Hey, HP, the Smartphone Market Is Calling

Hewlett-Packard CEO Mark Hurd last week said his company has no plans to aggressively move into the smartphone business, following the $1.2 billion acquisition of Palm. Which means HP is about to miss out on a tremendous opportunity to become a major player in mobile.

Hurd said it “doesn’t in any way make sense” for HP to spend billions to produce mobile phones; the company instead plans to use webOS as a common platform for a variety of connected devices, including tablets and printers. “We didn’t buy Palm to be in the smartphone business,” Hurd said, flatly. HP backpedaled a bit following Hurd’s comments, but the company failed to offer any details regarding its plans. This seeming indifference to the booming smartphone market is inexplicable, and it could actually harm HP’s long-term goal of churning out a variety of interconnected devices.

It’s true that the coming wave of connected devices will present enormous opportunities for developers and manufacturers. And I understand that the smartphone business is a crowded space where three dominant platforms (Android, BlackBerry and iPhone) are fending off a host of challengers. The field will get even more congested later this year when Microsoft trots out its Windows Phone 7 operating system.

But HP is passing on a chance to become a major player in smartphones? Palm’s webOS has widely been lauded as a powerful platform for mobile applications, and it is hailed as a worthy competitor to iPhone OS and Android. And while HP has no footprint in mobile, the  PALM Pre (or Pre Plus) already enjoys widespread distribution thanks to support from Verizon Wireless, AT&T and Sprint — the nation’s three largest carriers. Meanwhile, the smartphone market is growing twice as quickly as the overall mobile market, according to IDC, and it will continue to expand dramatically over the next few years, meaning there’s plenty of opportunity for the smaller guys. So the fundamental pieces are in place.

Palm failed to gain much market share with webOS, primarily because of a lack of marketing. The company’s own creepy ads for the Pre were too clever by half and failed to show consumers just what the phone can do. Meanwhile, the carriers failed to back webOS products with any serious advertising. As the surprising success of the Motorola Droid from Verizon Wireless proves, big-budget marketing campaigns can go a long way in selling phones.

That’s not to say that pouring money into advertising webOS would automatically make HP a player in smartphones. Growing its developer community would allow the company to build out its webOS Application Catalog, which still offers just a fraction of the number of titles carried by Apple’s App Store or Android Market. (And HP will have to spur development of webOS apps regardless of its plans in the smartphone business.) The meager portfolio of webOS devices needs to be expanded with fresh, new handsets. And HP may want to do away with the webOS brand, which has mindshare among techies and some early adopters but simply doesn’t have the consumer appeal of catchier names like iPhone or Android.

Hurd is right that webOS gives HP a foundation on which to offer a variety of devices that offer similar user interfaces atop a single platform. And as a longtime manufacturer with a worldwide reach, HP is well-positioned to supply the rising demand for a variety of products that leverage connectivity. But smartphones will be the underpinning of the applications that will help drive demand for those interconnected devices, just as Apple’s iPad and iPod touch are extensions of its iPhone business. HP now has the technology and the carrier ties to learn from Palm’s mistakes and build out an applications business that is built on smartphones, but also drives demand for other connected gadgets from HP. So turning its back on smartphones could be a roadblock for HP’s efforts to sell those other devices.

Question of the week

Can HP compete with the dominant players in smartphones?