Apple is taking over.

[JERRY2KONE]

Jordan Robertson, AP Technology Writer, On Friday August 19, 2011, 12:02 pm EDT
SAN FRANCISCO (AP) -- Hewlett-Packard's decision to surrender in smartphones and tablet computers and possibly get rid of its personal computer business underscores how Apple has transformed consumer electronics in just four years.

HP's new CEO Leo Apotheker is now trying to turn the Silicon Valley stalwart into a twin of East Coast archrival IBM Corp. In doing so, he is acknowledging that his company has failed to balance the demands of both the consumer and corporate markets. As a result, it needs to exit most of its consumer businesses, just as IBM did six years ago.

Apple is the hottest consumer electronics company on the planet. The iPhone's debut in 2007 brought ease of use and an intuitive design unmatched by predecessors, including smartphone pioneer Palm, which HP bought last year in hopes of getting a foothold in mobile devices. Apple followed in 2010 with the iPad tablet computer and managed to persuade people to buy a product they never knew they needed.

Rather than remain locked in a futile fight with a company that seems to have found the magic touch on making hit consumer products, HP is whittling its competition to the other business technology specialists -- namely, IBM, Oracle Corp. and Cisco Systems Inc.

"Apple singlehandedly knocked HP out of the PC, smartphone and tablet business," Gleacher & Co. analyst Brian Marshall said in an interview.

HP's overhaul, announced Thursday, has three parts:

-- HP will stop making tablet computers and smartphones by October.

-- It will try to spin off or sell its PC business, the world's largest. By the end of next year, HP computers could be sold under another company's name.

-- The company plans to buy business software maker Autonomy Corp. for about $10 billion in one of the biggest takeovers in HP's 72-year history. That would expand HP's software and services offerings, where IBM is strong.

HP, the largest technology company in the world by revenue, will continue to sell servers and other equipment to business customers, just as IBM now does. Those businesses currently don't generate as much revenue for HP as PCs, but they have higher profit margins.

Apotheker would not say whether any jobs will be cut. HP plans to take a charge of about $1 billion for restructuring and related costs, some of which could go for severance payments. HP employs more than 300,000 people worldwide.

HP's move toward an IBM-style business model, which is focused on selling to corporations and governments, makes sense considering that Apotheker spent most of his career at German business software maker SAP AG, another company that catered to the technology needs of companies and government agencies.

"This is his bread and butter," Marshall said. "Now he has to deliver."

Investors appeared underwhelmed and sent HP's stock down 6 percent Thursday on a day the broader market declined, with the Standard & Poor's 500 index falling 4.5 percent. In morning trading Friday, HP lost another 20 percent, or $5.81, to $23.70.

Apotheker is seeking radical changes to help erase the stain of scandal and leave his imprint on a massive company he inherited last year. His predecessor, Mark Hurd, resigned under pressure a year ago, after an investigation found expense reports that were allegedly falsified to conceal a relationship with an HP marketing contractor.

In trying to ditch most of HP's consumer businesses, Apotheker is reversing a decade-long binge on computer hardware.

The area where HP has been most visibly lacking is mobile devices.

HP has been hopelessly outmatched in smartphones and tablets despite its $1.8 billion acquisition last year of Palm Inc., whose webOS software was the crown jewel of the deal. The software powered the fledgling TouchPad tablet and HP-powered smartphones that are being discontinued in Thursday's announcement.

The software was well-reviewed, but iPhones and iPads and smartphones running Google Inc.'s Android operating system -- made possible after Apple paved the way -- have dominated the fastest-growing parts of the consumer technology market. HP was left in the margins. WebOS smartphones had a worldwide market share of less than 1 percent, according to Gartner.

HP will try to find ways to keep webOS alive, which could include using it in other devices such as PCs and printers or licensing it to handset makers, Apotheker said in an interview. He said he was disappointed with the designs of HP's mobile devices and believed the business would have required too much money to turn around.

"We have better opportunities to invest our capital," he said.

HP executives likely decided that "they were too late to the tablet market to make a dent," said Forrester Research analyst Charles Golvin. "They recognized they did not have a high probability of success."

HP conceivably could try to license webOS for use in cars and consumer electronics devices made by other companies, Golvin said. But even that is challenging because Google is targeting many of the same markets with its Android system, which is free.

"This begs the question of how much longer it will be before the other shoe drops and they close the Palm business entirely," Golvin said.

The diminishing of the Palm business will be striking to many technologists.

Jon Rubinstein, the former CEO of Palm, said in December that Palm sold itself because executives realized the business could be small and successful, but couldn't sustain itself on its own in the long run.

