HP to end mobile products, may sell PC division (Update)

Aug 18, 2011 By JORDAN ROBERTSON , AP Technology Writer
FILE - In this Feb. 2, 2010 file photo, the Palm Pre Plus, left, and the Palm Pixi Plus are shown in San Francisco. In a dramatic reshuffling, Hewlett-Packard Co. on Thursday, Aug. 18, 2011 said that it will discontinue its tablet computer and smartphone products and may sell or spin off its PC division, bowing out of the consumer businesses. The announcement comes just two years after spending $1.8 billion on smartphone maker Palm, which gave HP the webOS software that has been praised by critics but largely been ignored by the marketplace. (AP Photo/Jeff Chiu, File)

In a dramatic reshuffling, Hewlett-Packard Co. said Thursday that it will discontinue its tablet computer and smartphone products and may sell or spin off its PC division, bowing out of the consumer businesses.

It's one of the most extreme makeovers in the company's 72-year history and signals new CEO Leo Apotheker's most transparent move to date to make HP look more like longtime rival IBM Corp., which now makes most of its money from software and services.

The most apparent result for consumers will be the end of HP's TouchPad tablet, a sales dud, and HP-branded smartphones, also-rans in a booming market crowded with the iPhone and devices based on Google's Android system. By the end of next year, HP computers could be sold under another company's name.

HP will continue to sell servers and other equipment to business customers, just as IBM now does.

It was not immediately known whether any jobs will be cut. HP employs more than 300,000 worldwide.

A decade ago, HP emerged from a bitter fight to spend more than $24 billion on Compaq Computer, setting the stage for HP to become the world's No. 1 maker of personal computers. Now, three CEOs later, HP is changing course - hard.

The PC division is HP's biggest revenue generator but least profitable division. The move has long been rumored, but just six months ago HP dismissed reports of the possibility as "irresponsible reporting" and that PCs are "core to HP's strategy for the connected world."

The PC industry is under pressure from hot-selling smartphones and tablet computers, which have contributed to already weak consumer demand for PCs in the U.S. and Europe.

More striking is that HP plans to shutter its fledgling smartphone and tablet business just two years after spending $1.8 billion on smartphone maker Palm, which gave HP the webOS software that has been praised by critics but largely been ignored by the marketplace. It is here that HP was the victim of the Apple and Google juggernauts, as iPads and iPhones and smartphones running Google's Android software have been hot sellers, while HP devices have languished.

HP also announced that it is in talks to buy Autonomy Corp., a business software maker. Earlier, The Wall Street Journal and Bloomberg News had reported that HP planned to buy Autonomy for $10 billion, which would rank the deal among HP's biggest.

The decision to buy Autonomy also marks a change of course for HP, one that makes HP's trajectory look remarkably similar to rival IBM's nearly a decade ago. IBM, a key player in building the PC market in the 1980s, sold its PC business in 2004 to focus on software and services, which aren't as labor- or component-intensive as building computer hardware.

HP, which is based in Palo Alto, Calif., also announced its latest quarterly results an hour earlier than planned.

HP's net income increased in the fiscal third quarter, which ended July 31, but its lower-than-expected outlook for the current period weighed on the stock.

The company earned 93 cents per share in the latest quarter. That's up from 75 cents per share a year earlier. Its adjusted earnings were $1.10 per share, a penny above analyst expectations.

Revenue climbed less than 2 percent to $31.2 billion, matching analysts' average expectations, according to FactSet.

For the current quarter, HP forecast adjusted earnings of $1.12 to $1.16 per share, below analysts' expectation of $1.32 per share. Revenue should be $32.1 billion to $32.5 billion, short of analysts' estimate of $34 billion.

HP also lowered its full-year revenue outlook. It now expects revenue of $127.2 billion to $127.6 billion, down from its previous estimate of $129 billion to $130 billion. Analysts were predicting $129.1 billion in revenue.

HP's stock fell $1.88, or 6 percent, to close Thursday at $29.51. The stock fell further in extended trading to $28.79, a drop of 72 cents, or 2.4 percent. The announcement came about an hour before the close of market.

