Hewlett-Packard's confirmation last week that it is in talks with a number of companies to license webOS set off a flurry of speculation over the potential partners HP is negotiating with.
I don't have any inside scoop on those companies, or where the negotiations stand, though HP CEO Leo Apotheker said there is "no time pressure" to complete a deal. However, from talking with a range of analysts, it seems there are two schools of thought: either HP is talking to a handset maker looking to hedge its bets on Google's (NASDAQ:GOOG) Android platform, or a nontraditional company such as Amazon.com.
I'm still undecided on which side will prevail, but I'm leaning more toward the handset maker route. Before I explain why, let's take a look at the pros and cons of each side.
A traditional handset OEM could be in the cards, but it would have to be a company that does not compete with HP's core business. Analysts told me that HP also seems to be looking for a partnership akin to the one Microsoft (NASDAQ:MSFT) struck with Nokia (NYSE:NOK) on Windows Phone 7. HP is "looking for partners that will focus on webOS either primarily or exclusively," NPD Group analyst Ross Rubin said.
Samsung was named by Bloomberg as a possible partner for HP on webOS, but others include LG and Motorola Mobility (NYSE:MMI). Forrester Research analyst Charles Golvin said HP might try and push for a deal with a company like LG, Samsung or Sony that could put webOS into TVs, household appliances, automated home control units and other connected devices. HP bought Palm, he said, "to have a platform they could control," and licensing webOS to a direct handset and tablet competitor is "not antithetical to that strategy but doesn't support it."
A key benefit of licensing webOS to a handset OEM is that it could help HP achieve greater scale, especially if it is a company that could bring webOS to other devices beyond what HP plans to do. However, it would depend on how the deal is structured, because the downsides are, of course, that the devices could compete with, and potentially undercut, HP's efforts.
On the flipside there is Amazon, which analysts argued could be a compelling partner for HP that wouldn't compete as directly with it as OEMs would. Amazon has "assets that are reasonably close to what Apple (NASDAQ:AAPL) has in terms of a cloud-based, high-velocity transaction-based business model that doesn't need to monetize on hardware," said CCS Insight analyst John Jackson.
Working with Amazon could be a win-win, especially if Amazon put webOS on the Kindle, said Recon Analytics analyst (and FierceWireless contributor) Roger Entner. Amazon CEO Jeff Bezos strongly hinted in May that the company will produce a tablet soon. Amazon has the service-delivery mechanisms in place to allow webOS to compete more directly with iOS and Android, giving it a leg up on Windows Phone and Research In Motion's (NASDAQ:RIMM) BlackBerry. The downside, as Golvin pointed out, is that Amazon's cloud-based services would compete with HP's own, though HP's cloud services are more focused on the enterprise market than consumers.
HP hasn't said which way it is leaning, but has given indications of its intent. In an interview this week with AllThingsD, Todd Bradley, executive vice president of HP's Personal Systems Group, said the company is focused on working with a partner that will "expand the [webOS] ecosystem" and take the platform in a new direction, rather than compete head-to-head with HP. "That's exactly what we would look for, someone who would go in spaces that we are not in," he said.
My bet is that, although a deal with Amazon has a lot of potential, HP will forgo working with Bezos, partly because of the cloud services competition and partly because there might not be as much value for Amazon. Moreover, the onus is on HP to find a partner--they need the platform to scale up, and they have to get someone to bite.
Which companies could that be? I would argue for LG or Motorola. Unlike Samsung, neither really competes with HP in PCs or printers, and neither has found the kind of success HTC and Samsung have with Android. LG just cut its smartphone sales targets for 2011, and Motorola CEO Sanjay Jha recently indicated the company might be open to the possibility of combining resources with a software company. Both could use webOS as a strong hedge against Android.
Like I said, I don't know how this will turn out (Representatives from LG and Motorola declined to comment, and an Amazon representative did not immediately respond to requests for comment). But to any potential licensees out there, Leo Apotheker is waiting for your call. --Phil