A Win-Win

The deal would be a win-win for both companies. Lenovo, which bought IBM's PC business in 2005 for $1.75 billion, would immediately become the third largest maker  of x86 servers, behind market leader Hewlett-Packard and runner-up Dell. Thanks to its market clout in its homeland, the Chinese company has risen to become the second largest PC maker worldwide, according to the latest numbers from IDC. 

Adding x86 servers to its portfolio makes perfect sense for Lenovo, which has shown in PCs that it can do well in a low-margin, commodity market. For IBM, the opposite is true. The company's strength in hardware is in selling expensive — and profitable — mainframes.

IBM's mainframe business is the reason the company leads the global server market, at least in revenue terms. To give you some sense of how expensive these systems are, IBM's "System z" mainframe represented more than 12% of all server revenue worldwide in the fourth quarter. Because of a refresh in the product line, along with the introduction of new products, such as the zEnterprise, revenue from IBM's mainframe business rose almost 56% year over year in the quarter, according to IDC.

"Although revenue results for System z are traditionally heavier in the fourth quarter, this accelerated acquisition shows the breadth and depth of the IBM mainframe installed base," Jean Bozman, analyst for IDC said in a statement.

Lenovo would be a good buyer for IBM, because it doesn't compete in any of the markets IBM cares about, namely software and IT services. That wouldn't be the case if HP or Oracle were the buyer.

Disruption In Server Market

IBM may also have decided it wants no part of the disruption heading for the server market like a freight train. The increasing number of companies adopting cloud computing will mean fewer server sales, Larry Dignan points out at ZDNet. In addition, Internet companies with large server farms, such as Facebook and Google, buy customized white-box servers, which can't be good in the long term for traditional sellers, like HP, Dell and IBM.

While no one outside of IBM or Lenovo know how much the business would fetch, someone familiar with the talks told Bloomberg that the price would range from $2.5 billion to $4.5 billion, depending on the assets and liabilities included.

Lenovo Is Fired Up And Ready To Go

Not everyone agrees that IBM would be doing itself a favor by selling its x86 business. Gartner analyst Sergis Mushell says that without x86, IBM only non-mainframe servers would be its lineup of machines that run its Power processors — and that demand for those products is shrinking.

In other words, IBM would miss out on the opportunities to build systems based on x86 "while [its Power] architecture's ecosystem is shrinking," Mushell said. "Do you see how it would not make a lot of sense?"

Lenovo, meanwhile, is hungry to move beyond the PC market. The company announced last year a partnership with EMC in which Lenovo planned to introduce x86 servers that would include EMC storage systems. As part of the deal, Lenovo agreed to sell EMC networked storage products in China.

Given the jumpstart it would get from owning IBM's x86 business, Lenovo may be willing to make an offer that's hard for IBM to refuse.

Image courtesy of Shutterstock

(See also Leap Motion-HP Deal: Gesture Control Goes Mainstream.)

Leap executives said Tuesday that they see HP's clout justifying sales to other PC makers, as well as non-PC markets  like surgery and automation. But how does HP benefit from all this? A bit of sizzle from one of today's most hotly promoted technology firms, that's how. (Asus announced its own partnership with Leap earlier this year.)

And boy, does HP need some sizzle right now.

(See also This Tiny Gizmo Could Be A Very Big Deal In 2013 - And Beyond.)

PC Market In Free Fall

Just last week, IDC and Gartner chronicled a free-falling PC market, dubbing Microsoft's Windows 8 an anchor, when it was supposed to be a life preserver. Consumers are increasingly turning to tablets and phones as their "personal computing" devices. And without a viable tablet or phone offering (the Windows 8-based ElitePad excluded) HP must ride the barrel over the falls for at least the next two quarters. PC owners simply aren't replacing their PCs as quickly as they once might, which makes Hewlett-Packard, the leader in the PC market, look especially vulnerable. HP's PC shipments dropped by nearly 25% last quarter.

That's not to say that the Leap Motion partnership is nothing but a smokescreen. HP representatives said that there are viable technical reasons for the deal.

"Our customers are looking for new ways to interact with, and create content," an HP spokeswoman said in an email. "Leap Motion combined with HP technology and developer apps will offer incredible user experiences.

"Leap Motion's not intended to fully replace existing input mechanisms like the mouse or keyboard, but rather to augment them and provide new and/or improved functionality," she added. "Many creation and exploration tasks - like molding virtual clay or moving through maps - are intuitive in the real world but highly technical tasks when handled with computers. Leap Motion can help overcome the input barrier to give people a new interaction experience."

