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HTC considers buying its own smartphone operating system

Jeffrey Van Camp
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While arguably one of the best smartphone manufacturers in the market, and certainly one of the most successful, HTC has been taking flak from all sides, and by flak we mean its been getting sued by Apple and strong-armed into patent deals with Microsoft. These attacks stem from its use of Google’s open source Android operating system. Though the OS has helped propel HTC to the top, these attacks threaten to greatly hurt the company’s bottom line. As such, it comes as little surprise that HTC may want to try purchasing its own OS. FocusTaiwan reports that HTC is, at the very least, considering owning its own operating system.

“We have given it thought and we have discussed it internally, but we will not do it on impulse,” said HTC Chairwoman Cher Wang, speaking with the Economic Observer of China.

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But then again, maybe not. Wang also says that one of HTC’s strengths is that it knows how to wrap different operating systems with its own user interface: “We can use any OS we want. We are able to make things different from our rivals on the second or third layer of a platform. Our strength lies in understanding an OS, but it does not mean that we have to produce an OS.”

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Ever since Google announced the acquisition of Motorola and HP announced that it was discontinuing WebOS devices, rumors have been flying about the future of Android developers like HTC and Samsung, who have had a lot of success with Android, but also taken a lot of hits from rivals like Apple. Any company could potentially scoop up WebOS and Samsung has already begun beefing up development of its Bada operating system, mostly sold on lower-end devices. 

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Jeffrey Van Camp
Jeffrey Van Camp
Former Digital Trends Contributor
As DT's Deputy Editor, Jeff helps oversee editorial operations at Digital Trends. Previously, he ran the site's…
Rumor: Samsung may buy webOS from HP

Here's an interesting rumor. DigiTimes reports that Samsung may purchase webOS from HP, which recently announced that it no longer plans to make webOS devices and wishes to sell its entire PC division. While it doesn't appear likely that Samsung wants HP's entire PC business, as it could actually hurt Samsung's profit margins on products like DRAM and touch panels, webOS is a lot more appealing. The Korean electronics maker may have already hired HP's vice president of PC marketing to handle it's PC sales. 
Neither HP nor Samsung is commenting on the situation, but Samsung may be wise to snatch it up. The company seems a bit wary (speculation) since Google announced plans to buy Motorola. Last week, it publicly announced a new version of its Bada operating system, which is used in some mid-range Samsung handsets, mostly overseas. Samsung shipped 3.5 million phones running Bada in early 2011. 
We think this is a great move for Samsung, if true. While Bada isn't bad, it's certainly not on the cutting edge of smartphone platforms. WebOS is a great platform and could do well if Samsung really put some weight behind it and released webOS phones that are better than comparable Android and iOS devices. In addition, webOS already has a library of apps and a unique look and feel to it. Before HP decided to dump it, the company had plans to put webOS on PCs, in cars, and in appliances. 
On the downside, this will be the third company that has tried to market webOS. Samsung might also be wise to avoid the OS as it has struggled in the market under Palm and HP branding, though the TouchPad has been on fire lately at its $99 price. To effectively push webOS, Samsung would also have to scale back its Android lineup, which has brought it a lot of success in the last couple years. 
Still, we'd welcome a good fifth operating system. The more the merrier. Competition keeps everybody on their toes. 

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HP wants to sell its PC business, kill webOS: So what happens now?
hp wants to sell its pc business kill webos so what happens now headquarters

