Hewlett Packard (NYSE:HPQ) shares struggled ever since it lost its CEO, Mark Hurd. Shares are struggling to hold $35, and its shares are trading in the single digit P/E's. With valuations similar to Microsoft (NASDAQ:MSFT), Research In Motion (RIMM), and Cisco Systems (NASDAQ:CSCO), HP is not in good company when it the valuation of the company by the stock market.
HP's TouchPad is an important development for the company, and its success is needed if the company wishes to be relevant in the mobile market.
HP, Microsoft, Cisco and RIM are all in need of that next big product that Wall Street demands, if these companies are to earn higher multiples.
HP has lots of headwind: it must release a product that is preferable to an iPad 2, a device that will also see the new iOS 5 soon. The iOS 5 eliminates the need for iTunes on a PC. It can be inferred that the PC market is facing a decline every time Apple (NASDAQ:AAPL) succeeds in growing its tablet sales.
The purpose of this article is to examine the likelihood of success for the TouchPad. If successful, the market might choose to assign a higher premium for HP shares.
Here are the four areas to consider, in evaluating the likely success of the TouchPad:
Apple (AAPL) set the competitive bar on the pricing for the tablet. Will the WebOS-based TouchPad be able to compete with Apple, the market leader? Like the Blackberry Playbook (and aside from the greater portability offered by the device), HP chose to match Apple's prices. The TouchPad 16GB model is $499 and the 32GB version is $599.
With HP effectively matching Apple's pricing, HP offers to competitive discount to the consumer to choose the popular iPad 2 over the TouchPad.
HP promised to have "thousands of TouchPad apps" on their way. There are currently nearly 600 unofficial apps at PreCentral. Still, the app searching does not look very refined. Little coverage supports the notion that HP will aggressively build and grow the developer community around the WebOS. HP will need to reach out to developers, to promote the ease and profitability of WebOS development.
Until the device is released and reviewed, it cannot be confirmed that the WebOS will run legacy apps without performance loss or run in full-screen mode.
Since the device is not yet available, there is no reliable way to determine how well the device will perform. Any information in this area will be meaningless, until games, productivity, and office (word/excel) software are tested.
4. Battery Life
As a mobile device, a long battery life will be an important selling point for the TouchPad. HP so-far failed to publish the battery life in most promotional material, although there are rumors that the device will last a full working day. This definition, of course, could mean the device lasts anywhere from 6 to 10 hours. Given the lack of availability for this information, any news that the device suffers from poor battery life will result in consumers choosing another tablet option.
There is still too little information available on the TouchPad. Without any real review available on the device, HP shares are unlikely to move on optimism for sales for the device. The headwinds for HP are very high, and it does not look as though the company is on competitive ground with Apple. HP may have the ability to spur sales in the coming months by lowering the price of the device, since it is selling through the major retail channels.
Even if consumers choose the device based on a lower price, HP still needs to apps. To do that, HP needs to first build the WebOS developer community.
Disclosure: I am long MSFT.