What Leap Motion Really Means To HP

Reading between the lines, two things jump out:

1. Expect HP to either commission or partner with a developer to ensure that the Leap Motion gestures are well represented with at least one showcase app, like Windows 8's Fresh Paint app
2. HP carefully avoided the use of the word "touch"

Navigating through a map doesn't seem that difficult (pinch to zoom? Scrolling mice?) but sculpting a piece of virtual clay might be a fun experience using Leap Motion's technology. Navigating in virtual space (as we did with the Leonard3Do at the Consumer Electronics Show this January) provides a new, fresh way of interacting with a computer. And that's exactly what new technologies like Windows 8 hoped to offer.

HP declined to comment when asked if Leap's technology was designed to replace touch, and another representative hasn't yet responded to my question of whether the Leap peripherals would be bundled with HP's (non-touch) desktop monitors. The latter capability would be quite useful, I think. 

A Leap Ahead Of Touch?

In a way, I was really hoping that HP would position the Leap technology as a way to enable touch-like interactivity, but without gunking up the screen. It may seem a bit fussy, but who really wants to have to scrub off a fine glaze of Cheetos after lunch?

Bob O'Donnell, a PC analyst with IDC, said he sees the Leap Motion partnership providing another way of interacting with the PC, augmenting the mouse and keyboard. But he said it's also pretty impressive.

And Leap Motion could also save HP - and consumers - some money: A 13-inch touchscreen costs a PC maker $65 or $70 more than a similar non-touch screen; Leap's technology will probably be about $45, O'Donnell predicted. That's a big difference, especially with touchscreen competition making them hard to come by these days. "Remember, these guys argue over nickels and dimes," O'Donnell concluded.

At this point, the PC industry seems inclined to clutch frantically at whatever splinters it can to keep itself from drowning in sea of red ink. Will the partnership between Leap Motion and Hewlett-Packard be enough to save HP? Probably not, but it sure can't hurt to try.

But here's another thought: wouldn't building a competitive tablet be a better idea for HP?

But Apple is a consumer electronics company at heart; so future iPad models remained devoid of features that were needed to meet corporate requirements for security, deployment, manageability, up-time, support and training. In the meantime, Microsoft, Intel and PC manufacturers picked themselves up and plotted their comeback. After three hard years, PC makers have finally released Windows tablets that tech analyst firm Moor Insights & Strategy says will likely reverse Apple's gains in the corporate market.

Apple's Party Is Over

"Enterprise tablets now exist that provide the best of both worlds between end user and IT, which puts the Apple in a precarious position of needing to add more robust enterprise features," Moor says in a white paper released Monday. "Until that point, Moor Insights & Strategy recommends enterprises re-evaluate their iPad pilot and deployments."

In other words, the enterprise party is over for Apple's tablets.

The new Windows tablets that finally get it right when it comes to meeting the needs of corporations and their employees are the Hewlett-Packard ElitePad 900, the Dell Latitude 10 and the Lenovo ThinkPad Tablet 2. Moor makes a convincing argument as to why it believes these three devices will steer companies away from the iPad.

What's In the New Windows Tablets

Two crucial components are Microsoft's Windows 8 and Intel's Atom processor Z2760. The former provides a touch-based interface that's a key element of any tablet's appeal, while the former delivers the performance and battery life. In fact, a comparison review by AnandTech found that battery life with the Z2760 surpassed the iPad 4 when Web browsing.

Because Intel has built a competitive chip based on the X86 instruction set, the three tablets can run the latest touch-enabled apps for Windows 8, as well as Windows 7 apps. Among the most important app is Microsoft Office, the enterprise standard for office productivity. Office doesn't run on the iPad, and Apple's productivity tools are not regarded as being on par with Microsoft's.

There's also more baseline expandability with the Windows tablets. Depending on the vendor, the devices can come with a dock, USB, miniHDMI and microSD. Add other optional manufacturer-supported accessories and the iPad is left in the dust.

Other pluses include playing nicely with Active Directory, Microsoft's directory service for authenticating and authorizing users and computers in a Windows network. The tablets, through the Atom processor, also offer Intel security, which includes Secure Boot and the firmware-based Platform Trust Technology.

Overall, the fourth-generation iPad provides roughly a half-dozen enterprise features, while the Windows tablets have more than a dozen. Most important, those features are already in use in corporations, so there's no need to evaluate them before deployment, train IT staff or purchase new tools.

