Hewlett-Packard (HP) in its third-quarter earnings call yesterday outlined a major revamp of its business, which includes a discontinuation of all webOS-based devices, as well as a possible spin-off its Personal Systems Group (PSG), which sells computers and mobile devices. The company also said it is pursuing a $10 billion acquisition of analytics house Autonomy Corporation.
Following the company’s earnings call, shares of HP fell over 17 percent in aftermarket trading to $24.23 and had dropped further in early morning trading today, down 19 percent to $23.
The drastic measures come as the company dropped its full-year forecast for the third time from approximately $127.2 billion to $127.6 billion, down from its previous estimate of $129 billion to $130 billion. Third-quarter revenue of $31.2 billion was up 1.5 percent year-over-year, while net income of $2.3 billion was down 11 percent year-over-year.
CEO Leo Apotheker said the changes were all about rising shareholder values and addressing the challenges HP faces in our business. Apotheker said that while HP’s webOS mobile platform, which it acquired when it bought Palm Inc $1.2 billion back in 2010, had received strong reviews but that devices the company had built around it had not seen significant traction.
Specifically, the company’s TouchPad tablet has been a major disappointment.
“The tablet effect is real and sales of the TouchPad are not meeting our expectations,” Apotheker said, according to a transcript of yesterday’s earnings call provided by SeekingAlpha. Apotheker said the company has been closely tracking the progress of webOS and is now in the process of assessing possible strategic alternatives for the software.
Apotheker stressed that he could not be more specific about the company’s plans with regard to webOS or a possible spin-off of its consumer electronics business, as the company is still weighing its options.
Further on the subject of webOS, Apotheker said the company is keeping all of its options open. “Developers like it. Users like it, and we will be looking at all of the options from our own devices to third-party devices to other hardware manufacturer… and we will be looking at all possible business models from licensing to any other possibility in order to evaluate how we can best extract value out of webOS.”
With regard to all of the company’s other announcements, including the acquisition of Autonomy, Apotheker said he wanted “to make sure that people understand in this call that when we say this, all outcomes are possible, including a potential non-transaction.”
HP contends that a possible spin-off of the electronics group is aimed at sharpening the company’s focus on cloud solutions and software, accessible to any type of device, while continuing to leverage its other technologies, such as printing hardware, software and services.
