HP's WebOS failure highlight PC giants' mobile struggle

Poor brands, limited reach and a lack of differentiation have tripped up hopes for smartphone success

Vendors like Hewlett-Packard, Dell, Acer and Toshiba may dominate the worldwide PC market, but their efforts to turn those leads into smartphone success have failed, highlighted by HP's decision on Thursday to stop developing its WebOS-based products.

Of the four vendors, Toshiba was the most successful during the second quarter, but its market share was just 0.3 percent, according to Gartner.

A strong brand in the PC sector and plenty of money -- HP spent US$1.2 billion to buy Palm last April -- simply hasn't been enough to break into the highly competitive smartphone market, according to Francisco Jeronimo, research manager at IDC.

"When established vendors like Nokia, Sony Ericsson, LG and Research In Motion are struggling, it is difficult to see how the PC vendors can succeed," said Roberta Cozza, principal analyst at Gartner.

One of the main problems for HP and the other vendors has been a lack of operator interest in their products. And operators, with their subsidies, play a very important role in smartphone sales.

"They need to go through operators, and that is where their problems begin because they don't have the necessary partnerships in place," said Jeronimo.

Without operators pushing the products, consumer use won't grow and operator interest will remain tepid.

"It is a catch-22," said Cozza.

PC vendors don't just have to contend with strong smartphone brands like Apple, Samsung and HTC. ZTE, Huawei and other emerging Chinese vendors are extremely aggressive when it comes to winning market share with low-cost phones, according to Geoff Blaber, analyst at CCS Insight.

The Chinese low-cost approach has already proved successful. ZTE passed Research In Motion to become the fifth largest phone maker in the world during the second quarter, according to Gartner. Huawei is the ninth largest phone maker, Gartner said.

For vendors that don't want to be drawn into a price war with Huawei and ZTE, differentiation is key. And the established smartphone makers are making every effort to develop unique offerings. For example, last week, HTC invested in Beats Electronics, a U.S. headphones company, to help improve the audio on its devices. But the PC vendors have failed to differentiate their products in a meaningful way, according to Cozza.

Jeronimo thinks other PC vendors will soon follow HP's path. If Acer doesn't improve its smartphone fortunes over the next few quarters it will also quit: "I don't see why Acer should continue investing when it has been in this segment for more than a year without any success."

Many of the PC vendors are also trying to make a name for themselves in the burgeoning tablet market, but the chance for success isn't much greater, as shown by poor sales of HP's TouchPad.

"Today, there isn't really a market beyond the iPad," said Cozza.

Blaber agrees. "A huge number of players are getting their fingers burnt with tablets, and the reality is that expectations have been far too high for the tablet space," he said.

Send news tips and comments to mikael_ricknas@idg.com

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Mikael Ricknäs

IDG News Service
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