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HP kills TouchPad and signals end of its PC era

HP TouchPad

By Reuters

Posted on 19 Aug 2011 at 07:40

HP is set to spin off the world's largest PC business, part of a wrenching series of moves away from the consumer market.

That includes killing off its new tablet and buying British software company Autonomy for as much as $11.7 billion.

The moves underscore the problems plaguing PCs and devices, HP's core business, and a decade-long search for direction by the original Silicon Valley garage startup, whose "HP Way" was once a model for businesses.

HP is at a critical point in its existence and these changes are fundamental to the success we all want

HP also plans to kill WebOS-based phones and the TouchPad tablet, which was launched in June but has failed to excite consumers.

HP's third-largest acquisition ever and its potential departure from the PC arena sets in motion a transformation that recalls IBM's overhaul of the last decade.

The barrage of news masked a sharp reduction in HP's estimates for full-year revenue and earnings that sent its shares down 6.1% to a 52-week low.

HP chief executive Leo Apotheker is responding to mounting pressure to fire up growth just as global economic and tech-spending outlooks darken. Like other PC makers, it is struggling to come up with an answer to Apple's iPhones and iPads, which are gobbling up PC market share.

"HP is at a critical point in its existence and these changes are fundamental to the success we all want," Apotheker told analysts on a conference call.

Be like IBM

HP "is saying 'I want to be more like IBM.' They divested their PC business and they got more involved in software," said FBN Securities analyst Shelby Seyrafi.

"The PC industry is a very challenged one because of the slow growth in that sector. For those companies like HP which don't have a strong tablet offering, they are victims of the encroachment of Apple's iPads and tablets on their notebook business. So they're vulnerable to losing share."

The acquisition of cloud search-software specialist Autonomy, which analysts say may draw rival bids, marks its boldest foray into the software and technology services after Apotheker came on board with a mandate to drive innovation.

"HP is recognising what the world has recognised, which is hardware in terms of consumers is not a huge growth business anymore," said Michael Yoshikami, chief executive of YCMNET Advisors, a minor shareholder in HP. "It's not where the money is. It's in keeping with the new CEO's perspective that they want to be more in services and more business oriented."

Bold move

Speculation has swirled for months that HP was no longer keen on keeping a PC business struggling with low growth and single-digit margins.

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User comments

Sad day - but not the end - I hope

:(

I truly hope WebOS will live on somehow.

Somebody somewhere must see those Palm patents as valuable fodder - Samsung wake up and smell the coffee.

Would love to see an SG2 running WebOS

By nicomo on 19 Aug 2011

Sad indeed

I hate seeing such a clever and beautiful interface fail.

WebOS is wonderful and so much nicer than the dull grid of icons of iOS or Android.

Much like WP7 it is different, and a better thought through way of using a smartphone than just dumping the desktop paradigm on a phone.

By Grunthos on 19 Aug 2011

Wouldn't trust HP's signals on anything...

They paid 1.8 billion dollars for Palm only 18 months ago and now they've effectively killed the business. I think it says more about the desperatly dire state of the HP's management than it does about the PC business.

By rjp2000 on 19 Aug 2011

That's a damn shame..

Of all the tablet OS's, WebOS was the one I most wanted to succeed (if not atleast effectly compete against iOS).

HTC is currently the only major manufacturer without their own OS. Now wouldn't it be great if they picked it up?

By ihsan on 19 Aug 2011

good riddance

the worst computers, the worst consumer/support website, the worst drivers and the ABSOLUTE worst customer service on god's green earth.

By gavmeister on 19 Aug 2011

Apple fan here

saying I agree it is really sad and I hope somebody picks up Web OS. I was a long term fan of Palm and in Web OS they turned out something really good but didn't have the funds to bring it to market properly.

I think it's good for Apple to have quality competition.

Also I agree about the management of HP.

By kaneclem on 19 Aug 2011

Confussed

So HP want in on the software business but have just killed off the OS it bought for over a billion $

I'm not surprised though, since HP bought Palm they seem to have forgotten why they did it in the first place.

They released boring hardware, then a printer based on Android and then an expensive buggy tablet. They have tried to follow this up with a boring phone thats been delayed more times than British Rail ever did.

By JStairmand on 19 Aug 2011

@gavemeister

You've obviously never owned an Acer PC, HP is sweetness and light by comparison.

By milliganp on 19 Aug 2011

Change of Leadership at HP

HP has had a change at the top and lost a CEO who relentlessly reduced company costs so that they could turn a profit in the low margin PC business.
Now they are led by someone from the corporate software market which has a very different model.
There is now no single vendor who covers desktop-> data centre and PCs are now just seen as a low cost access device.
In 3 days we've had results from 4 PC manufacturers, Acer has seen reduced sales, Dell have refocussed outside commodity consumer PCs and only Lenovo seem to be making money.
Perhaps the cliff which is the "end of PCs as we know them" is slightly closer than we admit.

By milliganp on 19 Aug 2011

Unsustainable race to the bottom..

I think what everyone in the PC industry somehow lost sight of in their rediculous competition towards lower costing PC's, is that they've somehow got to make money off these things..

And on top of the hole they've dug themselves into, they're also got the 'Post-PC' devices to content with. Oh dear..

By ihsan on 19 Aug 2011

OPPORTUNITY

Could this be the opportunity UK firms need to improve their market visibility and make a mint off PC sales?!?! If you need money ask Dragons Den!!!

By anthonysjones on 19 Aug 2011

Falling PC sales can't be blamed entirely on tablets

I'm not sure you can say for certain that people aren't buying PCs BECAUSE they're buying iPads.

Since the arrival of the Core2Duo, the need for a new PC every few years has been less evident. Many 5 year old PCs are doing very nicely indeed, whereas 10-15 years ago you'd be itching for a new one after 3. There simply isn't a compelling reason for many people to upgrade, they have some spare cash and spend it on a tablet.

Of course it's quite easy to blame your misfortune on 3rd party bogeymen rather than admit management deficiencies.

By SirRoderickSpode on 19 Aug 2011

@SirRoderickSpode

Like I said, race to the bottom.. It's a failing of the PC industry to (dare I say it..) 'innovate' in the PC space that has led to it's decline..

Instead of focusing on providing a significantly improved overall user experience or inventing compelling reasons to get users to upgrade, they've focused too much on cutting costs..

I guess HP management's third monumental failing is in dropping the ball on WebOS tablets. But I guess if you can't stand the heat..

By ihsan on 19 Aug 2011

Badder to Worser

I felt Microsoft was a bit off-key buying Skype for $8.5 Billion. The price may have been far too high but at least it fitted in with future themes Microsoft might plan in the services sector.
HP's over the top price in purchasing "Autonomy" together with an announcement that HP is leaving the PC hardware market is astounding.
The market might be difficult at present but HP remains the market leader. What they do not do well is Serve their customers AS THEY SHOULD.
As far as I can envisage, this might prove to be horrific planning because they are about to rip the material they know up and go onto a cliff edge. HP's edge will become software based. The present edge of that cliff is Cloud Computing, Microsoft Google and the other front leaders which are already ahead in the field. In business it is no good trying to play catch-up to the leaders if you are not EXPERT IN THAT FIELD.
Money aside, they should have thrown out their present business structure, remodelling it into an improved one for guaranteed success.
Satisfied customers and improved customer relations would have been a better investment.
I hope a better customer service base will be developed: (My experience was) HP's online assistance was often that a USER help another USER... Not HP.

By lenmontieth on 20 Aug 2011

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