Safin
Skilled
Hewlett-Packard Co. has decided to stop selling Apple Computer Inc. 's popular iPod portable music players, abruptly ending a rare partnership that lasted less than two years, the firms said Friday.
For Apple, the breakup ends an alliance that gave the Cupertino firm access to HP's much wider retail presence, including Radio Shack, Wal-Mart and Costco.
For HP, it means the company won't have a portable music player to sell for about a year, leaving a gaping hole in its lineup of digital entertainment products that includes digital cameras and flat-panel TVs. That's because of a noncompete clause in the original deal with Apple that prohibits HP from developing or marketing a music player that's competitive with the iPod until August 2006, said Ross Rubin, an analyst at the NPD Group industry research firm.
Neither HP spokesman Ross Camp nor Apple spokeswoman Nathalie Kerris would comment Friday on the prohibitive clause. However, both confirmed the two firms are parting ways.
"HP has decided that reselling iPods does not fit within the company's current digital entertainment strategy," Kerris said. "As a result, HP plans to stop reselling iPods by the end of this September."
Camp said HP will honor outstanding warranties and support services on all iPods sold by HP.
HP also will continue to include Apple's iTunes jukebox software in its PCs, he said.
However, Camp refused to elaborate on why HP is ditching the iPod deal.
"One thing is that HP remains fully committed to our overall digital entertainment strategy, which still includes digital TVs, digital entertainment centers, Windows Media Center PCs and entertainment PCs," he said.
For HP, the move to dump the iPod is part of the company's overhaul that started in February with the firing of Carly Fiorina as chief executive and the restructuring by her replacement, Mark Hurd. The reworking of HP includes more than 14,000 layoffs announced last week.
"Mark Hurd is cleaning house," said Roger Kay, an analyst at Endpoint Technologies Associates. "He noticed it wasn't a great deal for HP and they weren't making any money on it."
In fact, many analysts were skeptical of the partnership once the shock of the announcement made by Fiorina at the Consumer Electronics Show in January 2004 wore off.
They wondered why HP, a company that markets itself as inventive, would rebrand and sell someone else's product.
"I thought it was a strange arrangement to begin with because HP (has a strong) engineering culture, and they have their own ideas. I was surprised that they were just reselling somebody else's product," said Mark Stahlman, a Wall Street analyst at Caris & Co.
And any hope that HP's version of the iPod would have some differences from what Apple was selling was dashed eight months later when HP finally unveiled its "HP-branded'' iPod. The new devices essentially were identical to what Apple was already selling.
And when HP started selling the players in September, the lineup didn't include the colorful and more popular iPod Minis. HP started selling the Minis only just this summer. Also, while Apple began selling its flash memory-based iPod Shuffle in January, HP only started selling them earlier this month.
With the number of HP-branded iPods making up about 5 percent of overall iPod sales, Apple probably won't be hit hard from losing HP as a partner, analysts said.
"Apple's bigger issue on iPods is competition from other MP3 player- makers," Kay said.
Although Apple enjoys a commanding lead with more than 75 percent market share, competition is heating up with a number of companies, including consumer electronic heavy hitters like Sony and Samsung, continuing to churn out new music players, he said.
Apple shares dipped $1.15, or 2.63 percent, to close Friday's regular trading at $42.65. HP shares gained 13 cents, or 0.53 percent, to close at $24. 62.
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For Apple, the breakup ends an alliance that gave the Cupertino firm access to HP's much wider retail presence, including Radio Shack, Wal-Mart and Costco.
For HP, it means the company won't have a portable music player to sell for about a year, leaving a gaping hole in its lineup of digital entertainment products that includes digital cameras and flat-panel TVs. That's because of a noncompete clause in the original deal with Apple that prohibits HP from developing or marketing a music player that's competitive with the iPod until August 2006, said Ross Rubin, an analyst at the NPD Group industry research firm.
Neither HP spokesman Ross Camp nor Apple spokeswoman Nathalie Kerris would comment Friday on the prohibitive clause. However, both confirmed the two firms are parting ways.
"HP has decided that reselling iPods does not fit within the company's current digital entertainment strategy," Kerris said. "As a result, HP plans to stop reselling iPods by the end of this September."
Camp said HP will honor outstanding warranties and support services on all iPods sold by HP.
HP also will continue to include Apple's iTunes jukebox software in its PCs, he said.
However, Camp refused to elaborate on why HP is ditching the iPod deal.
"One thing is that HP remains fully committed to our overall digital entertainment strategy, which still includes digital TVs, digital entertainment centers, Windows Media Center PCs and entertainment PCs," he said.
For HP, the move to dump the iPod is part of the company's overhaul that started in February with the firing of Carly Fiorina as chief executive and the restructuring by her replacement, Mark Hurd. The reworking of HP includes more than 14,000 layoffs announced last week.
"Mark Hurd is cleaning house," said Roger Kay, an analyst at Endpoint Technologies Associates. "He noticed it wasn't a great deal for HP and they weren't making any money on it."
In fact, many analysts were skeptical of the partnership once the shock of the announcement made by Fiorina at the Consumer Electronics Show in January 2004 wore off.
They wondered why HP, a company that markets itself as inventive, would rebrand and sell someone else's product.
"I thought it was a strange arrangement to begin with because HP (has a strong) engineering culture, and they have their own ideas. I was surprised that they were just reselling somebody else's product," said Mark Stahlman, a Wall Street analyst at Caris & Co.
And any hope that HP's version of the iPod would have some differences from what Apple was selling was dashed eight months later when HP finally unveiled its "HP-branded'' iPod. The new devices essentially were identical to what Apple was already selling.
And when HP started selling the players in September, the lineup didn't include the colorful and more popular iPod Minis. HP started selling the Minis only just this summer. Also, while Apple began selling its flash memory-based iPod Shuffle in January, HP only started selling them earlier this month.
With the number of HP-branded iPods making up about 5 percent of overall iPod sales, Apple probably won't be hit hard from losing HP as a partner, analysts said.
"Apple's bigger issue on iPods is competition from other MP3 player- makers," Kay said.
Although Apple enjoys a commanding lead with more than 75 percent market share, competition is heating up with a number of companies, including consumer electronic heavy hitters like Sony and Samsung, continuing to churn out new music players, he said.
Apple shares dipped $1.15, or 2.63 percent, to close Friday's regular trading at $42.65. HP shares gained 13 cents, or 0.53 percent, to close at $24. 62.
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