, including tablets, printers, and of course, smartphones," explained an HP spokeswoman, in an email to TheStreet. "We believe WebOS can become the backbone for many of HP's small form factor devices, and we expect to expand WebOS's footprint beyond just the smartphone market, all while leveraging our financial strength, scale, and global reach to grow in smartphones."
The Silicon Valley heavyweight ordered up another round of job cuts earlier this week, eliminating an additional 9,000 workers and taking a $1-billion restructuring charge. The cuts follow a 2008 announcement that the company would eliminate 24,600 jobs and take a $1.7-billion charge. HP listed a total of 304,000 employees in its last annual report.
HP's latest job cuts have raised questions about the much-discussed tech spending rebound, prompting speculation that the PC sales may be running out of speed.
The tech giant has nonetheless earned a reputation for tight cost control in recent years, although latest restructuring comes hot on the heels of strong second-quarter results.
HP shares crept up slightly in Thursday trading, rising 2 cents, or 0.04%, to $47.29. The Nasdaq rose 0.31 per cent over the same period.
