When Elephants Dance, You Better Notice

August 19th, 2011

Marcelo Somers published a terrific piece where he argues HP is making the right move by ditching their PC business and fledgling WebOS-powered mobile devices business. Go give it a read and then if you’re feeling particularly good, jump back here.

Marcelo is absolutely right on HP spinning off their PC business. It’s a low margin business already, and it’s only going to get worse, so transitioning away from it now is smart. I wanted to add a few things to his argument that doing the same with WebOS is the right move, too:

HP and Leo Apotheker know that great design and building amazing yet profitable products isn’t in their DNA. That’s ok! It’s the sign of a mature and well executing company. They’re not going to continue to copy and follow Apple in the PC and Post-PC markets while making razor thin margins – because those margins will turn south soon enough.

Instead, HP has confronted reality and drawn a line in the sand. They’re going to focus on areas where they can be the best: scale, security, reliability, perfect for the enterprise market.

What’s frustrating to people, I think, is HP’s as well positioned as anyone to compete with Apple in the mobile market—they purchased a world-class OS and development team and they know how to scale manufacturing—but they decided even they couldn’t compete.

Think about that for a second. Who else can compete with Apple on integrated, functional products? RIM had the potential, but has proven inept; Microsoft’s Windows Phone 7, while well done, is plagued with subpar hardware; and the Android OEMs aren’t anywhere close.

Let’s consider what Apple’s done. They have the best hardware, the best software, and their prices are lower than competing, lower-quality products, due to Apple’s supply chain strategy, all while their margins are larger. That’s difficult to compete with, and HP has effectively pulled out their white flag.

If not HP, then who? Google-Motorola?