Better known as an acquirer, Hewlett-Packard Company (HPQ) recently broke the trend by divesting its Halo video conferencing business to the unified collaboration solutions provider Polycom Inc. (PLCM). The deal was settled at approximately $89.0 million in cash.
The Halo visual collaboration technology was developed by HP and DreamWorks Animation in 2005. Halo is different from other available video conferencing technologies in that it sets up identical rooms at multiple locations and then links them with high-definition screens and advanced audio systems, facilitating organizations with easy access to face-to-face meetings or telepresence. But the rooms are steeply priced and can be used only by Halo users for conferencing.
Analysts believe that due to these drawbacks, HP is losing its business to other competitive video chatting tool providers such as Cisco Systems Inc. (CSCO) and Apple Inc. (AAPL). They also think that the strategic decision to sell off the business will help HP focus on its traditional PC business and cloud computing.
On the other hand, Polycom has a broad product suite of collaboration solutions. Its telepresence, video and voice solutions and services help users connect and collaborate from their desktops, meeting rooms, class rooms and mobile settings. The Halo technology is a good fit for Polycom’s collaboration portfolio.
Apart from the divestiture, the agreement also binds both companies in a business tie, whereby Polycom will provide video application technology support to HP's webOS platform. HP inherited the webOS mobile operating system platform from Palm Inc., acquired last year. Conversely, HP will resell Polycom’s unified communications and collaboration products through its channel partners.
In its Strategy Summit held in San Francisco earlier this year, HP’s new chief executive officer (CEO) Leo Apothekar announced the intention to develop the webOS platform into a leading connectivity platform. In the summit, the tech chief announced plans to launch the TouchPad tablet and new smartphones running on webOS.
Moreover, the CEO asserted that the system will eventually cover PCs and even printers, which will put competitive pressure on existing operating software makers such as Apple, Google Inc. (GOOG) and Microsoft Corp. (MSFT).
We believe Polycom’s technology will adequately support the platform, making it more competitive.
HP also announced that it will open the webOS platform to licensing. The idea is to make webOS more popular, as the platform was not losing its popularity when HP acquired Palm.
We remain encouraged by the Halo sell-off as well as HP’s go-to-market strategy for its webOS platform. However, we prefer to remain on the sidelines considering the lowered revenue outlook, which reflects moderate demand for desktop PCs, manufacturing problems in Japan and growing interest in tablets.
Currently, HP has a Zacks #4 Rank, which translates into a short-term Sell recommendation.
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