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

Gregg Keizer | Oct. 11, 2013
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.


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