Rubinstein, who was an Apple executive before leading Palm, said HP seemed to be the best choice because, given its size, it could help Palm bring its products to more people.

In PCs, HP is acknowledging that it needs to reverse course on a path begun two CEOs ago, under Carly Fiorina. She pushed through the controversial decision to spend $19 billion for Compaq Computer. That set the stage for HP's ascent to become the world's top PC maker.

PCs are HP's biggest revenue generator, but the business is also HP's least profitable, a result of falling prices for computers and brutal competition.

HP's effort to jettison its PC business is another concession to Apple's increasing dominance of consumer electronics, said Shaw Wu, an analyst with Sterne Agee. The PC division also had become a drag on HP's stock even though it still accounts for about 15 percent of the company's earnings, Wu said.

"Apple is such a fierce competitor that HP probably realized it was going to have to cut its losses," Wu said. "And it makes sense to cut your losses sooner than later."

The decision also makes HP's trajectory look similar to rival IBM's. A key player in building the PC market in the 1980s, IBM sold its PC business in 2005 to focus on software and services, which don't cost as much in labor and components as building computer hardware.

The acquisition of Autonomy mirrors a key element of IBM's transformation from stodgy mainframe seller into a software and services powerhouse, which has made IBM the envy of many large technology companies.

HP's net income increased in the fiscal third quarter, which ended July 31, but its lower-than-expected outlook for the current period weighed on the stock. The company, which is based in Palo Alto, Calif., also cut its full-year revenue outlook.

AP Technology Writers Michael Liedtke and Rachel Metz in San Francisco and Barbara Ortutay in New York contributed to this report.

[JERRY2KONE]

I would not have believed it if I had not read it myself. HP is pulling out and leaving the personal PC market to Mac. While we were on vacation this summer I was flabergasted everytime we passed by an Apple store by the tons of people flooding the stores. I remember going into an Apple store a few years back and it was completely empty. Now you have to make an appointment if you want any kind of technical assistance. Even making a purchase is difficult due to the shere volume of people filling the store space. It was amazing to me. The reason we were there was to get some periferals for the Mac-book Pro laptops we had to purchase for our two sons who are now in high school here in Prague. They attend The International School of Prague, and they required each high schooler to have their own Mac-book Pro in order to attend and be able to participate in all of the classroom activities that require the Apple platform. I knew when we saw the activity in the Apple or I-Store over the summer, but I never expected this. Did anyone else see this comming?

[bruce750i]

The news was saying last week Apple had more "cash" than the US Government. With their last earnings report at 74billion! It's crazy Jerry.


Sent from my IPhone

[JERRY2KONE]

I am sure that most of us thought that the prices Apple was charging for their equipment was out of this world, and now they are going to corner the majority of the PC market. Microsoft better look out. I never liked the fact that Apple had created so much propriatary software, and now that will inevitable get much worse in the comming years.

At the kids school they have a few high powered desktop Apple computers that sport 8 core processors, supported with 20gig of Ramm. From what we have heard they are turly impressive in speed and performance.

[FG101C]

We have four Apple stores in our area, I deliver to at least two of them every day. At least two pallets (48"x48"x60") and the stores are always packed. I mean nightclub packed at 11:00 a.m.

[JERRY2KONE]

For those of us who have been fighting moving over to Apple for years might want to think long and hard about moving over to the dark side now. With HP the largest provider of personal PC gear worldwide leaving their % of the market up for grabs, and the already established success of Apples mobile technology I would believe that it is time to move over to what works. Anything else will be left behind and within a few years colapse as well.

The next big move will be the whole idea of eliminating home PC's all together. The biggest companies are already preparing for vertual storage centers to take over as their servers, which will disapear before long. Once that is in full swing the home PC will be next. Everyone will be working in this new storage service called "The Cloud". The plan is for everything in your home to work through and be controled by "The Cloud". Its been in testing for a few years now and most of the Banks in the USA are already operating through this technology. Stand by our world is changing. Is it for the better? Only time will tell. Things are starting to get interesting.

[BrianG]

Yeah, the Apple stores do always seem to be packed. But at least 75% of those are tweens just playing around with the stuff. Another ~10% are older people just wanting something that will browse the web and send email without having to worry about antivirus software. The last ~15% seem to be people "kicking the tires" before a possible purchase.

I personally make an effort to boycott Apple products. The only Apple product I have is a 5th gen iPod (my wife's Mac doesn't count - that's hers), but only because after-market support existed to attach it to my car deck at the time.

