HP TouchPad Joins MSFT Kin On Shoals Of Abandoned Products
Aug 18th, 2011 | 10 responses
HP is “[discontinuing] operations for webOS devices, specifically the TouchPad and webOS phones.” The company slid this into its press announcement regarding possible purchase of Autonomy Corp (AU.L); with a market cap of $7 billion, it is the second largest pure software company in Europe.
The HP TouchPad tablet went on sale on July 1, 2011 and the Veer smartphone earlier in the year. Both run on HP’s webOS, which it acquired with Palm in April 2010 for $1.2 billion. HP has discontinued the TouchPad at 49 days.
Compare that with Microsoft, which spent several years developing at an estimated cost of $1 billion, which included the February 2008 purchase of Danger Inc., which had developed the Danger Hiptop/T-Mobile Sidekick, for $500 million. Microsoft announced the two Kin phone models on April 12, 2010; they were available for purchase in May; Microsoft discontinued the phones on June 30, 2010, after 48 days.
- Both products had lifespans of about 1.5 months.
- Both products had development costs that exceeded $1 billion.
There’s something wrong in the market when failures of this magnitude — let’s call them diseconomies of scale — are shrugged off by investors. (Yes, I know that HP’s stock is down, but that’s because it’s 1% growth rate failed to meet expectations.)
Bloomberg reports that HP is offering $10.3 billion in cash to buy Autonomy, “a 64 percent premium over Autonomy’s closing share price yesterday.” Last year, HP had $13.6 billion in cash and assets of $114 billion. Today, Google reports cash of $12.7 billon and total assets of $125 billion. From Bloomberg:
In the past five years, there have been more than 970 takeovers of European software companies, amounting to over $31 billion in deals, according to data compiled by Bloomberg. The largest was SAP AG’s 2008 takeover of Business Objects SA. Buyers have paid a median multiple of 10.8 times the targets’ earnings before interest, taxes, depreciation and amortization, based on 70 deals.
Companies would not grow to be this giganormous (HP market cap is $61 billion; CSCO, $83 billion, recently shuttered Flip, which it bought for $590 million in 2009; MSFT market cap is $207 billion) if there weren’t advantages in the tax code.
The “synergies” of such mergers and acquisitions bring to mind The Mythical Man-Month, the first book to argue that throwing more people at a struggling software project will cause it to take longer to finish. Is throwing money around any different in its ultimate impact? Who truly benefits from such M&As, other than the principals of the acquired businesses, who own significant chunks of stock?
:: Cross-posted from wiredpen :: Follow me on Twitter!
10 Responses to “HP TouchPad Joins MSFT Kin On Shoals Of Abandoned Products”
M&A’s are what business is doing now. It don’t help any economy. It don’t put anybody to work. It does not appreciate securities values enough to talk about. What they are doing, is positioning themselves against their competition. Maybe, but there is no guarantee. The money is hold up in traditional banks, buy and chop firms, and, investment banks. Why?
There is no market. There is massive unemployment like I have never seen in my lifetime. Few are buying, so why expand. So we see what comes first, chicken or the egg,…people or business,…..hire or hold.
The market is saturated. Capitalism has peaked out. All the money is no longer in the hands of the buyers….that’s “people” for you dummy bean counters.
There MUST be a major shift in wealth from the top to the bottom, and, the only way to do it, is with taxation and work programs/incentives.
The whole tax/work thing might work if there were an objective party putting it together, but instead we have politicians.
My favorite line for the man-month: you can’t make a baby in one month by putting nine women on the task.
prof-
Objective party? There is only government and private. There is nothing else.
Answer: Politicians. Make them work together. But you cannot do this with such things as Tea Parties and block head conservatism ruling the airwaves. Somebody PLEASE shoot Limbaugh before the world colapses!
Regarding,
Each woman deserves nine months’ full pay in lefty paradise. [chuckle]
LOL – that’s my favorite bit, too, but when I explained it to students this quarter, they looked at me blankly.
Allen, I agree that M&A seem to provide no value except for a handful of individuals. Certainly, if we look at the AT&T proposal to buy T-Mobile, we see fewer people employed, which makes the accountants and WS jump for joy.
This is an addendum:
Because I don’t routinely think about HP, I did not realize that “Personal Systems Group (PSG)” meant “our computing division.” Even this separate news release, focusing on PSG, doesn’t mention the word “computers.” Talk about writing like a lawyer (to obfuscate): http://www.hp.com/hpinfo/newsroom/press/2011/110818xb.html
HP did not say it was going to sell the PSG, despite headlines to the contrary:
“HP also reported that it plans to announce that its board of directors has authorized the exploration of strategic alternatives for its Personal Systems Group (PSG). HP will consider a broad range of options that may include, among others, a full or partial separation of PSG from HP through a spin-off or other transaction.”
If your goal is “sales growth” — then this makes a lot of sense because (a) the market for desktops and laptops is pretty saturated, at least in the developed world and (b) the price of said units goes DOWN every year which means you have to sell more of them to have “growth.”
thanks for the update Kathy…yes, they are dumping hardware altogether. Probably good. Their computers suck…compaq was just as bad.
They simply are not capable of putting out quality hardware at a competitive price.
I chuckle at the speculation Microsoft may acquire HP’s PC works.
No more PC’s from HP??
Meaning we are all now condemned to Dell hell forever?
Wait Mr. Allen, our tech reps are currently busy. You may possibly have assistance when hell freezes over. Be patient please.
There’s one more story I have to throw in on the man-month.
When I worked for the railroads, the main lines were more or less forcing all railroads to move toward automatically handling of certain settlements. A company quickly filled the niche for most of the smaller companies, but a couple of the main line companies couldn’t meet their own deadline. During one of the short-line meetings, a representative from one of those main lines made a presentation about the benefits, and an audience member asked about their progress:
main line: Rest assured that we take our role in this very seriously, but it’s proven to be a bigger problem than we anticipated. We’ve moved over forty programmers into the project to get it done as quickly as possible.
audience member: I think we found the problem.