HP to Kill Off webOS & Get Out of PC Business

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HP has just made an announcement that will potentially shake up the industry as much as the recent Google-Motorola deal. The company has confirmed its plans to spin off its PC manufacturing business, as well as drop webOS from its portfolio, in an effort to focus on the enterprise software business.

While it was only a couple of days ago that we were discussing how HP was likely in plans to put webOS into a variety of devices, HP has made an Earth-shaking announcement just this afternoon, confirming earlier speculations that it will be spinning off its computer business. The company has confirmed its planned acquisition of enterprise software Autonomy Corporation PLC, along with its announcement of 3Q 2011 revenues. But it wasn’t just that confirmation that will be important for HP and the tech industry in the days to come. HP has actually announced that it plans to spin off its PC business.

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.

The even bigger news — at least for smartphone and tablet industry watchers like us — is that webOS development will cease to contiune, as HP plans to explore options and alternatives for the smartphone and tablet OS’ value.

In addition, 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.

All this in the light of HP’s announcement of a $31.2 billion preliminary earnings in its 3rd fiscal quarter of 2011, compared with $30.7 billion last year, resulting in $0.93 earnings per share.

Is HP finally conceding to the likes of Apple’s iOS and Google’s Android operating system? Recall that the company acquired Palm to gain access to webOS and its potential market in mobile devices. While webOS had been promising in terms of actually integrating mobile and embedded devices to web services, it didn’t make as much as a dent in the market, what with the popularity of the iPhone, iPad and Android. Or was it just too late in the game to make any significant difference?

The looming question here is why HP would want to exit the hardware business, when it has been the leading brand for so long — in fact, the top-selling PC brand in the US, at least in volume. Maybe HP knows something we don’t. The market for PCs is, indeed, being overtaken by mobile devices, and it seems HP wants a business that can offer better value than hardware and computer systems. Will Enterprise be the magic bullet for HP?

Full Press release available below:

HP Confirms Discussions with Autonomy Corporation plc Regarding Possible Business Combination; Makes Other Announcements

PALO ALTO, Calif.–(BUSINESS WIRE)–HP (NYSE: HPQ) today commented on the recent announcement by Autonomy Corporation plc (LSE: AU.L). HP confirms that it is in discussions with Autonomy regarding a possible offer for the company.

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 addition, 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.

HP today announced preliminary results for the third fiscal quarter 2011, with revenue of $31.2 billion compared with $30.7 billion one year ago.

In the third quarter, preliminary GAAP diluted earnings per share (EPS) was $0.93 and non-GAAP diluted EPS was $1.10, compared with third quarter fiscal 2010 GAAP diluted EPS of $0.75 and non-GAAP diluted EPS of $1.08. Non-GAAP diluted EPS estimates exclude after-tax costs related primarily to the amortization of purchased intangible assets of approximately $0.17 per share and $0.33 per share in the third quarter of fiscal 2011 and fiscal 2010, respectively.

For the fourth fiscal quarter of 2011, HP estimates revenue of approximately $32.1 billion to $32.5 billion, GAAP diluted EPS in the range of $0.44 to $0.55, and non-GAAP diluted EPS in the range of $1.12 to $1.16. Non-GAAP diluted EPS guidance excludes after-tax costs of approximately $0.61 to $0.68 per share, related primarily to restructuring and shutdown costs associated with webOS devices, the amortization and impairment of purchased intangibles, restructuring charges and acquisition-related charges.

HP estimates full-year FY11 revenue will be approximately $127.2 billion to $127.6 billion, down from its previous estimate of $129 billion to $130 billion. FY11 GAAP diluted EPS is expected to be in the range of $3.59 to $3.70, down from its previous estimate of at least $4.27, and FY11 non-GAAP diluted EPS is expected to be in the range of $4.82 to $4.86, down from its previous estimate of at least $5.00. FY11 non-GAAP diluted EPS estimates exclude after-tax costs of approximately $1.16 to 1.23 per share, related primarily to restructuring and shutdown costs associated with webOS devices, the amortization and impairment of purchased intangibles, restructuring charges and acquisition-related charges.