As HP Retreats, What Next for the Mobile Market?

Just over a year ago, HP acquired Palm together with its webOS smartphone operating system and a few new smartphones. HP had some ambitious plans of leveraging its innovation culture and marketing channels to firmly establish itself as an important player in the mobile technology ecosystem.

HP discontinues developing smartphones and tablets

How times have changed. Last week, HP announced that it will discontinue operations for webOS devices, specifically the TouchPad and webOS driven smartphones. The reason is disappointing sales and low market share in a domain dominated by Apple and Google with their iOS and Android platforms.

Unfortunately for HP, its plans to become the third force, after iPhone and Android driven devices, in the smartphone arena failed miserably, even though HP’s webOS-driven TouchPad received positive critique from several analysts. Instead, HP plans on continuing developing its webOS and seek new business models including licensing.

Whether that strategy will be more successful remains to be seen. Microsoft uses the licensing model for its Windows Phone OS, included in several handsets from manufacturers like HTC, Samsung and LG. Still, Windows Phone market share is puny compared to iOS and Android. It will be interesting to see if the deal with Nokia from earlier this year will change the momentum for Windows Phone, with new Nokia smartphones running on Windows Phone. The first handsets are expected to be launched later this year.

Clearly, HP faced tougher competition than anticipated in a market that is largely driven by apps. The number of apps available for webOS is only a fraction of those for iOS and Android devices, making it difficult for buyers to choose webOS devices. The same largely applies to the troubles at RIM. The BlackBerry App World is relatively small compared to Android Market and Apple App Store.

Who will become the “third wheel” in the ecosystem?

While many analysts agree that there is definitely room for the third platform, together with iOS and Android, it’s still unclear whether that place would be filled by webOS, Windows Phone, RIM’s BlackBerry or something else.

Considering HP’s heritage as a company primarily focusing on the enterprise market, its decision of discontinuing developing smartphones and tablets may be understandable. With its dynamic changes and special traits, the consumer market is profoundly different.

However, this is something that HP clearly knew and understood when acquiring Palm in the first place, perhaps making a miscalculated decision in its effort of establishing a “mobile strategy” – admittedly a necessity for every technology vendor in today’s market. Hence, whether HP will be successful in finding a lucrative business model for its webOS platform needs to be seen, although currently it seems unlikely.

Apart from Apple and Google, it seems that Microsoft has a good position for becoming the third large player in the ecosystem, especially after its deal with Nokia, and due to its capacity and bundling options. While Apple and Google have certainly managed to do some clever bundling and integration of the mobile platforms with some of their other services such as Gmail, Microsoft can certainly do the same when it comes to Windows Phone including MS Exchange/Outlook and Office 365.