According to a press release today, Hewlett-Packard is discontinuing webOS and is looking for a "a full or partial separation of [consumer electronics division] from HP through a spin-off or other transaction." That's right, the number one PC maker in the world is essentially shutting, or selling, its doors. HP is looking for someone to buy its Personal Systems Group (PSG). This division is responsible for all consumer PCs, business PCs, handheld products like the Pocket PC, and TV-related devices like MediaSmart TVs and DVR products. Strange things are happening, people. Strange things. 
Apple takes HP's PC throne
This news comes just as reports are leaking that Apple may have stolen the top spot to become the number one PC manufacturer with its line of Mac computers and the massive success of the iPad. Hot Hardware reports that Apple took a 21.1 percent share of the PC market in Q2 2011, with 80 percent of Apple's sales of 13.6 million units for the second quarter coming from the iPad. HP, now in the number two spot, moved 9.7 million PCs in the second quarter. Dell, Acer, and then Lenovo rounded out the top five. 
So, why is HP planning to rid itself of its PC division? These sales aren't terrible. Well, it doesn't see a bright future in the space, apparently. With the PC space and smartphone space beginning to interbreed, traditional PC sales are stagnating (down 2 percent in Q2 2011) It's printing, enterprise, software, and services businesses hold a lot higher profit potential than PCs and tablets, which tend to have thin profit margins due to competition.
WebOS meets its demise
Then there's webOS. HP paid $1.2 billion to purchase Palm two years ago because it saw a future in webOS, but hasn't been able to capitalize on the platform. In February, HP announced three new webOS devices -- the HP Veer, HP TouchPad, and Palm Pre 3 -- and boldly stated that webOS would be integrated into all of its future PCs. As of today, that plan has been dissolved, partially due to poor sales of the HP Veer and HP TouchPad, two odd products that likely didn't take off more because of the hardware than webOS itself. Still, sales are everything. According to sources at Best Buy, the recently-launched TouchPad sold just 25,000 of its 250,000 initial shipment to the retailer. And in HP's quarterly earnings call, it announced that it would be taking a $100 million hit to buy off unsold inventory of the failed tablet. 

In its release, HP says it has no plans to continue development on webOS products, but may continue to update it or consider licensing it out to other vendors, like those who make smart cars and appliances. Still, we have to wonder why any manufacturer would sign on to integrate an OS that has been publicly discontinued. Would you want to run a dead OS when there are plenty of living options?  
Lenovo and IBM all over again?
So what might happen if HP spins off its PC business? It could simply operate independently and continue to make PCs and other electronics for a long time. The more likely scenario, however, is that someone will buy HP's PC business, in a deal not unlike Google's recent Motorola acquisition. But forget Motorola for a moment. We've seen this before. In 2005, IBM made the decision to sell off its PC business to a Chinese company called Lenovo for $1.75 billion, an amount that seems paltry when compared to the mammoth $12.5 billion sale of Motorola Mobility. At the time of sale, IBM was the number three consumer PC manufacturer in the United States, but, like HP, IBM saw a brighter, more profitable future in the world of enterprise, computing architecture, and a number of other business and government related projects. 
At first, Lenovo relied heavily on the IBM name, but in the years since, it has increasingly relied on its own branding, relegating the IBM logo to the inside of its products, similar to the old "Intel Inside" branding that used to adorn PCs in the 1990s. Lenovo is currently the number five PC maker with 7.5 percent of the market, $4.8 million in Q2 2011 sales and 9.7 percent of total market share in 2010. For comparison, IBM's market share in 2004 was 5.5 percent. Lenovo has announced and released tablet computers outside the United States and has a good foothold in China, which will undoubtedly see a great deal of growth in the future. 
Who will buy HP's PC business?
So who is HP's Lenovo? Who will step up and buy the PC giant? Well the obvious first guess would be one of HP's competitors. Dell, Acer, Lenovo, and Toshiba could be interested in acquiring HP if the math benefits them enough. After all, in 2002, HP bought its way to the number one PC position with its purchase of Compaq computers. Compaq was the number one manufacturer from 1996 to 2000. By 2006, HP had taken back the top spot from Dell, reigned supreme from 2001 to 2005. It has held the top spot ever since.
Or maybe somebody else wants in on the PC market. Samsung, HTC, LG, Google (why not?), or another smartphone manufacturer could choose to buy into the PC market or increase their stake significantly. Samsung seems an especially good fit, as its PC sales have never reached the heights of its smartphone and feature phone sales. Maybe somebody from outside the industry all together plans to join. 
The PC market is alive and well
It's not like the PC market is dying. It's just evolving. Tablet computers are becoming an important sector of the market and are slowly merging with the traditional PC, a topic we just covered in Back to Basics - How smartphones and tablets are shaping your next PC. Overall, the space is still growing quite rapidly. Global sales of PCs have risen from 305.9 million units in 2009 to 346 to 350 million in 2010. 2011 sales will likely grow still, propelled by the growing tablet market. Want to know how fast computer sales have grown? In 2005, 218.5 million units were sold around the world. In 2000, only 134.7 million were sold, and in 1996, only 70.9 million computers were sold. We've gone from 71 million to 350 million in 15 years. For those with an open mind, the PC industry is a great place to be.
Don't fret the coming loss of HP, should such a thing happen at all. Companies rise and fall all the time. It's only when we stop seeing companies fail that an industry gets into trouble and complacency. The PC market will not shrink or hurt severely without HP branded products to fill retail shelves. If anything, this mix up will only speed up innovation and growth. HP will survive too, likely sinking into the background of the tech industry much as IBM has done. Years from now we consumers will hear about Hewlett-Packard from time to time and wonder just what the company actually does anymore. HP isn't going anywhere, it's just content being boring. It's had enough with the glitz of consumer electronics. It's gotten to the age where it just wants safer and larger profits.

