In conjunction with a number of other announcements on August 18, 2011, HP has reported that it is shutting down operations for its webOS devices, including the TouchPad and webOS phones. With the webOS announcement, HP reported that it is now in the process of “exploring strategic alternatives” for webOS software and its Personal Systems Group (PSG). In the same release, HP delivered Q3 earnings results.
This group announcement has spurred curiosity and speculation within the business community. “It is really unfortunate that HP tried to do everything in a single announcement” said Greg Buzek, President of IHL Group. “Quite frankly, I was stunned.”
When asked by Retail TouchPoints how these announcements would affect HP’s overall business in retail, company media relations executive Jane McMillian said it would be “premature” to comment. “It’s too early to tell what it will mean for any of the industries,” she noted, adding that some decisions may be made within the next 12 to 18 months.
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While some industry analysts were hesitant to comment on the news, Buzek shared his insights. “HP in retail has had tremendous momentum up until this announcement,” added Buzek. “The team that Ray Carlin has put together has been really taking a considerable market share and growing very fast….but now all their customers hear is this negative news and that is like hitting a Mack truck on the highway head on.”
Buzek continued: “The PC business is where a lot of the (HP) retail business is very strong — selling to retailers to be used by retailers — and that spinning out of the company has been planned for quite a while as a way to free the entity up. But then when they lumped in the failure of the webOS into the same announcement it really had a negative impact on the overall business…they really shot themselves in the foot.”
Business Transformation In The Works
Part of the HP announcements included talk of a “company transformation” which is designed to:
- Move HP into higher value, higher margin growth categories;
- Sharpen HP’s focus on its strategic priorities of cloud, solutions and software, with an emphasis on enterprise, commercial and government markets; and
- Increase investment in innovation to drive differentiation.
Additionally, the HP board of directors has authorized the “exploration of strategic alternatives for the company’s Personal Systems Group.” The company is looking at a number of options, including a full or partial separation of PSG from HP.
The company also announced the acquisition of Autonomy Corp., an enterprise software company. “We believe the acquisition of Autonomy, combined with the exploration of alternatives for PSG, would allow HP to more effectively compete and better executive its focused strategy,” noted Leo Apotheker, President and CEO of HP, in a press statement.
Q3 Results Relatively Flat
HP’s Q3 results were neither positive nor negative:
- Revenue was up 1% from Q2, totaling $31.2B, but down 2% when adjusted for the effects of currency
- GAAP diluted earnings per share was up 24% with non-GAAP diluted earnings per share up 2% and cash flow from operations at $3.2B
- Full year FY11 revenue estimates were revised to between $127.2B and $127.6B
- Full year FY11 GAAP diluted earnings per share outlook were revised down to $3.59 and $3.70; and non-GAAP diluted earnings per share outlook were revised down to between $4.82 and $4.86