What this ultimately means is the Windows tablets will be less expensive when considering the total cost owning and managing the devices. In addition, they are more durable and as nicely designed as the new iPads, and have larger displays. The resolutions are less, but still more than adequate for businesses.

Some Disagreement

How much of a head start Apple has in the enterprise is tough to determine, since the company won't say how many iPads have been sold to businesses. However, a running tally of the top 100 iPad rollouts kept by SAP show that nearly 70 are K-12 schools, where Apple has always done well. Nevertheless, there are some notable names on the list, including the U.S. Air Force, United Airlines, British Airways, General Electric and the Walt Disney Company.

Not everyone agrees with Moor. Jack Gold, principal analyst for J. Gold Associates, believes the market momentum is still behind the iPad. Units within an organization, not the IT department, will often choose the tablet they want to use and many want the iPad.

"The iPad, and Android (tablets), will have a place as long as users demand it," Gold said. "And the Win8 devices will find a niche, particularly in those organizations that have company-owned assets that IT fully controls."

While Gold has a point, the advantages the latest Windows tablets have are too numerous for corporations to ignore.

Image courtesy of Wikimedia.

OpenStack Rising

IBM announced Monday that it will make OpenStack the foundation of its cloud services and software. In backing the open source project, Big Blue joined other tech heavyweights behind the technology, including Hewlett-Packard, Dell, Cisco, Red Hat and Rackspace.

"IBM is the big fish in the sea and for them to make the level of commitment that they did today is a big deal," said James Staten, analyst for Forrester Research. "That's the kind of heft OpenStack needs."

The announcement is likely to send OpenStack's two main competitors VMware and CloudStack, another open source cloud computing platform, into a battle for second place.

“OpenStack has won the race to become the standard, and it has done it rapidly,” Ann Winblad, a venture capitalist and a managing director of Hummer Winblad Venture Partners, told AllThingsD.

IBM And Open Source

IBM has conducted a long love affair with open source software. In 2000, it backed Linux and a year later committed $1 billion to the development of the operating system. IBM's support helped drive Linux into large organizations and made it a viable competitor against Microsoft as a server platform.

"IBM could have the same impact on OpenStack as it did on the Linux world," Staten said.

IBM recognized years ago that open source code fit its business strategy a lot better than proprietary technology. The company draws most of its $100 billion in annual revenue from providing IT services. By basing a lot of its own technology on the code from various open source projects, as well as industry standards, IBM is able to work its hardware and software into what enterprise types call "heterogeneous computing environments" — the combinations of patched-together technology from a variety of vendors typically found in large companies, the segment of the tech market IBM is strongest.

"IBM has really great credibility in the open source community," Gary Chen, analyst for International Data Corp., said. "They really do understand open source."

IBM's First OpenStack Product

IBM followed its announcement with the introduction of its first OpenStack-based product, SmartCloud Orchestrator. SmartCloud is the brand name for IBM's platform for running cloud installations in customers' or IBM's data centers or in a combination of both. Orchestrator is a service customers use to configure the computing, storage and networking resources for cloud applications.

One unanswered question is how IBM will integrate its current SmartCloud code base with OpenStack. In an interview with NetworkWorld, Robert LeBlanc, a senior vice president of software for IBM, waxed mystical in describing how Big Blue will handle the transition.

"We're on a continual journey," LeBlanc said. "But we think this is a major step in that journey."

Cloud Standards

IBM clearly wants to influence OpenStack's technological direction and efforts to develop industry standards for cloud computing, which is still a relatively immature architecture. IBM has formed a 400-member Cloud Standards Customer Council to help push other tech vendors in a direction favorable to IBM. The company says it has more than 5,000 customers running private clouds on its platform.

IBM is also a major player in standards bodies, such as the World Wide Web Consortium and the Organization for the Advancement of Structured Information Standards (OASIS).

While standards are key to making different technologies work together, they won't help companies make the cultural changes necessary to adopt cloud computing and make it work. Delivering applications as a Web service dramatically changes the role of IT departments and affects how employees interact with software, too.

Because of its success in professional services, IBM is in a strong position to help companies make those cultural changes, but it won't be easy. "A lot of enterprises are not ready to hear it," Staten said.

Nevertheless, the momentum in the tech industry is behind cloud computing. The public cloud service market alone is expected to grow 18.5% this year to $131 billion worldwide.