The problem I have with Apple is:

- Steve Jobs is sooo completely full of himself. He has the attitude that if he says it is the Holy Grail, then it is. Period. And that attitude carries over to the Apple store employees; all with their holier-than-thou, apple-is-god attitudes.

- Apple hardware is no big deal, especially given the cost. The iMac is simply a glorified tablet without a touchscreen, but with a hefty price. And the hardware in the mobile segment is nothing special either; there are other makers out there with similar specs. When you get to the hi-end stuff, the hardware is really no different than any other hi-end brand. An 8+ core CPU with 20GB of RAM and RAID0 HDDs on SATA3 is gonna be fast from any brand.

- Cost. My wife's iMac needed a new PS unit. It was a 150w module and costed $275. They covered labor free of charge (how magnanimous of them after dry raping me for the part), but it took a week to get the part in and installed. I told the tech that if this was my personal PC, I could have went out and gotten an 800w+ supply and have it installed within the hour, and it would have costed a fraction of that. He countered that their product quality was superior. Wanting to see what "superior quality" looks like, I took the PS apart and be assured, there is nothing magical in there; no futuristic glowing sphere of pulsing power or alien technology. Besides, if their stuff was so superior, why did it break in the first place?

- Apple OS on Apple hardware. This is a double-edged sword in my opinion. On one hand, it allows Apple to have an OS that is less cluttered with backward compatibility, having to support a huge range of hardware configurations, and support for legacy hardware/apps. On the other hand, it limits what people can do with it unless they want to spend all kinds of time tinkering/hacking it if they aren't using apple OS on apple hardware. Personally, I think Apple would have much better market share if they released the OS with their hardware like they do now, but offer an add-in or internet updater (similar to how Linux updater works) to support other hardware. That would keep the OS leaner when running on their products, but opens doors for other people.

I am not a Windows fan-boy either (M$ does have their heavy handed business approach), but I do like the lower price and vast hardware configurations possible. Take pretty much any PC hardware and you can put Windows or one of a multitudes of Linux distros on it - and it works (with Linux, you may have to tinker a bit). The Mac OS itself is ok (customized version of Linux), I might even be tempted to use it under different circumstances.

I too was shocked when I heard about HP stopping PC sales. But I can understand how hard it must be to be competitive on the middle to low end product segment where this is little profit. I guess that leaves Dell and Gateway for the main-stream desktop and laptop market.

I know many people use laptops instead of desktops at home now, but I just have a hard time figuring out how I could run what I do at home on dual hi-res monitors on relatively mediocre mobile hardware? The desktop platform IS shrinking, but won't be gone for a while IMO. Besides, I like the idea of separate components; when one part breaks, I just replace that instead of the whole computer.

[JERRY2KONE]

Trust me BG I agree with you on every account, and the only Apple stuff we own are our various Ipod/Itouch products. But now the boys had to have their Mac-book Pro laptops in order to go to this school, which is not only a very good school, but it is also litterally 100 yards from our front door. If they did go to any other school here they would have to use public transportation to and from school and we just want to avoid that if possible.

Not that it was a big deal but HP bought out Palm last year for something like $10B as well, so they will also be going away once HP drops out of the market. THeir plan is to stop selling home PC gear next Oct, and I would bet that the product support will dwindle within a few years after that. We are kind of bummed, because we have HP all over our house. 3 HP cameras, 4 HP printers, and 3 HP laptops. Oh well.

I have been pretty much against Apple for quite some time now for the very reasons you also stated. Still with HP departing that leaves some pretty awful companies for us to deal with. I do not like Dell simply because their customer service is apauling from my experience. Gateway, Lannova, Toshiba, Samsung, Asus, Alienware, and all the rest are operating pretty skimpy in comparison and frankly do not offer much to desire compared to Mac in todays envronment. Mac is taking over whether we like it or not. I am on a Toshiba now and it is OK, but in time all of this will be history. With our kids now using Mac's it is hard not to want to give it a try. Plus it is easier to help them out if we have the same platform. The new I-Pad now has over 50,000 applications avialable and that number is growing quickly. You can use I-pads to do just about anything now-a-days. They really are phenominal in comparison to anything else on the market today.

[BrianG]

Interestingly enough, I just read an article about the iPad and tablets in general. The author makes some pretty good points: http://www.engadget.com/2011/08/21/e...-hoped-for-fr/

And another article about the "post-PC" era: http://mashable.com/2011/08/20/post-pc-era/

BTW: Alienware is Dell...

