HP and smartphones: A necessary risk?
An analyst downgrades shares of Hewlett-Packard based on a likely push into tablets and smartphones. But HP doesn't really have a choice but to plunge into the post-PC era.
Hewlett-Packard is taking on a risky strategy to "aggressively attack" the smartphone and tablet market and risks damaging its balance sheet, said Jefferies analyst Peter Misek.
The larger question is whether HP can afford to stay out of the mobile fray in the name of profit margins.
In a research note, Misek said "we believe HP will aggressively attack the smartphone and tablet markets, which we believe are risky investments."
After failing with its acquisition of Palm and subsequent goodwill and inventory write-offs totaling $3.3B, recent comments from HP management point to a retargeting of tablets and smartphones. While the move makes sense strategically, we see it as a high risk move. On top of adding costs and working capital burdens to an already stressed balance sheet, there could be additional write-offs. We note that to date almost all PC OEMs have failed to gain significant traction in consumer tablets/smartphones.
Misek's point is well taken. HP's mobile plans will be risky. And no PC makers have made the mobile transition except for Lenovo, which is gaining traction in China.
But the reality is that HP is a PC company facing the post-PC era. It's clear that the PC and printer businesses will be challenged for some time. However, HP has to try. Is doing nothing on the mobile front really a choice?
The short answer is that HP thinks it has to go mobile. Meg Whitman told Fox Business that it has to offer a smartphone. Other signs point to HP making a mobile move.
It's clear HP is caught in a bit of a mobile vise, but the do-nothing option isn't much of one.
This story originally appeared at ZDNet's Between the Lines under the headline "HP: Is a push into tablets, smartphones risky?"