It’s official; HP’s TouchPad, featuring webOS 2.0, had a lifespan nearly as short as the failed Microsoft Kin phones. HP today announced after the markets closed that they were immediately discontinuing the TouchPad tablet. Insiders claim that as many as 250,000 TouchPads remain in the warehouses of retailers like BestBuy and Wal-Mart, unsold. HP will also cease active development of webOS, the underlying software for the TouchPad as well as the Palm Pre family of smartphones and Veer.
While they left open the possibility that they would sell or potentially license webOS to someone else to continue on with, HP didn’t indicate there was any specific parties with interest. Or that they necessarily would do so at all, only that it may be possible in the future. There’s no question that this spells doom and gloom for the unsold TouchPad inventory regardless of how many there actually are—people now know the likelihood of future software updates for the device is about nil.
At the same time, HP announced they were considering spinning off their profitable Personal Systems Group (PSG)—their PC business. For 2010, the PSG, covering PCs and laptops, increased their revenue 4%, bringing home a total of $10.3B for HP with $565M in profits. HP also holds the dominant market share in home PCs, and has been increasing their presence and revenues in the commercial (business use) space. For the first quarter of 2011, HP’s PSG saw only a 1% decline overall; an 11% jump in commercial despite a 12% decline in personal sales. Despite this, PSG delivered what HP declared to be a record profit while retaining their lead in PC units shipped.
Why?
So why is HP considering abandoning PCs—or more accurately, spinning the business off? It seems that it’s not entirely clear to most anyone inside or outside of HP. HP’s website offered a press release with the title of “HP Confirms Discussions with Autonomy Corporation plc Regarding Possible Business Combination; Makes Other Announcements“. Exiting the PC business only warrants a “Makes Other Announcements”? O-kay then. Let’s not forget that HP is also Compaq; a company they acquired in 2002 and paid an estimated $25 Billion for; a company they acquired to increase their presence and power in the PC space against Dell and IBM.
HP’s general statements have been that they want to focus more on software and enterprise. HP is one of the companies leading the push to the “cloud” for both consumers and enterprise, making it a prominent feature of the TouchPad and offering complete “cloud in a box” solutions for enterprises—something I was personally briefed on last year. There’s no denying that competition in the PC space is stiff, even after IBM sold their PC business to Lenovo. Dell remains the 800-pound gorilla, and there have always been dozens of specialty and boutique builders, not to mention thousands of small local shops.
But HP is (or now was) the market leader in PCs if you go by market share. PSG has been profitable. They just announced an all-new line of home PCs not that long ago. And they are Intel and AMD’s biggest customer by volume. (Yes, both AMD and Intel.) Details on plans are scarce, and not expected to be available any time soon. Per the official announcement, HP is “[exploring] strategic alternatives” which will examine a “broad range of options”. Spinning PSG off is only one option, but usually when companies say this, it’s just a matter of time.
Oh, and what of Autonomy? The rumor mill places the price tag for this UK-based business at a cool $10 billion (update: confirmed at $10.2B). Autonomy has been around since 1996, and describes themselves as the “leader in Meaning-based computing.” They were born out of research done at Cambridge University, and offer products for enterprise search and knowledge management, using adaptive pattern recognition, Bayes algorithm and other techniques. They’ve acquired a string of firms since 2005 to add to their products and grow the business successfully. Autonomy is an FTSE100 and FTSE techMARK 100 listed company with revenues of over $800 million for 2010. But it’s not a done deal yet—HP and Autonomy have only disclosed that they are in talks, with neither side confirming the amount or even that a deal has been struck yet.
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