With that much money on the table, IBM plans to become a major player in the market and is betting that OpenStack can help it achieve that goal.

Image courtesy of ShutterStock

The sale, first reported by CNET, marks the end of a sad era for the once promising mobile operating system developed by Palm and sold to HP for $1.2 billion in April 2010. It is hard to imagine how HP could have bungled how it handled webOS any worse than it did before essentially quitting on the operating system and eventually selling it. 

So much for the TouchPad Finally Free Of HP's Mangling

When HP bought Palm, it envisioned a robust line of phones and tablets that would compete head-to-head with Google’s Android and Apple’s iOS products. The company spent a year developing the HP TouchPad, which launched on July 1, 2011. The launch did not go well for HP and within a couple of months the company had pulled the plug on trying to bully its way into the tablet market and began a fire sale of existing TouchPad inventory, selling the device for $99 on a first-come, first-serve basis.

At the time, the reversal of HP’s mobile strategy seemed like a stunning knee-jerk reaction. The TouchPad was only on sale for a couple of months before HP gave up on it and, really, webOS. HP pulled most of its development resources from webOS shortly thereafter and open-sourced webOS whilst, theoretically, offering structure and support to the operating system.

In the end, nothing new came from HP after it open-sourced webOS in January 2012. A little more than a year later, it is unloading the operating system to LG, which does not plan to use it in smartphones or tablets. 

HP Goes Android

We knew the death knell was coming for webOS at HP earlier this month when ReadWrite reported that HP would be turning to Android for next foray into the mobile market. Yesterday, HP announced a $169 Android tablet – the Slate 7 – it will begin selling in April this year.

If HP was unable or unwilling to create an ecosystem that could have supported webOS, moving to Android was the next logical choice. Android has hundreds of thousands of apps, a loyal following and a trusted name among consumers. Android is open source and costs HP very little to develop to place it into its own devices. If HP had come to the decision to use Android earlier, it could have saved itself $1.2 billion plus the time and development resources it put into building the TouchPad. webOS, of course, would have been free of HP’s mangling fingers. 

The Android ecosystem is extraordinarily competitive. The only tablets running Android that get any modicum of marketshare are the Amazon Fire series and Google Nexus 7, built by Asus. Samsung's variety of Galaxy Tabs and Notes also hold some weight in the market. HP is hoping that its bargain-rate pricing of its new Slate 7 (pictured top) will be able to cut into the tablet sector, but do not bet on it. There is no shortage of cheap Android tablets for HP to compete with.

LG’s Smart TV Bet

Depending on the cost of acquisition (which was not reported), LG’s bet on a smart television running on a webOS kernel is fairly safe. The beauty of webOS is the fact that it is designed to be mobile Web compatible. With webOS, LG can bring the entire Internet to a television, not just a series of apps designed to run on large screens. 

Will it pay off? That is a harder question to answer. The connected-TV race has supposedly been on the cusp of taking off for years now. As yet, it has not gained the type of traction that one would have hoped. Samsung and a variety of other players make Internet-connected televisions but their products remain a consumer niche. Then there is the question on whether Apple will go full-tilt and make its own television, which nobody outside of Cupertino knows right now. 

In the end, webOS lives another day. Whether we will ever hear from it again is a different story.

Update: Talking to reporters at Mobile World Congress, Hewlett-Packard said that it is not selling the entirety of webOS to LG. HP will only sell the source code, documentation, websites and staff responsible for building webOS. HP will retain the cloud aspects of the system, including app catalogue, backend systems and updating service. 

It’s a bit of a Hail Mary pass for HP, which has fallen years behind its rivals in the mobile space. It’s also a big win for Google, which adds another powerful partner to the Android ecosystem.

HP’s first Android device will be a high-end tablet that is powered by NVIDIA’s Tegra 4 chip, and it could be announced soon, according to two sources familiar with the matter (the sources spoke on the condition that they not be named because they are not authorized to discuss unreleased products).

The tablet has been in the works since before Thanksgiving and sources say it could be one of the first tablets to ship with the Tegra 4. NVIDIA’s latest mobile chip was just announced during the Consumer Electronics Show (CES) in January and it features some impressive specs, but we have not seen many devices adopt it yet. NVIDIA’s own Project Shield gaming system is slated to debut Tegra 4 in the second quarter of 2013, while partners Toshiba and VIZIO are also reported to be working on Tegra 4 tablets.

