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 broader."
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, he said.
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 additive."
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, he said.
"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 data center.
Hurd also countered a question from an analyst who suggested that HP's $13.9 billion acquisition of services company EDS 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 revenue.
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.