Friday, July 27, 2007

HP Opens Wide for Wares, Part 2 - Neoware

When I saw that HP was acquiring Neoware, I wasn't too surprised, but I also wasn't aware of all the history, either. I knew Neoware was a leading thin client maker, I think number 2 or 3 with such others as Wyse (private), HP, Sun and iGel (private). What I didn't know was that Neoware used to be part of IBM, then they got out of that business. So, in addition to getting the Neoware technology, HP also picks up some formerly true blue accounts.

I wasn't surprised by HP's decision to buy Neoware because I have been saying for some time that Sun was about ten years too early in pronouncing that the Network is the Computer. From the time they made this announcement, it's taken a few things to actually make it become reality, namely ubiquitous broadband, SaaS, Internet APIs, open source, and the continued decrease in the relative price of processing power and storage. Now that each of these things has taken hold, computer users find ourselves in the situation of actually not needing an expensive computer for a great many tasks.

I'm not sure if it was Stephen O'Grady or David Berlind who said it first, but whoever it was, they said it well when they said that more and more, they live in their browser. Meaning, increasingly, the applications they use, such as word processing, blogging, email, research on the Internet, etc., they access via their web browser. I couldn't agree more. Developments like Google Apps and Gears make this all the more true and all the more accessible to more and more people.

Seeing this, HP was smart to jump on Neoware to position themselves as the leading provider of a broad line of Windows and Linux-based thin client solutions.

But I also think that, prior to HP's Neoware buy, broad enterprise adoption of thin clients faced one major obstacle - namely mindshare and marketshare with VARs. Without this, it seems to me, the road to wide scale enterprise adoption of thin clients would be long and slow. HP is very strong in the channel, and will have the capacity to fit their new Neowares right into their VAR go-to-market. Whether they will successfully execute on this is another question. Clearly, the more businesses spend on thin clients, the less they will spend on Pavilions and Presarios, so I would be very surprised if there isn't some internal product group jockeying going on.

I've seen first hand how this sort of political infighting can really screw up a vendor as they try to broaden their channel product line. It's non-trivial. To the extent they do this poorly, I would look for pure-play thin client makers like Wyse and iGel, and also Sun, which isn't a pure play but does have a strong thin client line up, to capitalize. Unfortunately for investors, there aren't any publicly-traded pure play's left. Sun would be the closest, but their Sunray line represents a small percent of the company's business.

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