Sources also say that HP is currently exploring the launch of an Android-powered smartphone, but recent comments from CEO Meg Whitman indicate HP will not offer a mobile phone this year.

HP declined to comment on its plans, but the news of such a tablet shouldn’t come as a big surprise. HP has been toying with Android devices since 2010, and some might remember the mysterious TouchPads that shipped with Android installed instead of webOS. Most recently, HP has teamed up with Google and released its own Chromebook.

HP Plays Mobile Catch-Up

The move to Android could help HP regain ground in mobile computing, where so far it has lagged behind Apple, Samsung, HTC, Motorola and many others.

Over the last couple of years HP’s mobile scorecard has been a disaster. In 2010 the company spent $1.2 billion to acquire Palm and announced it would double down on webOS after Palm’s smartphones had failed to catch on with consumers. But the resulting products were massive failures and HP decided to stop making mobile devices and went on to open source webOS.

HP recently regained the top spot in the PC market by leapfrogging Lenovo, according to research firm Canalys. However, HP leads the PC market only when tablets are taken out of the equation. If tablets are counted as PCs, Apple jumps to first with 27 million units shipped in Q4 2012 and HP falls to second place with just 15 million PCs shipped.

At first glance adopting Android looks like yet another desperation move from a lumbering giant that can’t seem to figure out the new mobile erane. HP has no choice but to figure out something here. The truth is, PCs are over, and the future is all about mobile.

A Big Win For Google

It’s unclear how many mobile OSes HP will support going forward, but the news that it is going down the Android path is a significant win for Google. Android has been slowly evolving towards the desktop PC market, and HP could be the partner that helps Google turn the corner in that area.

“HP supporting Android at this point in time is deeply strategic,” said Ben Bajarin, Principal analyst covering consumer market intelligence and trends for Creative Strategies, Inc. “As any vendor who has history in the PC industry knows, it can be rough when you are completely dependent on only one OS platform provider.”

“It worked out well during the PC growth period because Windows was the standard computing platform. That is no longer the case when it comes to mobile computing where Android is the leading licensable mobile OS platform,” said Bajarin. “The reality is that if HP, or any vendor for that matter, wants to have a relevant tablet / mobile strategy, it has to include Android.”

Most of the traditional PC OEMs have already experimented with Android tablets, though several have trimmed their roadmaps after discovering there’s no money to be made in the low-end of the market. HP will face the tough challenge of releasing just another Android tablet, so it will be interesting to see what kinds of software and services the company will provide to help differentiate them from the competition.

HP is holding private meetings during the Mobile World Congress in Barcleona, Spain, later this month, and it might show off the new Android tablet there behind closed doors. But we were told not to expect an official announcement until after the show. Look for more details in the coming weeks.

Meg Whitman image courtesy of drserg / Shutterstock.com.

Why not all of the above?

Early Monday morning, Hewlett-Packard announced the Pavilion 14 Chromebook, a $329.99 netbook boasting both a larger screen - 14 inches - than rival Chromebooks, as well as a new pricing tier. HP's Pavilion 14 brings the total Chromebook count to four: the $229 Samsung Chromebook, the $199 Acer C7, the $449 Samsung Chromebook 550, and the Pavilion 14. HP's screen may be the largest of the bunch, but its processor - a dual-core Intel Celeron - sits below the Chromebook's 550's Intel Core processor.

More Of The Same

The new HP Chromebook is essentially the same as the others: it runs Google's Chrome OS, a bare-bones operating system that, on the surface, does little more than launch a Web browser. (Some games, such as the indie hit Bastion, also have been ported over to the OS.) Each of the four Chromebooks, aside from the C7, includes a 16GB solid-state drive, and connects to the Web via a Wi-Fi connection. HP said that the battery life  for its version is a disappointing 4.25 hours, rather than the 6 hours or so offered by some of the other Chromebooks.

Google has positioned the Chromebook as "companion devices," the same tack HP took as it launched the Pavilion 14. In my own use, I've found that Chromebooks and Chromeboxes are a simple, easy and effective way of accessing the Web - although a dearth of apps and a complicated approach to printing mean it can't quite compete with full-fledged PC functionality. But there's something to be said for a "PC" that boots up and resumes almost instantly, downloads patches in the background and offers a managed computing experience better than anything Apple or Microsoft offer.

A Slap To Microsoft?

