The world’s largest PC maker announces it is quitting the PC business to concentrate on business software. Google announces its intention to buy Motorola, the company that invented mobile phones.
Even in the hectic environment of Silicon Valley, the latest few days of deal—making represent an extraordinary level of activity and analysts say it reflects the huge structural upheaval that is transforming the technology industry.
For once, Apple and its legendary chief executive Steve Jobs were not the ones making headlines. But the effect of their incredible success over the decade since Jobs returned from the cold to lead the company he co—founded, was a primary driver of the latest activity.
How fitting then that the massive deals announced this week came just days after Apple had toppled ExxonMobil as the world’s most valuable company thanks to the transformative success of its revolutionary iPhones and iPads.
While the word “revolutionary” is chronically overused in the technology world, the effects wrought by those devices have clearly upended the order of business in the world’s high tech capital.
The iPhone kicked off the smartphone revolution, and pressured Google into making a huge bet on Android, which has only recently emerged as the most popular smartphone operating system with a 43—per—cent share of the global market.
It was largely to protect itself and its Android partners from Apple’s patent litigation that Google is prepared to sign the biggest check in its history to buy Motorola Mobility. The company’s other main motivation behind the 12.5—billion—dollar deal is to better compete with Apple by controlling both the hardware and software of its customers’ mobile experience.
The success of Apple’s iPad meanwhile was a major factor behind HP’s stunning change of direction. Apple has sold more than 10 million of the tablet computers in the last quarter, according to market research firm DisplayWatch, with many of those purchases coming at the expense of notebooks, laptops and other traditional PCs.
The latest evidence of the shrinking PC market came in a report by research firm Gartner Thursday, which found that western European sales of PCs declined by almost 20 per cent in the recent quarter.
HP chief executive Leo Apotheker, who was brought in by the company last year to supervise a strategic shift in focus, alluded to all these factors in a conference call to explain his company’s new direction. HP plans to buy enterprise software maker Autonomy for 10 billion dollars, exploring “strategic alternatives” for its PC business, and pull the plug on all its webOS devices, the smartphones and tablet computers that were meant to be its retort to Apple.
“Due to market dynamics, significant competition, and a rapidly changing environment — and this week’s news only reiterates the speed and nature of this change — continuing to execute our current device approach in this marketplace is no longer in the best interest of HP and HP shareholders,” Apotheker said. “The transformation starts today.” Whether Apotheker can succeed in turning the Titanic of the tech industry is an open question. The sweeping changes he says are needed to remain at the top of the tech ladder did not inspire investor confidence and the company shares dropped almost 8 per cent following the news.
“The problem HP faces comes from years of mismanagement which killed employee morale, devastated innovation, and undermined the company’s future,” explained analyst Erik Sherman.
Many compare HP’s strategy to IBM’s bold 2005 move to sell its PC unit to Chinese manufacturer Lenovo in order to concentrate on high— margin business services. The fear is that HP’s manoeuvre has come too late.
“HP is significantly farther behind in the software market than IBM was,” noted The Wall Street Journal’s Shara Tibken. “And since then, the value of PC assets has declined, meaning the world’s biggest computer maker may not get the cash boost needed to catch up with the software leaders ahead of it.” “Just like IBM,” added Sherman. “Only way too late.”
