Hewlett-Packard will spin off its PC business, and the future of WebOS is now looking dark indeed, according to reports in the PC press. The sauciest headline so far has been "HP to PCs: Drop dead." As part of an HP press release about an acquisition of a UK software firm, the company leaked out early results from its Q3 (scant revenue growth, but beating analyst estimates on profits.) It showed that PCs are the biggest slice of the HP revenue pie (above, click for detail). Never mind that May-July action, though.
HP also reported that it plans to announce that its board of directors has authorized the exploration of strategic alternatives for its Personal Systems Group (PSG). HP will consider a broad range of options that may include, among others, a full or partial separation of PSG from HP through a spin-off or other transaction.
In this karma-coming-home moment, the half of HP's shareholders who said in 2001 buying Compaq was bad business -- well, now HP believes they're probably right. What HP got out of that decade was Compaq's ProLiants, which probably will remain in HP's Enterprise Servers, Storage & Networks division. Even though they're Intel Xeon-based Windows systems, most of them.
What's dead looks to be WebOS, and for sure its hardware. "HP reported that it plans to announce that it will discontinue operations for webOS devices, specifically the TouchPad and webOS phones. HP will continue to explore options to optimize the value of webOS software going forward." By the end of October that's the end of the HP TouchPad as we know it, and the Palm heritage of smartphones, too. HP hasn't had a flameout of a computer this quick since, well, never -- not even the crude launch of the 3000 in 1972, the one that made Dave Packard swear he was right about not needing to be in the computer business. At least the 3000 got 90 days or so before HP backed it out of the market.
(A swing through Costco today showed plenty of TouchPads on the shelves at $479 for the big-storage 32GB model. HP wanted to sell a TouchPad tablet with half as much storage at the same price just six weeks ago. You're glad there's an easy return policy at Costco, if you've shopped there today. Imagine the markdowns to come.) At least HP got to attempt comedy with its Russell Brand commercials. Nobody in financials was laughing at the silence of sales, however.
Bloomberg and The Wall Street Journal were both guessing this morning that PCs will be a prior HP product very soon. As I pointed out yesterday, products like a laptop, a tablet or a printer can help an enterprise vendor get a foot in the door. That's what HP's been saying all year while beating the WebOS drum. The laptop world is working well for HP right now, and you can read about the TouchPad troubles in yesterday's story. WebOS still belongs to HP now. It looks likely to be licensed to anybody who'd want it. HP may sell off its PC operations, just like IBM did. Many years ago.
New printers cannot be presented as groundbreaking technology as easily as a tablet or a clever laptop. The HP spinoff would not include smartphones. So much for the superior advantage of Flash and "true" multitasking. Consumers didn't even want to do one thing at a time with the Pre/TouchPad products: buy them. So while HP's had a fabulous success in its last spinoff -- the release of instrument making into an Agilent that's a better performer than its ancestor -- it must now consider how a world where "consumers use of PCs is changing" will change the chances of duplicating that success.
HP's not the kind of company that would use a quarterly report briefing to announce such a big move. They'll be peppered with analyst questions, though. (And we've learned now that the company is exploring all options for its PC futures, including a nothing-changes decision. WebOS hardware is a nothing-doing future, and the software is under consideration for how HP might make back just some of the $1.2 billion it spent on Palm last year.)
There's profitability to improve if HP cuts loose its tightest-margin business. IBM, after all, doesn't need PCs anymore to compete and win in the enterprise. HP's stock is in obvious need of the rebound that never happened after the company outsted Mark Hurd last summer.
HP said its moving to close a deal to buy the UK software technology firm Autonomy for $10 billion, but there's no word on when that deal is closing. A spinoff of the HP PC business might be related to that acquisition, or not. $10 billion is a lot of HP M&A money. The last time HP uncorked a PC deal of the caliber of a spinoff was its 2001 buyout of Compaq. That deal that led to the departure of the 3000 from HP's product lineup. Maybe the opposite move -- cutting a business loose -- will have a positive impact on the hardware that remains under the PC badge, such as its Integrity line.
That would be good news for HP-UX sites, those migrated from the 3000 or those considering the future of the hardware. It would be a great counter to the Oracle argument that HP's got its eye on Intel Xeons, not Itanium. But cutting loose PCs might be a reason to drive WebOS into the worldwide market it needs to survive. An HP dedicated to software could license WebOS, beefing up a focus on software that would please CEO Leo Apotheker. Like every HP executive who talked at the recent HP Discover conference, the CEO has enjoyed saying that PCs helped HP offer a full IT suite to large business customers.