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.
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.