Who Killed HP’s PCs, Phones and Tablet?

HP announced this week that it would spin off its PC division as a separate company and terminate its Palm hardware business. The software platform that runs Palm phones and tablets may be licensed in the same way that Android is. But HP is getting out of the PC and mobile computing hardware racket.

How did the industry’s number-one PC maker, and long-time leader in mobile computing come to the decision to exit those businesses?

Did Apple kill HP’s PC, phone and tablet businesses?

The answer is: What, are you kidding?

HP: Where Great Mobile Technology Goes to Die

The total failure of HP’s latest product, the HP TouchPad tablet, was really just the last straw.

A few weeks after Apple launched the iPad last year, HP responded by buying Palm for $1.2 billion.

The iPad revealed that touch tablets were the future of mobile devices — or at least the most profitable part of that future.

Unlike PCs, laptops and especially netbooks, the iPad was a highly lucrative platform that would earn Apple billions in more profits from apps, content, peripherals and more.

HP, which prided itself on leadership in mobile devices, was caught flat-footed, and without a response to the iPad challenge. The iPad exposed HP as a dinosaur, So the company bought struggling Palm, which had developed the WebOS to run its phone and tablet devices.

It was a marriage made in heaven, some thought. Finally, a solid company with deep pockets would nurture and support the long-suffering Palm products. And for a while, HP appeared to do just that. Engineers put their heads down to develop the next generation of phones, and the first generation of tablets. They launched the phones in February of this year, and the tablets in July.

Unfortunately, HP’s formerly-known-as-Palm devices were both too little and too late. By the time they shipped, Apple was already on its second generation iPad. The HP TouchPad tablet was slower, had less battery life, an inferior user interface, no apps and the same price.

Essentially, HP bought a platform bursting with potential, and they ruined it with their special brand of mediocrity. It’s not the first time.

HP’s main specialty in mobile is taking great design and engineering, then wrecking it with group-think decision-making.

During the 1990s, an era dominated by clunky “IBM clone” devices, two truly great mobile appliances emerged.

The first was the original HP OmniBook 300. Designed by the calculator division of HP, the OS and key office apps executed from ROM, reducing the need for more RAM and storage, and increasing battery life and stability. The mouse “popped out” with a push of a button. It got 12 hours of battery life, and even could run on AA batteries. The laptop quickly developed a fanatical following, even though it cost $3,000.

Once it became a potential hit in the market, the suits wrested control of the platform for the small, visionary team that created it. HP “evolved” the OmniBook over each iteration into the most generic, pointless, average line of laptops imaginable before unceremoniously killing it off. When they terminated the OmniBook line, nobody cared anymore because the platform had become so boring.

The second great mobile appliance from the 1990s was the Palm Pilot. At the time, the market was dominated by “Sharp Wizard” type “organizers,” which didn’t sync with desktop apps, didn’t have applications, and were too weird to use. The Palm Pilot changed everything, providing a “connected organizer” that has what we now call apps. More specifically, it was super simple to use. The visionary designer, Jeff Hawkins, also had an Apple-like design discipline that protected the initial design from feature bloat. It had four simple buttons, and hardly did anything. But it was fast, functional and appealing to use.

What both of these great mobile platforms have in common is that they both started out as truly great products only to be ruined, then killed, by HP.

The HP Jornada was another device with major potential that HP unceremoniously strangled in its cradle.

The most bizarre fact in all this is that the venerable iPAQ, launched by created by Compaq 11 years ago and powered by Windows Mobile, has inexplicably not been killed. HP still sells it, for some reason.

Although HP has killed many once-great product lines, they have never exited all the major mobile businesses as they’re doing now. Mediocrity plus marketing has generally worked for HP for two decades. But the challenged posed by Apple was simply too much.

Why Nobody Can Compete with Apple’s iPad

The total failure of the HP TouchPad perfectly illustrates the challenge companies face in competing with Apple on tablets.

