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HP Smartphone: Good Idea, Bad Idea, or Just Pure Fiction?

Chris Lau, Kapitall: Time is running out for HP to release a smartphone this year. But would that even be a good idea?

If rumors that Hewlett-Packard ( HPQ ) could enter the smartphone market are true, it might be a sign that the company is headed in the right direction.

Even if the rumor turns out to be false, sentiment clearly shifted favorably for HP. Bearishness was at its worst very recently, in November 2012, when HP shares bottomed out at around $12.50. Since then, the company reduced its debt, improved its position in the PC market, and its shares are headed towards $30.

[Read more from Kapitall: 3 Mobile Stocks to Consider as Americans Double Down on Data]

HP maintained its relevance as a hardware supplier for PCs by offering Chromebooks. Though, HP’s Chromebook 11 had to be recalled due to fire and burn risks, sales of laptops running Google’s (GOOG) Chrome OS could potentially have been strong during this holiday season. HP also sold tablets running Android.

Click on the interactive charts below to see data over time. Sourced from Zacks Investment Research.

HP smartphones?

If HP enters the smartphone market, it may choose to start in emerging markets. China, for example, would be a good starting point for HP. Smartphone usage in the region is dominated by small-sized Androids.

If HP releases phablet devices (with screens at between six and seven inches) at a competitive price, that would also give the hardware maker some traction in the smartphone market.

And while webOS would give an HP smartphone a unique position in the market, it would also be costly. HP will most likely sell an Android-based smartphone in the beginning. It could then pre-install HP-based printing apps on the device.

HP still has a long way to go before it reaches previous highs, but the company is stabilizing its consumer divisions. By embracing Android, HP does not need to spend much of its resources in building tablet, smartphone, and PC markets.

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