Why HP Is Dropping webOS : HP Comments At Length

Earlier today we received word that not only would HP be "spinning off" or completely separating from their PSG* division, they'd be completely stopping production of all webOS phones and the TouchPad tablet, as well as the webOS mobile operating system. Why on earth would they do such a thing when their PC division is the biggest in the world and their preliminary results of the third fiscal quarter of 2011 is at $31.2 billion, up from $30.7 billion the same quarter last year? We did a bit of research, soul searching, and listening in on the HP Q3 FY11 earnings call to get some answers and a better look at the future of Hewlett Packard.

Before we continue, you should know if you do not know already that *PSG, or HP Personal Systems Group, is a division of Hewlett Packard at the moment, responsible for everything from personal computers to handheld computers (mobile devices) to software and accessories. Should HP part ways with their PSG sect, they'd be looking at a very different way of going about their business, having left a group that deals in Enterprise Storage, Servers, and Networking, Software, Imaging and Printing, Financial Services, and Corporate Investments. Look for a company that's in the public eye a whole heck of a lot less than it is now.

HP's personal computing business is currently the world's largest, in the USA alone shipping at 4,533 units in the second quarter of 2011 while its closest competitor, Dell, trailed behind at 3,822 and Apple then being the third place business had a comparatively tiny quarter at 1,814 units – all of this information coming a Gartner report on Q2 in the states only. In the rest of the world, also according to Gartner, HP's dominance is just as strong at 18.9% of the total market with Dell next in line at 12.8% and Acer at 11.2%. On the other hand, Apple is the biggest tech company in the world when you consider the worth of the company as a whole.

Another factor to consider here is that HP just TODAY revealed a new version of their HP TouchPad in a white-backed 64GB edition destined for Europe. Right along this same track is the story from just YESTERDAY in which webOS chief Stephen DeWitt told the Wall Street Journal that HP is exploring the possibility of putting the software into home appliances and cars, claiming enormous interest from manufacturers to get started on projects. The FCC has had some webOS action of late as well: TouchPad Go 7-inch webOS tablet was spotted on the block just this past week.

Was there a bit of miscommunication going on here in one place or another?

Did HP not plan to drop webOS until very recently?

The HP TouchPad has very recently been discounted desperately. This combined with mixed reviews and Best Buy turning their backs on the tablet make for a not very friendly environment for either the tablet or the operating system on it to survive. Without its hero tablet on which HP placed so much of its faith in webOS, the operating system must fail.

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As HP's CEO Leo Apotheker said today on the Q3 sales call, the TouchPad just "has not gained enough traction in the market" to be able to be successful enough for HP to keep, therefor 12 to 18 months is the amount of time HP says it will take to decide what to do with their PSG unit aside from webOS products. "We have made a difficult decision" to phase out webOS from HP by Q4 2011 says Apotheker, this being in the best interest of the consumer, the company, and the shareholders.

Apotheker focused the call mainly on the enterprise dealings of HP and their acquisitions to strengthen that piece of their ecosystem. First, Apotheker noted that John Visentin previously of IBM is now with HP, appointed as the new executive vice president in charge of enterprise services. Next, HP will acquire all outstanding shares of Autonomy Enterprise Software company to effectively acquiring them. HP made no attempt to hide the fact that they were all disappointed by their less-than expected earnings this quarter, but did make an attempt at focusing on how they could work with the situation rather than continuing down a negative road.

An operating loss of $332 million USD in Q3 of 2011 for webOS was just one of these negative stats HP certainly took no joy in announcing. They did continue to note that they'd be seeking "strategic alternatives" for the webOS mobile operating system in the future, not committing to any plan specifically. Cloud services were mentioned several times, as were enterprise storage, service, and networking services, each of them looking positive for the future, so says HP. Software as well as Financial Services are growing by double digit percentages, and HP made sure to let this be known.

As far as webOS as a software goes, HP notes that it's been very well received and that they'll be looking at all options including working with other manufacturers as well as licensing the software out "as well as other options." Apotheker was very careful to say that no plans are concrete nor would he or anyone else be discussing the future of webOS OR the hardware surrounding it until they were able to make further decisions with the board. This comes aside the comments from webOS GBU VP Stephen DeWitt from earlier today, DeWitt saying that HP would not be leaving webOS as a software in the dust:

"We are not walking away from webOS." – DeWitt

DeWitt also noted that they hoped they'd have further answers within the next two weeks, admitting that "Clearly, we don't have all the answers today." HP VP Todd Bradley noted in particular that webOS, though only able to work with Qualcomm at the moment, would be open for work with other SoC manufacturers in the future. Bradley and DeWitt spoke on how it's been the hardware that's been holding webOS back and that HP needed simply to stop "trying to force non-competitive products into the market," as it were.

The webOS device business will be shut down, this much is clear for HP. Licensing the software is now the obvious answer for HP while webOS remains an HP-owned product. As far as PSG, Apotheker assured us near the end of the question and answer portion of their Q3 sales call that they would continue to work with the PSG sector like they have been in a sense, but like webOS, no final answer on what they'd be moving forward to do exactly with the sector was given.

We'll continue to explore this major set of moves by HP as they develop, and certainly we hope to get some more answers by the time the next two weeks are up!