Still, the fact that the largest PC maker in the world began offering a Chromebook just months after Microsoft launched Windows 8 might be seen as a slap in the face to Microsoft. And long-term, HP's Chromebook may blossom into something more. For now, though, analyst Bob O'Donnell with IDC saw the announcement as nothing more than HP dipping its toe into a new market. 

"I think they're trying to offer an even lower-cost notebook option with this and trying to stand out with a larger-size screen," O'Donnell wrote in an email. "But ultimately, I think it's testing the waters and filling out their price range."

ReadWrite reached out to both Microsoft and HP for comment, but we haven't heard back. In the meantime, a statement from HP indicates that it believes the market for Google's ChromeOS is growing.

"Google's Chrome OS is showing great appeal to a growing customer base," said Kevin Frost, vice president and general manager, Consumer PCs, Printing and Personal Systems, HP, in a statement. "With HP's Chromebook, customers can get the best of the Google experience on a full-sized laptop—all backed up by our service and brand."

HP & Chromebook: An Odd Couple When It Comes To Printing

It might be a bit odd to think of Hewlett-Packard and Chromebooks together, if only because of the awkward approach Google takes toward printing. You can't connect a USB printer directly to a Chromebook or Chromebox; instead, you either need to connect to a network-connected printer through a service called "Google Cloud Print" or use a Chrome extension to a traditional PC or notebook that is itself connected to the printer via a USB cable. (Of course, if your home doesn't have a dedicated desktop PC hooked up to a printer, the latter approach may not work so well for you.) Apparently, wirelessly connected PCs and multifunction printers are now common enough so that HP felt that there's enough of a critical mass to make this approach feasible.

But as far as the direction of the PC market is concerned, the impact of an HP Chromebook is clearly muddy. That is, no one quite knows the direction the venerable PC will take over the next few years. The conventional thinking seems to be that minicomputers gave way to desktops, desktops to notebooks, and notebooks to... where, exactly? Tablets are one answer, and HP's Windows 8 convertible notebooks fill that niche. But there may still be profits to be extracted in cheap netbooks, and Google's Chromebooks may answer that call.

Market Research?

In addition, by offering its own Chromebook, HP can gain invaluable market information. Instead of hiring IDC or Gartner to provide  sales forecasts on the expected success of the Chromebook category, HP can use the Pavilion 14 to generate real data on which way the wind is blowing. If over time we see HP announce a refreshed or additional Chromebook, we'll know that the Chromebook's sails are filling out.

Images courtesy of HP.

For HP, Flat Is The New Up

International Data Corp. (IDC) found that HP's fourth quarter PC shipments last year remained roughly flat from the year before. But that was enough to keep it at the top with almost 17% of the market. Soon after the scrap of good news hit the Web, HP public relations went to work. "We believe HP's position as the market share leader demonstrates out ongoing commitment to deliver superior PC products and experiences across customer segments," the press release said.

Woo-hoo!

Ironically, in tooting its own horn, HP highlighted its biggest problem, which is its need to cling to dwindling markets. The IDC report found that global PC shipments fell more than 6% in the quarter and more than 3% for the year. It was the first time in more than five years the PC industry had recorded a year-on-year drop during the holiday season, according to IDC.

The reasons behind the decline are well known. People increasingly favor smartphones and tablets, both fast-growing markets where HP remains a non-player. Heck, even Microsoft, which helped to usher in the PC era, sees its demise and is pushing tablets and smartphones as the future of computing.

But for HP, staying flat in PCs was so exciting it had to churn out a press release. That's not a good sign. But given what else is going on at the company, the temptation is understandable.

Due to management bungling over the last few years, HP has fallen ever farther behind its rivals in taking advantage of game-changing trends in the consumer and enterprise markets. The company paid a total of $24 billion for Autonomy and EDS to become a player in big data software and IT services, respectively, only to see both deals go down in flames through huge write offs.

HP Battles Workers

Meanwhile, HP is chasing distractions when its focus should be on innovation. In Texas, HP is in a tussle with customer General Motors, which is in the process of giving HP services the boot. Eighteen employees quit HP at the same time and without notice to join GM's efforts to take its IT work in-house.

HP is asking the state court for permission to depose two of the workers; a move GM has called "retaliatory" and a "fishing expedition," according to Bloomberg. It seems HP can't understand why anyone would want to flee a company that has promised Wall Street that it will fire 29,000 employees this year and next.

