HP's Whitman pegs Microsoft as an 'outright competitor' over Surface

HP's Whitman pegs Microsoft as an 'outright competitor' over Surface

CEO acknowledges reality, joins others like Acer, Lenovo to criticize partner's move into hardware

Hewlett-Packard CEO Meg Whitman yesterday blamed part of her company's problems on competition from long-time partner Microsoft, making HP the U.S.'s largest OEM to publicly find fault with Redmond.

"HP's traditional highly-profitable markets face significant disruption," said Whitman on Wednesday in prepared remarks at the start of a day-long presentation to Wall Street. "We are seeing profound changes in the competitive landscape. Current long-time partners, like Intel and Microsoft, are increasingly becoming outright competitors."

Whitman did not elaborate, but since October 2012 Microsoft has competed directly with its OEM (original equipment manufacturers) hardware partners by selling tablets of its own design, first to consumers and secondly to businesses, including using a traditional OEM strategy of distributors and resellers authorized to sell to enterprises.

Microsoft's Surface line -- the Surface RT launched a year ago and the Surface Pro released in February -- has not broken any sales records, but the company has remained bullish about its devices strategy. In less than two weeks, Microsoft will start selling second-generation tablets at prices starting at $449 for the Surface 2 and $899 for the Surface Pro 2.

Both tablets, but especially the Surface Pro 2, have been marketed as 2-in-1 devices that can function as either a hand-held, touch device and, with the addition of the optional-but-really-required cover keyboards, as an ultralight notebook.

"I don't think this was scapegoating," Patrick Moorhead, principal analyst at Moor Insights & Strategy, said in an interview today about Whitman's view of Microsoft as a competitor. "For HP, this hasn't been discussed as an additional challenge for them. But if she hadn't brought it up in this forum [before financial analysts], and did later, then it would have looked like scapegoating."

According to IDC and Gartner, which each released their third-quarter estimates for PC shipments on Wednesday, HP was the second-largest PC seller during the July-September stretch, behind only Chinese computer maker Lenovo.

Previously, smaller OEMs have expressed displeasure or concern about Microsoft entering their business. Acer, which sold fewer than half the PCs HP did in the third quarter, has been especially vocal in its opposition, and has, like others -- Dell for instance -- blamed Windows 8's confusing dual and dueling user interfaces for sluggish sales. Lenovo has also opposed Microsoft's move into hardware.

HP has put its money where Whitman's mouth was, releasing a handful of systems powered by alternate operating systems. This week, for example, the company launched a Chrome OS-powered laptop, the $279 Chromebook 11, which was developed in conjunction with Google.

Today, Acer unveiled a Chromebook at the even lower price of $249.

The bulk of HP's personal computers, however, remain tied to Windows. Chromebooks, while surging in sales this year compared to 2012, remain a very small part of the total market -- even in the U.S., where they are strongest.

"HP could have stomached Microsoft's consumer piece [of its devices strategy]," said Moorhead, "But the commercial piece took them to the point where they had to say something."

Microsoft has been expanding its efforts to push Surface, notably the upcoming 2-in-1 Surface Pro 2, into businesses, its historic stronghold. Although it waited until July, six months after the launch of the original Surface Pro, before it allowed distributors and resellers to handle the tablet, and even then limited the number of eligible resellers, a report Wednesday by long-time Microsoft watcher Mary Jo Foley of ZDNet claimed that in at least some markets, all resellers would be able to sell the Surface Pro 2 -- and its less-expensive cousin, the Surface 2 -- to businesses.

At the presentation yesterday, Whitman and other HP executives noted the changed computing landscape, where Microsoft's OS and Intel processors are no longer the only choices for OEMs.

"We're in a new world now with multiple operating systems, new architectures, new silicon, new graphics, new subsystems," said Dion Weisler, the leader of HP's personal computer division. Later, Weisler acknowledged that HP is pursuing a four-OS strategy that includes not only Windows, but also Android, Chrome OS and Ubuntu, one of the more popular Linux distributions.

"This was all more about the future direction, as opposed to what's happened in the here and now," said Moorhead of both HP's plans and its complaint about competition from Microsoft.

Indeed, Microsoft has big plans for the first half of its devices-and-services strategy. Not only has it not given up on the Surface, particularly the struggling Surface RT (renamed the Surface 2 after a refresh, but it will spend $7.2 billion to acquire Finnish phone maker Nokia, which will drive Microsoft's own smartphone sales and may contribute to the Redmond, Wash. company's tablet portfolio, too.

Gregg Keizer covers Microsoft, security issues, Apple, Web browsers and general technology breaking news for Computerworld. Follow Gregg on Twitter at @gkeizer, on Google+ or subscribe to Gregg's RSS feed. His email address is

See more by Gregg Keizer on

Read more about tablets in Computerworld's Tablets Topic Center.

Join the CIO New Zealand group on LinkedIn. The group is open to CIOs, IT Directors, COOs, CTOs and senior IT managers.

Join the CIO New Zealand newsletter!

Error: Please check your email address.

Tags MicrosoftWindowshardware systemstabletssoftwareoperating systemsintelHewlett-PackardHP

More about AcerAppleDellGartnerGoogleHewlett-Packard AustraliaHPIDC AustraliaIntelLenovoLinuxMicrosoftNokiaTopicUbuntuWall Street

Show Comments