HP is to discontinue its TouchPad tablet and webOS phones as part of a corporate reorganisation that will see the world’s biggest IT company reduce its manufacturing base in favour of software and services.
HP CEO Leo Apotheker told analysts yesterday that the TouchPad and webOS phones had not met internal milestones and financial targets. This lent credibility to rumours that big retailers like Best Buy had sold less than 10% of their TouchPad stocks, and were seeking to return the rest and get their money back.
HP acquired Palm and its webOS operating system for £675m ($1.2bn) in April last year as part of a plan to get into the rocketing market for smartphones and tablets. However, its webOS-based TouchPads only went on sale in July.
Ditching the TouchPad and phones is part of a wider plan to sell or spin off HP’s $41bn personal systems division, which contributes around 31% of HP’s turnover.
For Q3 the division’s continued to lead the market in unit sales, revenue and profit share. But revenue declined 3% year on year, delivering a 5.9% operating margin, Apotheker said.
This compares to profit margins of 13.5% in services, 13% in servers, 19.4% in software, and 14.7% in imaging and printers.
Apotheker said HP would continue to explore options to optimise the value of webOS software. Earlier this year he spoke of licensing it to other manufacturers such as Taiwanese mobile phone maker HTC.
Apotheker said the reorganisation would move HP into higher value, higher margin growth categories, namely cloud computing, solutions and software, mainly in enterprise, commercial and government markets.
This was behind its decision to buy British enterprise search and documentation software specialist Autonomy for £25.50 a share, valuing it at $10bn, not far short of its previous biggest acquisition, that of IT services firm EDS for $13.9bn in 2008.