HP’s Decision to Scrap webOS Signifies iPad’s Dominance
Source: Wikimedia
During the recently held earnings call, HP (NYSE:HPQ) announced that it is shutting down its tablet offering “TouchPad” along with smartphones based on the webOS operating system. Management mentioned that the company is grappling with the changes in the way the consumers are shifting away from PC and made an indirect reference to the increasing dominance of tablets like Apple’s (NASDAQ:AAPL) iPad. [1]
In its earnings conference call, management noted that, “The tablet effect is real and sales of the TouchPad are not meeting our expectations.”
This is another reminder that many tablet makers are struggling to match the popularity of the iPad. Tablet makers like Research in Motion (NASDAQ:RIMM) and Motorola Mobility (NYSE:MMI) have also shown little ability to compete against the iPad, and this strengthens our belief that the iPad will continue to dominate the tablet market for the next 1-2 years. Samsung is the only competitor starting to catch up in terms of tablet sales. We believe Samsung sold around 7.5 million tablets in the first half of 2011, compared to around Apple’s 14 million sold in iPads. We discussed Samsung’s opportunity to take advantage of the distraction of Steve Jobs’ departure in a recent note.
In another note titled Why Apple Still Dominates Tablets, we also discussed why Google’s (NASDAQ:GOOG) and Microsoft’s (NASDAQ:MSFT) operating systems for tablets are not yet ready to provide any meaningful challenge to Apple.
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The iPad accounts for about 12% of our $510 price estimate for Apple stock, which is about 40% above market price.
See our complete analysis for Apple stock.
Editorial Note: An HP spokesperson has confirmed the following regarding the webOS platform, “While we [HP] are discontinuing the development of webOS-based devices, we are continuing to enhance the webOS software platform and grow the application catalog. TouchPad activations and application downloads have grown exponentially. HP also plans to continue to investigate the best ways to leverage webOS software and grow the applications.”
Notes:- HP’s fiscal year Q3 2011 earnings conference call transcript, SeekingAlpha, August 18th 2011 [↩]