H-P Breathing Life into WebOS - Analyst Blog

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Palo Alto, CA-based tech giant Hewlett-Packard Co. ( HPQ ) is about to make another experiment with its not-so-profitable mobile operating system platform, webOS. H-P inherited the platform from Palm Inc.,which was acquired last year.

In its Strategy Summit held in San Francisco earlier this year, H-P's then chief executive officer ( CEO ) Leo Apotheker announced the intention to develop the webOS platform into a leading connectivity platform. The tech chief also announced plans to launch the TouchPad tablet and new smartphones on webOS.

But the TouchPad tablet and the smartphone failed to carve a niche in a market dominated by Apple Inc. 's ( AAPL ) iPad and iPhone as well as Google Inc. 's ( GOOG ) Android-based devices. The devices did not reach internal milestones or financial targets. Actually, the webOS platform itself lagged far behind Apple's iOS and Google's Android operating system platforms. And the CEO had no option than to reconsider the continuation of its webOS-based devices.

Hence, in a major restructuring plan announced in August 2011, H-P decided to abandon operation of the underperforming webOS devices. However, the tech behemoth stated that it would continue to explore options to optimize the value of the webOS software going forward.

H-P's present chief, Meg Whitman, who was eBay Inc. 's ( EBAY ) former CEO, seems to be enthusiastic enough to keep webOS going. Under her leadership, H-P is now planning to make its webOS mobile system available as open-source software that anyone can freely use and modify.

It can be said alternatively that the PC maker is donning Google's hat. The ace search engine offered its Android software as an open-source program, thereby opening the platform to developers so that they could individually enhance the program.

With this initiative, H-P expects a new generation of applications and devices, eventually establishing webOS as a profitable part.

For the past few quarters, H-P has been struck by bad luck, which is reflecting in its share price. Changes in CEOs, lackluster PC demand, the decision to acquire Autonomy Corp. at a premium price and the recent hard drive supply shortage due to the Thailand floods are worth mentioning in this regard.

Though we believe that the open source project was initiated a bit late, webOS could do better this way than any other. Overall, it will be worth watching whether Meg Whitman could position H-P to give the other smartphone and tablet makers a reason for concern.

Currently, H-P has a Zacks #3 Rank, which translates into a short-term Hold recommendation.


 
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: AAPL , CEO , EBAY , GOOG , HPQ

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