Bright Spots

HP's current state is not all dark. Last week the company launched a services center for in-memory computing, an emerging technology that significantly boosts application performance by keeping all data in system memory rather than on disks. The announcement came the same day SAP said it was making all its business applications available on its in-memory database called HANA. HP plans to throw its support behind HANA and is also working on its own in-memory platform, codenamed Project Kraken," according to InfoWorld.

Kraken-like initiatives are what HP's PR team should be crowing about, rather than the company's managing not to shrink in the cratering PC market. Chasing hot new markets - not scrambling to be the last PC vendor to avoid extinction - is the only way to change HP's image as a dinosaur.

Dinosaur image courtesy of Shutterstock.

Well, what the heck else were they going going to do? Billions of dollars of infrastructure is invested in manufacturing PCs, so it's not like the company was going to turn around overnight and say "Oh, well, that was a mistake, let's make tablets and nothing but tablets from now on."

And it's not like Lenovo is ignoring the whole concept of alternative computing platforms. The China-based hardware maker also pushed out a line of Android phones and a big-ass "Table PCs" that just barely avoids the raging failure of the original Microsoft Surface by (a) not costing a gazillion dollars and (b) not requiring the help of a furniture mover to be repositioned. HP is busy with its convertible tablets. And that's the story with pretty much ever hardware vendor you can name.

Still, it may seem weird that hardware vendors are putting in a lot of marketing and sales into "traditional" PC form factors when all the hype is about mobile and tablets.

Workers & Creators Unite!

But it's not so weird when you take two very important facts into consideration:

1. People still need to get work done
2. Right now the best software for productivity is geared towards the PC form factor. And that's true even of Web-based applications.

It's not that you can't get work done on a tablet. I write on my iPad all of the time and I've gotten to the point that I will haul it around instead of a full laptop when attending various events. But I always use a TouchFire keyboard overlay or an external Bluetooth keyboard with my iPad - anything to avoid typing directly on a glass screen.

And I always still bring my laptop along when I travel. Because even though I can (and will) write a complete article on the tablet, using most Web-based content management tools requires a keyboard and mouse/touchpad interface.

PCs Still Rule For Productivity

More generally, that's still the preferred interface for most business applications, not just website back ends. Using Google Docs (especially the spreadsheet) is painful on a tablet's browser, and unless it were heavily modified, I could not imagine using an application like GIMP long-term on a tablet (although I have done it done so in a pinch using remote desktop software).

Sure, there are tablet-specific alternatives for increasing numbers of common business applications, and many custom business apps are now going mobile as well. But many other apps still don't have mobile equivalents, and even when mobile versions do exist, they're not always as full-featured and easy to use as the original PC versions.

All the hardware vendors are well-aware that there are two kinds of computer users out there: those who consume and those who produce. Most "consuming" users can get by with tablets, smartphones and touchscreens. Many producers, on the other hand, still find such form factors limiting at best.

They may not be the meat of the computing market going forward, but they're never going away completely. Heck, someone has to get some work done, right? Hence, the continued investment in PC devices.

For my part, I hope new and better PCs keep on coming. if Lenovo and HP and everyone else (including Apple) ever abandon those who create in favor of those who consume, productivity would decline and make us all poorer.

As a teacher, I worry that my students are increasingly ill-prepared for business computing work because their parents are buying them the latest tablet or smartphone instead of something they can actually work on. As a father, I may lend my kids a tablet for fast research or messaging, but to write reports or build presentations, the PC is still the best way to go.

Image courtesy of Lenovo.

A Breakup Alternative

For Chief Executive Meg Whitman, selling off pieces of the crippled tech giant would be a much better alternative to breaking up the company. Whitman has opposed the latter option, starting with her decision in 2011 to nix a proposal by her predecessor, Leo Apotheker, to spin off the company's personal computer unit.

Since then, Whitman has ignored Wall Street analysts who say shareholders would be better off if the company spun off the division that sells PCs and printers from the one that sells software, hardware and services to companies.

As a less dramatic alternative, getting rid of businesses draining the company's limited resources, would help HP make better use of limited cash. In fiscal 2012, HP's free cash flow dropped to $6.9 billion from $8.1 billion the previous fiscal year, according to The Wall Street Journal. That's a trend that could spell trouble if not stopped. Without cash, a company will find it difficult to develop new products, make acquisitions, pay dividends and reduce debt.

Getting rid of underperforming businesses is one way to improve cash flow and avoid splitting the company. "Everybody zeroes in on printers and PCs as the things they should potentially sell, and quite frankly, there's not really a logical buyer for either of those businesses," Crawford Del Prete, analyst for International Data Corp., said. "And, those businesses generate a significant amount of cash, which Hewlett-Packard needs right now."