Apple is run by design dictator with the industry’s clearest vision for how mobile devices should function. After Apple’s best minds spent several years working on the iPad (that work started even before Apple created the iPhone) and those designers and engineers developed 90 percent of what the iPad is today, Apple CEO Steve Jobs (then on medical leave and mostly working from home) devoted much of his time to using, testing and thinking about the iPad and how it should function.

The iPad is in perfect alignment with Apple’s core mission, its other product lines and its future direction of all Apple products.

The resulting iPad, and precisely what is so great about it, has eluded most people trying to articulate it. My own view is that the “magic” Steve Jobs describes, and which he is often mocked, is a quality no other device has been able to achieve.

The “magic” is that the iPad responds to gestures in a way that thrills the subconscious mind. A simple gesture like swiping to the left to see the next screen full of icons gives such instantaneous feedback that it’s just like doing the same gesture with a piece of paper on a table, and to the same effect: Zoom! Off it goes. Gestures like pinching to resize photos, moving Web pages around and all the rest give the same gratifying response. The iPad isn’t magic, but it is illusion. The virtual feels physical. But without gestures and feedback with physics — or without perfectly responsive performance — the illusion is shattered. And this is why the “magic” iPad is winning: None of its competitors have yet achieved the interface illusion necessary to thrill the user.

And while Jobs devoted a big part of his life to perfecting the iPad, HP’s CEO may not even know how to use an HP TouchPad, for all I know. HP has more important things to do from a business point of view.

Ultimately, HP pursued the TouchPad so they could check off another box on the long list of devices they offer to customers. “Yeah, we make those, too.” No love. No mission. No vision.

If you’re going to come at Apple and directly compete in their most important business, you have to bring your best game.

And that’s why today, there is no tablet market. There is only the iPad and its unsuccessful competitors. Eventually, Android tablets will gain market share once their prices drop to below half of what the iPad costs. But companies like HP and RIM don’t have a prayer of ever competing with Apple in the tablet business.

How Apple Shamed HP Out of the PC and Mobile Hardware Businesses

Let’s be clear about what’s going on here: HP has been humiliated by Apple, and that’s why the company is existing all the businesses in which it was competing with Apple.

The timing of its announcements were not coincidental, either.

HP announced this week that it would take a $100 million or so charge in order to buy back from stores their unsellable inventories of HP’s failed TouchPad tablet. And retailers will be giving customer refunds for many of the tablets purchased. This is one of the most embarrassing things a company can possibly do. They went all in, challenged Apple, invested billions, spent heavily on manufacturing, distribution and marketing. And now they need to raise money to reimburse the retail partners who can’t sell their products. Now hundreds of thousands of brand-new HP TouchPads will be removed from their boxes and recycled for scrap.

The massive gulf between Apple’s tablet success and HP’s failure reminded everyone of a similar distance in the smart phone handset business. More subtly but importantly, it also reminded everyone of the incredible gap in design excellence and innovation between Apple’s laptops — especially the MacBook Air — and HP’s generic crappy laptops.

HP is getting out of all the businesses that brought it into direct competition with Apple because that competition was giving the whole company a bad reputation as a visionless loser.

Because HP is primarily an enterprise services, hardware and software company, reputation is everything. Reputation counts on Wall Street, and in the corporate board rooms that choose enterprise vendors.

The money HP could make going forward in a PC, tablet and smart phone market increasingly dominated by Apple is dwarfed by HP’s other businesses. Yet one of the biggest barriers to those big enterprise sales has become HP’s declining reputation as a PC and mobile company. So it makes sense for HP to get out of a business that brought the company little more than unfavorable comparisons to Apple.

Let’s not have any illusions about Apple’s role in HP’s announcement this week. If Apple didn’t exist, HP would not have spun off their PC division. They would not have bought Palm and, if they did, they would not be killing off the Palm phones and tablets.

Apple shamed HP out of the game. And RIM is next.

Mike Elgan

Mike Elgan writes about technology and culture for a wide variety of publications. Follow Mike on Google+, Facebook and Twitter.