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HP to end TouchPad, smart phone sales; may sell PC division

SAN FRANCISCO — In a dramatic reshuffling, Hewlett-Packard said Thursday that it will discontinue its tablet computer and smart phone products and may sell or spin off its PC division, bowing out of the consumer businesses.

It's one of the most extreme makeovers in the company's 72-year history and signals new chief executive Leo Apotheker's most transparent move to date to make HP look more like longtime rival IBM, which now makes most of its money from software and services.

The most visible result for consumers will be the end of HP's TouchPad tablet, a sales dud, and HP-branded smart phones, which are also-rans in a booming market crowded with the iPhone and devices based on Google's Android system. By the end of next year, HP computers could be sold under another company's name.

HP will continue to sell servers and other equipment to business customers, just as IBM does.

It was not immediately known whether any jobs will be cut. HP employs more than 300,000 worldwide.

A decade ago, HP spent more than $24 billion on the Compaq Computer, setting the stage to become the world's No. 1 maker of personal computers. Now, three CEOs later, HP is changing course — hard.

PCs are its biggest revenue generator but least profitable division. The PC industry is under pressure from hot-selling smart phones and tablet computers, which have contributed to already weak consumer demand for PCs in the United States and Europe.

More striking is that HP plans to shutter its fledgling smart phone and tablet business just two years after spending $1.8 billion on smart phone maker Palm. HP also announced that it is in talks to buy Autonomy Corp., a business software maker. The Wall Street Journal reported the price as $10 billion.

The decision to buy Autonomy also marks a change of course for HP, one that makes its trajectory remarkably similar to rival IBM's nearly a decade ago. IBM, a key player in building the PC market in the 1980s, sold its PC business in 2004 to focus on software and services, which aren't as labor- or component-intensive as building computer hardware.

Also Thursday, HP said it earned $1.93 billion in its fiscal third quarter, up 9 percent from a year earlier. HP's stock fell $1.88, or 6 percent, to close Thursday at $29.51.

HP to end TouchPad, smart phone sales; may sell PC division 08/18/11 [Last modified: Thursday, August 18, 2011 8:57pm]
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