HP discontinues all webOS devices, may exit PC business altogether

Just a year after it bought Palm for $1.2 billion, HP has given up and is discontinuing all webOS phones and tablets, including the Pre and TouchPad devices.  The strategic turnaround is mentioned in the “other announcements” section of a press release saying HP may spin off its whole Personal Systems Group (PCs, mobile devices, and storage)– itself quite a bombshell:

“In addition, HP reported that it plans to announce that it will discontinue operations for webOS devices, specifically the TouchPad and webOS phones. HP will continue to explore options to optimize the value of webOS software going forward.“

It’s unclear what HP plans to do with webOS going forward– license or sell the OS to other phone manufacturers, open source it, or just kill it completely.  But by announcing the move this way, HP has pretty much guaranteed that developers and enthusiasts alike will begin to abandon the platform.

These moves are part of CEO Leo Apothekar’s plan to move HP towards an IBM-like model– going from low-margin personal computers and devices into high-margin enterprise software and services.  The  also confirmed that HP is acquiring Autonomy Corporation plc, another B2B software vendor, for $11.7 billion.

Ultimately, these moves make sense given Apothekar’s past as the head of SAP, a German enterprise software giant– he’s clearly much more comfortable selling software licenses to large companies than competing with the likes of Apple in the consumer space.  Yet we can’t help but see the move as severed misguided.  HP is the largest seller of PCs in the world and has a deeper supply chain and global distribution network than anyone else in the consumer electronics industry.  Further, Apothekar’s inspiration, IBM, has always focused on business first, consumer second, and thus saw the PC business as a diversion from its core, but HP’s history is much more focused on consumers.

HP’s newer PCs, most visibly the Envy line of laptops that resulted from the VoodooPC acquisition, show that the company can successfully compete against Apple in premium computers.  The TouchPad tablet has not been an instant success, but the webOS software has received broad acclaim, and who knows– greater investment in hardware and developer engagement, as HP promised a year ago, could have resulted in a viable mobile competitor.  HP’s current leadership seems to have a fundamental impatience that is incompatible with success in the consumer space.

Even before this announcement, HP displayed a lack of strategic clarity with webOS, alienating Microsoft by announcing it’d ship webOS on all its Windows PCs and then backpedaling on the decision.  While Apothekar thinks the move to abandon webOS will help HP in the enterprise space, credibility is key in that business, and how credible is a company that gave up, after just one year, on a $1.2 billion acquisition whose technology was supposedly critical to the company’s future?  Further, the move seems to all but ignore the recent trend of consumerization– even enterprise buying decisions are now being influenced by consumer devices.

Perhaps HP has something magical up its sleeve, but we’re going to join the bandwagon of “#hpfail” posters on Twitter and say that giving up on the entire consumer computing business — PCs, smartphones, tablets, and peripherals (except printers) — would be a sad and serious misstep for one of the world’s strongest consumer electronics brands.

Update: Rahul Sood, founder of VoodooPC, has some interesting thoughts on HP’s move here and here.

Update 2: This graph from AllThingsD indicates a lot of what’s wrong at HP:

Press release after the break.

August 18, 2011 03:02 PM Eastern Daylight Time
HP Confirms Discussions with Autonomy Corporation plc Regarding Possible Business Combination; Makes Other Announcements

PALO ALTO, Calif.–(BUSINESS WIRE)–HP (NYSE: HPQ) today commented on the recent announcement by Autonomy Corporation plc (LSE: AU.L). HP confirms that it is in discussions with Autonomy regarding a possible offer for the company.

HP also reported that it plans to announce that its board of directors has authorized the exploration of strategic alternatives for its Personal Systems Group (PSG). HP will consider a broad range of options that may include, among others, a full or partial separation of PSG from HP through a spin-off or other transaction.

In addition, HP reported that it plans to announce that it will discontinue operations for webOS devices, specifically the TouchPad and webOS phones. HP will continue to explore options to optimize the value of webOS software going forward.

HP today announced preliminary results for the third fiscal quarter 2011, with revenue of $31.2 billion compared with $30.7 billion one year ago.

In the third quarter, preliminary GAAP diluted earnings per share (EPS) was $0.93 and non-GAAP diluted EPS was $1.10, compared with third quarter fiscal 2010 GAAP diluted EPS of $0.75 and non-GAAP diluted EPS of $1.08. Non-GAAP diluted EPS estimates exclude after-tax costs related primarily to the amortization of purchased intangible assets of approximately $0.17 per share and $0.33 per share in the third quarter of fiscal 2011 and fiscal 2010, respectively.

For the fourth fiscal quarter of 2011, HP estimates revenue of approximately $32.1 billion to $32.5 billion, GAAP diluted EPS in the range of $0.44 to $0.55, and non-GAAP diluted EPS in the range of $1.12 to $1.16. Non-GAAP diluted EPS guidance excludes after-tax costs of approximately $0.61 to $0.68 per share, related primarily to restructuring and shutdown costs associated with webOS devices, the amortization and impairment of purchased intangibles, restructuring charges and acquisition-related charges.

HP estimates full-year FY11 revenue will be approximately $127.2 billion to $127.6 billion, down from its previous estimate of $129 billion to $130 billion. FY11 GAAP diluted EPS is expected to be in the range of $3.59 to $3.70, down from its previous estimate of at least $4.27, and FY11 non-GAAP diluted EPS is expected to be in the range of $4.82 to $4.86, down from its previous estimate of at least $5.00. FY11 non-GAAP diluted EPS estimates exclude after-tax costs of approximately $1.16 to 1.23 per share, related primarily to restructuring and shutdown costs associated with webOS devices, the amortization and impairment of purchased intangibles, restructuring charges and acquisition-related charges.

HP will host a conference call with the financial community today at 2 p.m. PT / 5 p.m. ET to discuss these announcements well as HP’s third quarter 2011 financial results. The call is accessible via an audio webcast at www.hp.com/investor/2011q3webcast.

About HP

HP creates new possibilities for technology to have a meaningful impact on people, businesses, governments and society. The world’s largest technology company, HP brings together a portfolio that spans printing, personal computing, software, services and IT infrastructure at the convergence of the cloud and connectivity, creating seamless, secure, context-aware experiences for a connected world. More information about HP is available at http://www.hp.com.