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HP's Acquisition Of Palm Isn't About Depth But Breadth

Posted by Don Ryan on Wed, May 05, 2010

Not only does HP continue to acquire companies whose time is running out, but they are also extending their product lines to offer their customers more. 3Com may not have been the first networking company one would choose to acquire, but it did fill in gaps from HP's Procurve business. Similarly, Palm complements HP's iPaq phone line (new OS, touch screen technology, etc). What HP is showing is that an acquisition does not have to be the best, but rather it needs to provide more scope within a growing market and new technology platforms from which they can build new products.

In fact, the HP acquisition may not be as much about the smartphone business as it is about other mobile devices like netbooks and tablets.  There's no question about the importance of developing Web OS applications for all mobile devices. (See WSJ article for acquisition analysis). 

In a recent Bloomberg News interview with Michael Cuggino, portfolio manager for The Permanent Portfolio based in San Francisco, he talks about the Palm acquisition being about much more than the smartphone business and thinks maybe HP can "unlock the real value of the Web OS and fill a hole in their product line." Cuggino also talks about the importance becoming an integrated entity and the breadth of product lines...

In the mobile device space it is becoming table stakes to have a full product line that spans device types, user interfaces and operating systems. The importance of having a robust product line is consistent with technology research CMB recently conducted on consumer electronic device preference and usage. One of the things we asked among a group of approximately 700 US consumers was which device would you replace your current device with when you make a new purchase.

What we found is that there is a fair amount of substitution especially between netbooks and notebooks and tablets and netbooks. Not surprisingly, most smartphone users would likely replace their existing smartphones with a new smartphone, but we did see that 15% will say they will replace their smartphone with either a tablet or netbook.

These shifts underscore the importance of a vendor having a full line of products to maintain overall device market share as consumers switch from one device to another. What HP has recognized is that it is not as critical what the brand is that they acquired, but rather having a new brand in the first place that offers consumers a viable choice when they do decide to switch.

I will presenting more of these findings at the Netbook Summit taking place May 24th- 25th in San Francisco. We hope to see you there!

Posted by Don Ryan. Don is a senior consultant for CMB's technology practice. Don is an avid tennis player and enjoys reading political commentary and spy novels.

Topics: technology research, product development, mobile