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Apple sues HTC again: Will Microsoft come to the rescue?

Apple still doesn't like HTC. On July 8, the Cuppertino company filed its second U.S. patent complaint against the Taiwanese High Tech Computer Corporation, claiming that it has infringed on five patents related to software and user interface design, touch screen hardware, and movement sensors, reports Bloomberg. As it did with Samsung, Apple is seeking to block the import of all infringing HTC devices, with a special emphasis on tablets. This news comes as HTC continues to beat sales and profit expectations due to the success of its Android phones.
Last year, Apple sued HTC accusing it of infringing on 20 patents related to the iPhone. "We can sit by and watch competitors steal our patented inventions, or we can do something about it. We’ve decided to do something about it," Apple CEO Steve Jobs said regarding the original suit. "We think competition is healthy, but competitors should create their own original technology, not steal ours."
The results of the first suit will be issued by a judge on August 5, but a recommendation from the ITC in April found HTC innocent of charges.
"HTC is dismayed that Apple has resorted to competition in the courts rather than the marketplace," said Grace Lei, HTC’s general counsel. "HTC continues to vehemently deny all of Apple’s past and present claims against it and will continue to protect and defend its own intellectual property as it has already done this year."
Microsoft to the rescue?
HTC admitted that it was blindsided by Apple's first lawsuit, but it may be prepared for this one. HTC has since signed a huge patent licensing deal with Microsoft, giving it the "broad protection" of Microsoft's giant pile of patents. The deal, which gives Microsoft $5 for every HTC Android phone sold, was puzzling when it first surfaced in late May, but the pieces may be fitting together now. Hoping to get money from other huge Android manufacturers like Samsung, Microsoft needed a big Android maker like HTC to join its side, and HTC needed protection from the red sea of frivolous patent lawsuits being hurled around the smartphone industry. So they joined forces.
HTC and Microsoft have been partners for about a decade, working together extensively on Windows Mobile in the pre-iPhone era. In exchange for the $5-per-handset fee for every Android phone sold, it's likely that Microsoft is giving a discount on Windows Phone licensing fees to HTC, among other things. Though it is making most of its money off of Android, HTC is still the most prolific supporter of Windows Phone, having released five WP7 handsets in since the operating system debuted last November--far more than any other manufacturer.
While we do not know exactly what patents Microsoft has and if they overlap with Apple's, it's likely that some of them could be of use to HTC in its defense against Apple. After all, if you're being sued by one of the oldest personal computer companies, what better way to defend yourself than aligning with another giant of the PC world?
And if Microsoft can't help, why would HTC have caved to its will so easily? This could be a good chance for Microsoft to show the power of its patent portfolio.

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