HP-UX And More Must Go

A more logical sale would be the Itanium server business. HP has spent a lot of money trying to drive sales of its HP-UX Unix server that runs on that chip architecture, while the business continues to shrink. In 2010, Microsoft said it would drop support for Itanium and Oracle said a year later it wants to do the same.

Another candidate for jettisoning is HP's low-end IT outsourcing business, which was included in the 2008 acquisition of Electronic Data Systems. Earnings from the services business has been falling, and last August, HP said it would write off $8 billion in goodwill from the EDS purchase.

Last year, General Motors, a major HP customer, said it would move away from outsourcing IT and take some work in-house. The announcement made industry observers wonder whether HP can handle those large-scale deals, Del Prete said.

Within HP's Personal Systems Group that makes PCs, workstations, tablets and printers, the company could sell the low-performing notebook and desktop PC businesses, which have been trumped in the market by tablets.

The low-end printer business that primarily serves consumers and small businesses could also be sold. However, printers are still used in emerging markets, so HP would be just as likely to hold off to see how profitable those markets become. "HP has a plan to drive those businesses, so I'd be surprised to see them get out," Del Prete said.

Finally, tape drives used for long-term data storage is a candidate within the company's enterprise servers, storage and networking division. Such a low-margin business would be best left to IBM and others with larger stakes in the market.

HP likely has other losers within its product lines that it would be better off without. Whitman should act quickly to get rid of the chaff and focus resources only on the profit generators.

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Probe Expected

The probe was expected, given that HP announced last month it had proof that it had been conned in last year's $10.3 billion acquisition-turned-fiasco. At the time, HP said it had turned over the evidence to the Justice Department, the SEC and the U.K. Serious Fraud Office. "On November 21, 2012, representatives of the U.S. Department of Justice advised HP that they had opened an investigation relating to Autonomy," the company reported to the SEC Thursday.

HP claims Autonomy executives inflated the company's value by reporting some revenue prematurely or improperly. The alleged bogus reporting accounts for almost 60%  of the $8.8 billion write down HP booked last month on the Autonomy deal.

Ex-Autonomy Chief Executive Lynch responded to the investigation Friday by continuing to deny any wrongdoing. On a website Lynch set up to counter HP's allegations, he reiterated his complaint that HP has yet to release any details of the alleged scam. "Simply put, these allegations are false, and in the absence of further detail we cannot understand what HP believes to be the basis for them," Lynch wrote.

Details Still Hidden

HP is still keeping the details of the allegations confidential among itself, prosecutors and regulators. Thursday's filing did not provide any new details. Nevertheless, Lynch is ready to tell his side of the story. "We will co-operate with any investigation and look forward to the opportunity to explain our position," he wrote.

Throughout the claims and counterclaims, HP stock continues to get hammered. From the beginning of 2012 to Thursday, the price has fallen 45%.

Officially, the Federal Bureau of Investigation won't discuss whether or not it is involved in the case. However, an unidentified source told Bloomberg that the agency is assisting the SEC in its investigation.

While Autonomy execs are under the investigatory microscope, shareholders are blaming HP for the deal that ended up wasting billions of dollars. In the SEC filing, HP lists 10 lawsuits, including four class-action suits.

Apotheker Still Blamed

HP CEO Leo Apotheker, who was fired in September 2011, led the Autonomy deal as part of a plan to get HP deeper into the high-margin enterprise software business, while reducing its dependence on selling low-margin PCs. Autonomy software searches, organizes and manages data within large companies.

Apotheker sealed the end of his short career with HP when he announced he was considering the sale of its PC business. Because he had no buyer, Apotheker's disclosure sent Wall Street analysts into a tizzy. To them, Apotheker appeared to lack a clear vision or roadmap for saving HP from its years of bad deals, management turmoil and strategic blunders.

Current HP CEO Meg Whitman was on the company's board when it signed off on the Autonomy deal. Nevertheless, she has distanced herself and other board members from the debacle by laying the blame on Apotheker and then mergers and acquisitions head Shane Robinson, who also left the company in 2011.

History aside, now that federal prosecutors are officially involved, the repetitive claims and counterclaims being tossed back and forth between HP and Lynch won't matter much. The companies, their customers and shareholders now have to hope for clarity in the courts, especially if charges are filed.

Image courtesy of drserg / Shutterstock.