Hewlett-Packard to end mobile businesses

The HP TouchPad was the company’s primary showpiece during ISTE's ed-tech trade show in late June.

In a dramatic reshuffling, Hewlett-Packard Co. is discontinuing its tablet computer and smart-phone products and might sell or spin off its PC division.

The surprise move comes a year after HP purchased mobile device maker Palm Inc. for $1.2 billion—and just seven weeks after HP touted its new TouchPad tablet as a competitor to Apple’s iPad at the nation’s largest ed-tech industry trade show.

HP’s Aug. 18 announcement is one of the most striking 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.

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 its least profitable division. The move has long been rumored, but just six months ago HP dismissed reports of the possibility as “irresponsible reporting” and said that PCs are “core to HP’s strategy for the connected world.”

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

Even more striking is that HP plans to shutter its fledgling smart-phone and tablet business just a little more than a year after spending $1.2 billion on smart-phone maker Palm, which gave HP the webOS software that has been praised by critics but largely been ignored by the marketplace. While iPads, iPhones, and devices running Google’s Android software have been hot sellers, HP devices largely have languished.

HP thought it could turn that around with its HP TouchPad tablet, introduced in February and available starting last month. The TouchPad had security and manageability from the cloud—it pulled applications down from the web based on the user’s profile, rather than having apps reside on the device itself. The HP TouchPad was the company’s primary showpiece during the International Society for Technology in Education’s ed-tech trade show in late June.

During the ISTE conference, HP also claimed that it was putting webOS on all of the devices it made going forward, including laptops and PCs—so that any app developed for webOS would work on any kind of device, the company explained. However, HP’s Aug. 18 announcement represents a sharp U-turn in strategy.

An HP spokeswoman said the company will continue to focus on PC products for the education market, at least for the time being. She did not answer questions about how many TouchPad tablets had been sold to schools, or whether webOS devices that schools currently own would be supported, before press time.

HP also announced that it is in talks to buy Autonomy Corp., a maker of business software. 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 largest.

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 shares fell $1.36, or 4.4 percent, to $30.01 in afternoon trading.

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