During a conference call to announce strong quarterly earnings, HP CEO Mark Hurd said that the goal of HP's proposed $1.2 billion acquisition of ailing Palm is the company's mobile operating system, WebOS, which HP plans to spread throughout its stable of connected devices, including Web-enabled printers.
Hewlett-Packard has plans for Palm's WebOS mobile operating system that go
well beyond smartphones and tablet PCs, such as Web-connected printers.
During a conference call with analysts and reporters to
announce fiscal second-quarter 2010 results May 18, HP President and CEO
Mark Hurd said that while he certainly wants to grow Palm's smartphone
business, the real key to the proposed $1.2 billion deal is Palm's WebOS.
"[The proposed deal] isn't precisely a smartphone play, as
I've seen some people write," Hurd said. "It is, for us, strategically
HP offers a wide range of connected devices that would benefit
from having a common operating system, he said.
"We expect to leverage WebOS into a variety of form factors,
including -slates' and Web-connected printers," Hurd said.
HP had been developing a tablet PC called Slate that was set to
run on Microsoft's Windows 7 operating system and challenge Apple's popular
iPad. However, once HP announced its intentions to buy struggling Palm, the
industry soon heard that the technology
giant had ditched the Slate
in favor of creating another tablet,
dubbed Hurricane, which will run on the widely praised WebOS platform.
Reports have said that a WebOS-powered Hurricane could hit the
market as early as the third quarter. Hurd said that HP's intention is to be a
player in the tablet market, and that he saw a space that would not be
dominated by a single product, but rather it will be a robust space with a
number of alternatives from different vendors.
As the world becomes more mobile, there will be a wide range of
preferences in what customers want from their devices. They will demand choice,
Hurd said that despite the change of direction in HP's tablet
plans, Microsoft is still an important partner for HP.
"Microsoft is probably one of the best relationships we've
got in our company, and they're still extremely important to us," he said.
"There are a couple of form factors, though, that are very attractive for
us, and these small form factors are where we think the IP can be very
Hurd said the real driving force behind the Palm acquisition is WebOS. With so many connected devices in their product portfolio, HP officials
believe it's important to have a common operating system on which to run them,
"It really has more to do with the intellectual property and
the fact that when you look across the HP ecosystem of interconnected devices,
it is a large family of devices and we think of printers, you've now got a
whole series of Web-connected printers, and as they connect to the Web, [they]
need an OS," he said.
He also hinted that HP could use Palm's app store for the
printers and other devices.
The Palm acquisition, which is still pending, was one of
several deals that were topics of discussion during the earnings call. Hurd
noted that HP's
$2.7 billion deal
for networking vendor 3Com closed in April 12, and that
since that time, 3Com had added about $50 million in revenue to HP's bottom
line in the second quarter.
He reiterated that a key benefit is that by combining HP's
ProCurve products and VirtualConnect technology with 3Com's portfolio, HP will
have a strong presence not only on the edge of the network, but also in the
Hurd also countered a question from an analyst who suggested
that HP's $13.9 billion acquisition of services
is not working out as planned, as growth in services is not as
fast as in other divisions. He said that EDS-now called HP Enterprise
Services-gives the company a stronger services arm.
"We feel really good about the services business," he said.
Cathie Lesjak, HP's chief financial officer, suggested that
HP's acquisitions won't end with Palm.
Overall, HP had a strong quarter, earning $2.2 billion in
profits on $30.8 billion in revenue, significant jumps over the same time last
year, when the worldwide recession was in full swing. During that quarter, the
company earned $1.7 billion on $27.4 billion in revenues.
HP saw a 28 percent jump in profit and 13 percent increase in
Hurd said the strong performances were felt in each segment of
HP's product portfolio, and in each region.
The strong numbers also convinced HP to up its revenue targets
for the year, to 8 to 9 percent over
2009. For the current quarter, HP is expecting revenue of between $29.7 billion
and $30 billion.