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Mobile Device Market Eludes HP

Hewlett-Packard Co. is taking another stab at the tablet market.

This week at the Mobile World Congress in Barcelona, Spain, the company unveiled the HP Slate 7, a low-end tablet powered by the Android operating system and priced at $169. The product provides an affordable entry point for consumers looking to buy a tablet under $200, and joins the higher-end HP ElitePad which runs on Windows 8 and is more suitable for enterprises and government customers.

Even after suffering from its own incompetence in developing a serious tablet strategy (HP introduced the TouchPad tablet in 2011, only to discontinue production because of dismal sales), the company's latest efforts suggest that HP executives believe that a crucial part of the success of its multiyear turnaround plan rests on the company's ability to grow market share in the tablet market.

HP misses the boat
When Apple Inc. (NYSE:AAPL) introduced the first iPad in 2010, there were no competing products on the market. Every likely competitor had to go back to the drawing board and figure out how to introduce their own tablet. When they couldn't do so effectively, many companies lost revenue as PCs sales declined and tablet as well as smartphone sales soared.

Believe: HP's missteps in the tablet market are legion.  Have executives found the recipe with the Slate 7?

Believe: HP's missteps in the tablet market are legion.
Have executives found the recipe with the Slate 7?

Since 2010, HP (NYSE:HPQ) has also had three chief executives who have had markedly different opinions and made poor business decisions that have hurt the company's ability to perform at a high level in the mobile device market. Most notably, during the tenure of the Leo Apotheker, the decision to sell HP's PC business (a decision that was later reversed) and the acquisition of software company Autonomy were decisions that cost the company both time and money.

Since the first tablet was introduced, and during the period in which HP's executive decision clouded its focus, we have witnessed the rise of Samsung Electronics Co. Ltd. as a major competitor to Apple in mobile devices. Microsoft Corp. (NYSE:MSFT), Lenovo Group Ltd., Acer Inc., and ASUSTeK Computer Inc. have also introduced their own tablets, and in some cases phablets, which are selling in North America, Europe, and emerging market.

HP's latest earnings results
HP's slow go-to-market strategy in mobile devices may very well reflect a much deeper problem as the company seems unable to read the demands of its customers.

This is reflected in HP’s financial results for its first fiscal quarter ended Jan. 31, 2013, which revealed that sales declined in all five of HP's major businesses. The results were:

  • Personal systems: Revenue was down 8 percent year-over-year with a 2.7 percent operating margin. Commercial revenue decreased 4 percent, and consumer revenue declined 13 percent. Total units were down 5 percent with desktop units up 10 percent and notebook units down 14 percent.
  • Printing: Revenue declined 5 percent year-over-year with a strong operating margin of 16.1 percent. Total hardware units were down 11 percent year-over-year. Commercial hardware units were down 6 percent year-over-year, and consumer hardware units were down 13 percent year-over-year.
  • Enterprise group: Revenue declined 4 percent year-over-year with a 15.5 percent operating margin. Networking revenue was up 4 percent, industry standard servers revenue was down 3 percent, business critical systems revenue was down 24 percent, storage revenue was down 13 percent, and technology services revenue was down 1 percent year-over-year.
  • Enterprise services: Revenue declined 7 percent year-over-year with a 1.3 percent operating margin. Application and business services revenue was down 9 percent year-over-year, and IT outsourcing revenue declined 6 percent year-over-year.
  • Software: Revenue was down 2 percent year-over-year with a 17 percent operating margin. Support revenue was up 11 percent while license revenue was down 16 percent and services revenue was down 8 percent year-over-year.

These results suggest that even while Meg Whitman describes 2013 as a “fix and rebuild” year that will “set HP up for recovery and expansion in 2014,” competition in PCs, storage, cloud computing, and other areas may interrupt the company's plans to turn its fortunes around in the near future.

As far as PCs and mobile devices are concerned, research firm IDC published numbers last week that confirm HP's challenges in this market. The numbers took into account shipments of desktop PCs, portable PCs, tablets, and smartphones — a collection of technologies that IDC refers to as “smart connected devices.”

According to IDC, the top five smart connected device vendors by shipments and market share were Samsung, Apple, Lenovo, HP, and Sony in that order.

Commenting on Lenovo and HP, IDC analysts had this to say:

Rounding out the top 5 smart connected device vendors in 2012 was Lenovo at number 3 with 6.5% share. Lenovo's strong point is still in portable PCs where it shipped just over 30 million units in 2012. However, smartphones are a growing space for the Chinese vendor as shipments grew from 3.7 million in 2011 to 23.7 million in 2012. In the fourth position was HP with 4.8% share, however shipments of smart connected devices were down 8.5% year over year primarily for the lack of smartphone and tablet offerings.

It will be very interesting to see how HP restructures its company over the next 18 month, which I think will be a critical period of adjustment as it seeks to carve out markets with new technology that it hopes customers will buy. In the meantime, are you getting ready to buy an HP tablet, laptop, or PC? Tell me what you think.

15 comments on “Mobile Device Market Eludes HP

  1. Brian Fuller
    March 1, 2013

    Nicole, great insights. You wonder whether HP shouldn't be thinking instead about whatever technology will be disrupting the tablet market in a year or two… Going into tablets strikes me as an electronics race to the bottom. 

