Major Ramifications from HP’s Palm Buy

Microsoft was one of the primary reasons I did not think HP would pursue an acquisition of Palm. Simply put, I though HP would tap Microsoft as its operating-system partner in the mobile space. I calculated that HP wouldn’t do anything that would endanger its extensively business and technology partnerships with Microsoft.

Well, I was wrong.

In buying Palm, HP sent shockwaves through the industry. It’s time to review and challenge the assumptions and orthodoxies that underpin our understanding of the information-technology universe. This move will have repercussions beyond the mobile space, which is increasingly important in its own right.

Even if HP fails utterly with its acquisition of Palm — even if it spins its wheels as a fringe player in the mobile space with smart phones, tablets, and netbooks running webOS — it has sent a powerful message that is being carefully digested in boardrooms worldwide.

Microsoft, once the capo di tutti capi of the industry, is no longer a feared and respected force. In choosing to buy Palm, in choosing to have an mobile operating system of its own over anything its longtime partner could provide, HP is speaking volumes not only about its own objectives and the changing dynamics of the mobile space, but also about Microsoft’s downwardly mobile place in the world.

The HP-Microsoft partnership is or was exceptionally close, far closer than any dalliance HP had with Cisco. HP and Microsoft partnered across product portfolios, markets, business units, and geographies. If Microsoft developed software, one could be sure it would run on an HP system, be it a server, PC, or mobile device. The companies co-marketed and sold into nearly every addressable market.

Even though executives from HP and Microsoft say the relationship will remain strong, that it will endure, one has to wonder. HP has wounded Microsoft grievously, and both parties know it. What’s more, the rest of the vendor community knows it, too.

Everything must be reconsidered now. How and where else will HP deviate from its Microsoft alliances? Watch for changes to HP’s collaboration and unified-communications strategy, especially for HP to enhance and extend 3Com’s VoIP product portfolio from its mid-market perch. Watch also for HP to bolster its videoconferencing capabilities.

What does Microsoft do now? Now that HP has kicked it in the gut, its other mobile operating-system licensees will question, even more than before, whether Windows Phone 7 Series is really for them. Those doubts are turning into negative judgments, decisions to look elsewhere for what they need.

I would have to think everything is back on the table at Microsoft, even acquisitions of other mobile players, something that would have been unthinkable before HP’s acquisition of Palm. For Microsoft, mobile is too important a space for it to be seen as week and irrelevant.

Irrespective of whether HP succeeds in squeezing value from Palm, it has set off an interesting chain reaction.

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