Drastic HP Pivot: Axes TouchPad, Acquires $10B Autonomy Software, May Spin Off PC Business

Only a month on the market, and the device that HP said would give Android and Apple a run for their money is already finished. Rumors were confirmed today that HP will discontinue its TouchPad tablet as well its WebOS phones. Reports indicate the company plans to instead focus on software and services, while distancing itself from hardware--HP may spin off its personal-computer business and acquire enterprise software company Autonomy for $10 billion.

Also dead, the digital magazine it presciently dubbed "Pivot."

In an earnings call following the news, HP CEO Leo Apotheker attempted to explain the chaos surrounding HP's direction. "[There] is indeed a lot of news, so let me put it in perspective," he said. "Today is about transforming HP for the future."

While acknowledging the company has had to make some "tough decisions," he was clear in saying that the "tablet effect is real," meaning consumer purchasing habits are shifting away from PCs and toward the tablet market. Even still, HP's TouchPad "has not gained enough traction" and is "not meeting expectations," and will be discontinued along with other WebOS devices. The Personal Systems Group, which oversaw the TouchPad, will now be separated from HP, and possibly sold off, so HP can sharpen its focus on cloud solutions and software.

To that end, Apotheker said the company's WebOS software has been successfully launched, and called it an "elegantly designed" product. "Therefore, we are exploring options for how best to optimize WebOS going forward," he said--that could possibly mean licensing out the OS to other device makers, whether that means it is embedded in cars, appliances, or other mobile gadgets.

Recognizing the challenges HP faces, Apotheker lowered the company's outlook for next quarter. "I'm taking ownership for these decisions," he said. Apologizing to investors, the HP CEO added, "I feel your pain."

No doubt a tough earnings call for HP, but the harshest damage may come for company's brand. Acquiring Palm for $1.2 billion, investing a year to build smartphones and tablets, spending millions of dollars marketing and pushing the products out, only to shut down the TouchPad after a few weeks? Its reputation not only with consumers but with retailers such as Best Buy--which was reportedly frustrated by abominable TouchPad sales--is at significant risk.

"We are focusing on what needs to be fixed, and what needs to be shut down, and what needs to be separated," Apotheker said.

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2 Comments

  • Tony Wasserman

    HP has long been King Midas in Reverse, especially where software is involved.  No one comes close to them in value destruction: Verifone, Bluestone Software, Mercury Interactive, Palm, the PocketPC/Jornada, and more, with the special Fiorina Award for Compaq, which became HP's Yugo brand, signifying low price and low quality. Autonomy customers should start looking for alternatives now, since they will probably only have 12-18 months after the acquisition before all of the talented people depart, HP tires of their shiny new acquisition, and the Autonomy products are shifted to "maintenance mode", supported by a team in Bengaluru. 

  • Brian Fergusson

    This seems like the first step in the oft-repeated joke about the 3 envelopes: 1) blame your predecessor; 2) reorganize; 3) prepare 3 envelopes...