    Maybe it's innovation in the traditional TV platform? Tough road ahead… 

     

  2. _hm
    March 3, 2013

    One common sense approach is to enhance qulaity and make non-performing management and enginnering staff leaner.

     

  3. The Source
    March 3, 2013

    _hm,

    Another common sense approach is to look at the market you're serving, analyze the products that are selling in that market, and develop products that compete in that market. HP has had a hard time doing this in the mobile device market, leaving others to fill the gap.   

     

  4. t.alex
    March 4, 2013

    This new tablet from HP is like any other lowcost  tablet in the market. It does not have the ecosystem like those from Amazon. High chance this tablet is designed and manufactured somewhere else and HP is just the brand on the cover.

  5. The Source
    March 4, 2013

    t.alex,

    I think you'll agree with me that HP has lost its way in the tablet market. This Slate 7 tablet is an Android Jelly Bean consumer tablet that has a 7 inches diagonal screen and weighs 13 ounces. It's powered by an ARM Dual Core Cortex-A9 1.6 GHz processor and includes a 3-megapixel camera.  Here's a link that provides more information on the product. 

    http://www8.hp.com/us/en/hp-news/press-release.html?id=1373429#.UTVybjBUd8M

    Would you buy this product for $169?  

    By the way, thanks for your comment.

  6. The Source
    March 4, 2013

    t.alex

    Have a look at this commentary on HP's Slate 7.

    http://www.youtube.com/watch?v=x9ZCxdDxjBI

     

  7. The Source
    March 4, 2013

    Brian,

    Tough road ahead indeed!  I think HP is looking at other areas like cloud, business analytics and other services. With regard to TV's there's a whole lot of competition there and it will be difficult for them to compete.  Storage technology offers good prospects, though. 

    Thanks for your comment.

  8. t.alex
    March 5, 2013

    The Source, Proably i would go for iPad mini instead.

  9. Wale Bakare
    March 5, 2013

    Have you tried to do comparison on different tablet computers in the markets? Are you just contemplating of getting iPad for hype sake? Meanwhile, i am on the side of people who would love to see tablet PC close match to desktop PC with relative to functional parts. Considering HP track records in hardware sector – I might try get HP ElitePad.

  10. Wale Bakare
    March 5, 2013

    I bet any leading OEM can struggle with the present situation – competitive markets, consumer demand, change in technology/innovation, and still the financial crisis. Like Brian pointed out – it's a rough and tough path for anyone. Less hardware more software integration.

    Even in emerging markets – local manufacturers have tablet PCs available in their markets ( India, Nigeria, Kenya, Brasil, Malaysia and more) at an extremely low prices. Yet, all still doing same tasks like Samsung and Apple, even better.

  11. The Source
    March 5, 2013

    Wale,

    I don't think t.alex would buy an Apple iPad Mini instead of an HP Slate 7 just because there is hype surrounding the Apple product. I'm sure that like most consumers of electronics t.alex is looking for a tablet with a high resolution screen, fast performance, and just about every other feature that makes consumers want to buy a tablet at the right price.  

     

  12. Patrick_yu
    March 6, 2013

    Wale, one thing for sure, Slate 7 is another proof of a waste of money and resource, and it is the beginning of another round of laid-off.  At HP, there were a bunch of idiots and these people are still in charge of marketing/strategies today.  Frankly, in the history of high-tech in USA, HP is probably the only company of high profile that is consistently managed at the Board level by a bunch of super-idiots.  Otherwise, we won't have seen the non-stop saga at the top: board member (Patricia) hiring detective, scandal of Mark Hurds, wasted investment over WebOS, hiring of Leo Apotheker, approval of acquisition of Autonomy, …  In fact, HP probably has the most dyfunctional Board of the past decade!  Under the management (leadership, compensation, etc.) of such a Board, how could HP perform?  Shame on the Board members at HP of the past 10 years!

  13. Patrick_yu
    March 6, 2013

    Consumers, or the market, are looking for solutions.  The composition of a solution often goes beyond software and hardware. Partnership and leadership are also part of the solution.  Without partners to offer service and accessories to enrich/enhance the user experience, without leadership which commands trust and dependancy, why would consumers pick the Slate 7 instead of Nexus 7, Kindle Fire, Asus MeMO, … 

  14. Patrick_yu
    March 6, 2013

    In my humble opinion, HP lost its way perhaps before Carly Fiorina left the CEO post.  Frankly, the only company on earth which convince convince consumers to spend US$169 for a tablet like the Slate 7 would be Apple Inc.

  15. Patrick_yu
    March 6, 2013

    You are probably wrong with “most consumers … looking for a tablet with a high resolution screen … about ever other features …”  iPad 1/2/3/4 and worst still the iPad mini never fit these description (no USB socket, no SD/uSD card slot, 4:3 form-factor unfit for wide-screen movie/soap-opera/website viewing, expensive with so limited function, …) but has been selling extremely well and contribute to the over US$150 Billion cash reserve!  In fact, most analysts would buy the iPad without hesitation despite of the over-valuation.  Nowadays, people would spend money on many things simply because of perception.

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