[JERRY2KONE]

Yea I know Dell bought out Alienware and is using it as a launchpad for research products. Acutally finding or having a viable use for an Ipad truly is a conundrum isn't it? I do fine with my genaric cell phone and laptop for most things. I have a desktop that is our home Command center, but I just do not see the need for a smartphone. I just read that the day of the land line is fading fast as well. 30% of US homes now use a cell phone in place of having a landline phone. The future sure is blury. Who knows whats next?

[TexasSP]

In Dell's defense the crappy support started when they started selling low end computers. Buy the higher end stuff, get the high end support. With my XPS laptop I get US based support and have never been on hold more than 5 minutes. I also get NBD onsite repair.

My XPS 3 years ago cost half the price of a mac with the same damn hardware. Seriously, the same exact processor, graphics card, ram, specs on hard drive, etc. If I had bought a Mac and needed service, I would have to go to the stupid store. The only reason my XPS has needed service is due too someone else knocking it off my desk, more than once.

Someone will pick up HP's business, I have no doubts. I just hate they came into Houston and totally jacked up compaq in the reign of terror.

Personally, a lot of Apple's numbers are seeing a downward trend. The markets just have not picked up on it yet. Not too mention that their phone hardware is now lagging seriously behind and that's even if they come out with a 4g capable phone. HTML5 is also going to start kicking their asses in the app arena because many things they were limiting with the OS can be circumvented with HTML5 just like Amazon has started to do. Now amazon can set you up without the app store and without paying 30% to apple to do it.

The funny thing is that Steve was such a big supporter of HTML5 in his quest to knock down Adobe. I said back then it was going to bite him in the ass and sure enough it is.

Arrogance like that will always bite you in the ass though.

[2genewb]

i wish my xps played well with the o/s that it came packaged with. personally, i've had much better success with dells lower end pc's. seems they all want to fail prematurely for one reason or another anyway. can't stand their bloatware and proprietary drivers, either.

alienware used to be respectable and even sought after. then dell happened.....

but enough of my dell rant.

i don't think apples strong hold on the market is going to last forever. i think eventually their marketing hype will be questioned and the end-user will become price savvy in our down economy by necessity, not choice. if so, there should be no problems pushing apple back into the sales dungeon it's been into several times already. they're just experiencing an "up" moment currently, methinks.

[JERRY2KONE]

I guess HP had a change of heart after receiving a ton of bad press from concerned and disappointed customers.

PALO ALTO, Calif., Oct. 27, 2011 – HP today announced that it has completed its evaluation of strategic alternatives for its Personal Systems Group (PSG) and has decided the unit will remain part of the company.
“HP objectively evaluated the strategic, financial and operational impact of spinning off PSG. It’s clear after our analysis that keeping PSG within HP is right for customers and partners, right for shareholders, and right for employees,” said Meg Whitman, HP president and chief executive officer. “HP is committed to PSG, and together we are stronger.”
The strategic review involved subject matter experts from across the businesses and functions. The data-driven evaluation revealed the depth of the integration that has occurred across key operations such as supply chain, IT and procurement. It also detailed the significant extent to which PSG contributes to HP’s solutions portfolio and overall brand value. Finally, it also showed that the cost to recreate these in a standalone company outweighed any benefits of separation.
The outcome of this exercise reaffirms HP’s model and the value for its customers and shareholders. PSG is a key component of HP’s strategy to deliver higher value, lasting relationships with consumers, small- and medium-sized businesses and enterprise customers. The HP board of directors is confident that PSG can drive profitable growth as part of the larger entity and accelerate solutions from other parts of HP’s business.
PSG has a history of innovation and technological leadership as well as an established record of industry-leading profitability. It is the No. 1 manufacturer of personal computers in the world with revenues totaling $40.7 billion for fiscal year 2010.
“As part of HP, PSG will continue to give customers and partners the advantages of product innovation and global scale across the industry’s broadest portfolio of PCs, workstations and more,” said Todd Bradley, executive vice president, Personal Systems Group, HP. “We intend to
Editorial Contacts
Mylene Mangalindan, HP
+1 650 236 0005
corpmediarelations@hp.com
Marlene Somsak, HP
+1 408 873 5125
marlene.somsak@hp.com
Michael Thacker, HP
+1 650 857 2254
corpmediarelations@hp.com
www.hp.com/go/newsroom

[BrianG]

Also, didn't the exec who came up with the idea in the first place get fired? I think I remember reading something about it...

[Finnster]

Originally Posted by BrianG

Also, didn't the exec who came up with the idea in the first place get fired? I think I remember reading something about it...

Yes. He was forced out and replaced by Meg Whitman. She reversed the pc division sale.