Saturday, August 20, 2011

HP gives up on webOS and exiting PC Business

[spincop1]Tumultuous times at HP. Just 49 days after releasing the first webOS based tablet, HP announced it is discontinuing its webOS devices. The company now plans to "optimize" the value of webOS after spending nearly $1.2b on Palm, a year back. HP could either sell or license webOS off to other manufacturers or more likely salvage Palm's patent portfolio, in  a time where mobile patents are a premium.

The news was part of a bigger announcement with HP openly declaring its intention to spin off its low margin PC business and focus more on enterprise, software and consulting. HP shares immediately fell 20% wiping 12b of market cap in a single day.

One third of HP's revenue comes from PCs with an operating margin a bit above 5% (2010) compared with 11.7% from its overall operations.

HP seems to be taking a page from rival enterprise giant IBM, which successfully sold its PC arm to Lenovo in 2005, after a period of dismal PC sales.

HP's exit from both PC and mobile segment will definitely hurt competition. With the US and EU heading for another recession, it will be interesting to see how HP rebounds after the spin off. 

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