HP, PCs, WebOS and Autonomy

The most amazing feeling, yesterday evening, of having fallen through the mirror into a bizzaro world where America is Europe, Apotheker is Elop and HP is Nokia. It's as though the Americans, unwilling to countenance a strong European player in the mobile phone industry, sent in Elop to administer the coup de grâce to Nokia, and now the Europeans have done the same to one of their industry giants in retaliation.

The feeling only intensified as I read through the details, noting the similarity of the arguments advanced for the decision, and the strange way that they both actually seem to be doing the very opposite of what they are saying. Let me explain.

With regards to Nokia, I was struck by Elop's statement that he wanted to move to a software platform that had a large "ecosystem" — shorthand I suppose for a large developer base *and* a large user base. Struck, because he promptly ignored the platform that had the largest ecosystem, Android (iOS not being an option for him, naturally), and chose the one that had if anything the smallest ecosystem, Winpho 7. Similarly, he said he wanted the platform that would best allow Nokia to distinguish its offerings from the herd — by which he undoubtedly meant the host of manufacturers offering Android based phones — but he ignored the fact that one of the reasons that those manufacturers love Android is precisely because it is so customisable, being open-source (think MotoBlur, HTC Sense, TouchWiz, ...), whereas Microsoft puts stringent compatibility and design requirements on manufacturers who want to use Winpho 7.

I still think that Nokia might have done better to dump Maemo/MeeGo while retaining its Qt-based presentation layer (the GUI, Touch UI, whatever you want to call it, and the user-facing apps), and to graft that onto Android, completely replacing Android's current, Java/Dalvik-based presentation layer and apps. That way Nokia would be absolved from any responsibility for developing the lower layers of the stack, which clearly Google are making a very good job of, and could concentrate their efforts on the UI layers and on tying the apps to Nokia's services. Indeed, given their current woes with Oracle, Google also might one day have been better off if Nokia had done that, since they would presumably have open sourced the code as they were doing with MeeGo. But I digress.

With respect to HP, Apotheker says he wants to move away from hardware and towards software as an engine for growth. So ... he dumps their biggest software asset, the proprietary WebOS...??? He blames the slowdown in the PC market on what he calls the "tablet effect", but clearly it's not just any old tablets, otherwise HP's own offerings would be doing much better: it's just *Apple's* tablets that are doing so well, and Apple's tablets run ... the proprietary iOS! And what was it, Leo, that has made Apple's operating system such a big deal? Why, it's the number of phones and tablets they've sold that run it! HP's PCs represented an excellent vector for insinuating WebOS into the market — as a quick-boot solution for those wanting just to browse the web and do emails for example — and WebOS represented HP's best bet for locking users into its software and services, as well as its hardware.

It's very odd. In the past decades, HP has steadily moved away from anything that required unique or original abilities in its labour force. It makes standard Windows PCs, and it's outsourced their manufacturing to the Far East. In recent years even the proportion of HP-specific design in its products has gone down — Asus design HP's PC motherboards for example. Apple on the other hand has gone in just the opposite direction. After the debacles of the old Mac OS and the Power Macs, Apple had to violently alter course and jump onto a bog standard Unix-like OS and bog standard Intel chips. Since then they've added customisation after customisation to their OS, moving it ever further away from its open source roots, and now they are designing their own ARM-based processors which it looks very likely they will soon be using in desktops and laptops. Every move they make is designed to increase user lock-in to their platform, while reducing the likelihood that their suppliers will be able to reverse engineer and mimic their offerings.

At least I have something to thank HP for. No one has less confidence in Autonomy than the UK stock market's institutional players, and my 125 shares were showing a rather large net loss at close of business last night, after the general market landslide during the day, and on top of accumulated slippage over the past few months. Now that's all transformed and my investment is showing a lovely 55% gain. Thank you so much HP, may your every endeavour be crowned with success!

That AA+ rating

So one of the big credit rating agencies, Standard & Poor's, has downgraded the United States' rating from AAA to AA+ — basically, from so called "prime" debt to "high grade" debt. Still a long way from junk then.

Good, even so. Sovereign states, especially big ones that feel utterly omnipotent within their own territory, are prone to a kind of ego inflation in their governmental elites that lead them to believe that they can make just about anything happen so long as they can get agreement from "stakeholder" parties. They are so used to making, and on occasion bending, the legal laws in other words, that they fall into the trap of thinking that the laws of nature can be chivvied in the same way.

Big mistake. I see that the administration still hasn't really learned this lesson: the article linked to above notes that "unnamed officials in Washington had told US media that S&P's analysis of the American economic situation was deeply flawed". Shoot the messenger then!

In part of course, the agencies are simply making up for their failings pre-2008, when their routine granting of prime and high grade ratings to what turned out to be toxic and unrecoverable debt made them look like complete patsies — and complicit patsies at that, given that companies pay them to rate them. In an echo of "quis custodiet", who will believe the agencies' credit ratings, if they have no credibility themselves? So it's only natural that, now they are finally and completely awake, they are rushing around and barking like mad, in an effort to convince their subscribers that they are worth the money.

For all the briefing and spinning in Washington, and in chancelleries around the world in what are pleased to call themselves the "advanced" economies, you have to remember one thing: these countries are all running primary deficits; they are all still getting further into debt. For all the sound and fury in Washington last week, the nub of the agreement they reached was that they would allow themselves to take on extra debt now, while cutting back a little bit on the expenditure in two years' time. That's all you need to know to figure out that in a national emergency, US politicians' time horizon shrank to just under two years.

Imagine a rich man who, when told by his bankers that his extravagant spending has outpaced even his magnificent income by some 20% per annum, decides that he can, with great difficulty and with a lot of noble self sacrifice and tears, perhaps cut that 20% deficit to 18%, and really, the bankers should be grateful that he could manage even that. There were many such men in 18th century Europe, noblemen who knew how to spend but not how to save, and without fail they left their families ruined and their estates in the hands of other, more sensible individuals.

Indeed, it all reminds me rather horribly of one of my favourite bits of Jane Austen:

But now, another occupation and solicitude of mind was beginning to be added to these. Her father was growing distressed for money. She knew, that when he now took up the Baronetage, it was to drive the heavy bills of his tradespeople, and the unwelcome hints of Mr Shepherd, his agent, from his thoughts. The Kellynch property was good, but not equal to Sir Walter's apprehension of the state required in its possessor. While Lady Elliot lived, there had been method, moderation, and economy, which had just kept him within his income; but with her had died all such right-mindedness, and from that period he had been constantly exceeding it. It had not been possible for him to spend less; he had done nothing but what Sir Walter Elliot was imperiously called on to do; but blameless as he was, he was not only growing dreadfully in debt, but was hearing of it so often, that it became vain to attempt concealing it longer, even partially, from his daughter. He had given her some hints of it the last spring in town; he had gone so far even as to say, "Can we retrench? Does it occur to you that there is any one article in which we can retrench?" and Elizabeth, to do her justice, had, in the first ardour of female alarm, set seriously to think what could be done, and had finally proposed these two branches of economy, to cut off some unnecessary charities, and to refrain from new furnishing the drawing-room; to which expedients she afterwards added the happy thought of their taking no present down to Anne, as had been the usual yearly custom. But these measures, however good in themselves, were insufficient for the real extent of the evil, the whole of which Sir Walter found himself obliged to confess to her soon afterwards. Elizabeth had nothing to propose of deeper efficacy. She felt herself ill-used and unfortunate, as did her father; and they were neither of them able to devise any means of lessening their expenses without compromising their dignity, or relinquishing their comforts in a way not to be borne.