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Bookbinder
5 / 5 (1) Aug 18, 2011
The new business unit is to be called Fiorina'sFolly, Inc.
Nanobanano
not rated yet Aug 18, 2011
Market analysts on tv news are blaming this for the 5% market crash so far today.

BS.

Something in the market is being manipulated by sinister individuals and companies.

The tech sector is making more money than ever (except possibly the cable tv company,) so why the heck would the NASDAQ plummet 5 to 5.4% in one day?

Both the American firms, and their chinese and Japanese partners are bigger than ever, making more devices than ever, with 25% to 50% profit margins as a share of revenues, and they are losing stock value? Makes no damn sense.

This to me is a clear sign of some form of fraud or manipulation in the markets on a global scale.

Gold is now trading at like $1840 per ounce?

Are people insane?

They'd rather own a yellow metal brick, instead of a piece of land, or a company that actually produces goods and services?

After yesterdays(?) article about a gold bubble, people drive up the gold again today even more...

This is going to crash HARD...
Vendicar_Decarian
2.3 / 5 (3) Aug 18, 2011
This suicide won't be painless.
dogbert
1 / 5 (1) Aug 18, 2011
HP seems intent on self destruction.

WebOS was (is) and excellent phone OS which could have been marketed to other phone manufacturers or which could have been used in competitive products made by HP. HP instead let the OS languish, failed to produce any competitive products and is now going to retire its PC and smart phone business.

By By HP.
jamesrm
not rated yet Aug 19, 2011
Whats the bet Google goes after Palm, would fit Googles hunt for patents.

let the patent troll-fights begin!
COCO
not rated yet Aug 19, 2011
and we thought RIM had bad management - let us all give up without a fite
I_Am_God
not rated yet Aug 21, 2011
What is going to happen to WebOS?! I have the palm pixi and love it. The OS is perfect for smart phones. I hope someone buys the rights to it.
dogbert
1 / 5 (1) Aug 21, 2011
What is going to happen to WebOS?!


WebOs died when HP bought Palm. I don't know why HP bought Palm, but HP never had any intention of making cell phones or developing WebOs.

What is going to happen to WebOs? It will go away like anything else that is dead.

I'll miss it too. It is a very intuitive cell phone OS. Android is so fragmented that it is frustrating. WebOs does everything the same way. But it is dead.

HP is heading toward its own destruction. Why is anyone's guess.
Y8Q412VBZP21010
not rated yet Aug 21, 2011
I was with HP for almost 20 years. After Bill & Dave left the scene, it increasingly became dominated by Suits.

In any organization there's a contest between the people who want to get things done and the people who want to play bureaucratic games. Once the game-players get in control, the organization is in irreversible decline.

I will not malign HP, since they paid me generously, I learned an enormous amount, and boyo did I do a lot of playing with fun toys -- I can be nothing but grateful. But sadly I wouldn't bet it has much of a future.
MarkyMark
not rated yet Aug 21, 2011
Well here's to HP and its past successes. Seems another good old name bites the dust.
Vendicar_Decarian
1 / 5 (2) Aug 21, 2011
"What is going to happen to WebOS?' - PoorBugger

Dead. Worthless. Gone. History. Non-existence.

HP is now going to be a software company. Selling products they don't have, and are unlikely to develop.

I applaud the brilliance of HP's leadership.

Sell now.
Vendicar_Decarian
1 / 5 (2) Aug 21, 2011
"HP is heading toward its own destruction. Why is anyone's guess." - Dogbert

It's because they can't compete in the marketplace of ideas with the nations of the Pacific Rim.

The plan will now be to sell off the assets of HP over time until there is no company left.

Management has obviously decided that the parts are worth more than the company as a whole.

Vendicar_Decarian
1 / 5 (2) Aug 21, 2011
"Seems another good old name bites the dust." - Marky

Maybe that name will be sold to some Chinese toy company? Maybe the people who license the Hello Kitty franchise.