Mobile

HP executives: ‘WebOS did not meet expectations’

Hewlett-Packard is having quite a day.

HP today announced it would acquire Autonomy, a massive enterprise software company, for $10 billion. It also announced that it would no longer develop mobile devices running Palm’s webOS mobile operating system, and that it is spinning off its personal systems group, which manufactures PCs.

The company reported quarterly revenue of $31.2 billion compared with $30.7 billion one year ago.  The company said that sales for the fourth fiscal period ending in October will be between $32.1 billion and $32.5 billion. That is below the average $34 billion estimate of Wall Street analysts.

HP’s chief executive Leo Apotheker was on the company’s quarterly earnings call to explain HP’s rationale for dumping webOS and making the massive purchase. Here’s a breakdown of what happened on the call.

For other angles on today’s HP news, see VentureBeat’s HP coverage.

2:05 p.m.: Apotheker said, “Today is all about raising shareholder value, transforming HP for the future.” Apotheker has been CEO of the company for about nine months.

2:06 p.m.: “Sales of the TouchPad are not meeting our expectations,” Apotheker said. The company will sharpen its focus on cloud and software starting today.

2:07 p.m.: The competitive landscape for personal computers has grown too complex, Apotheker said. HP’s PC business has not maintained the traction as tablets have begun to take over, he said.

2:09 p.m.: Apotheker said HP was successful in launching a new operating system, but WebOS devices have not gained enough traffic in the marketplace with consumers. Due to significant competition and rapidly changing competition, the company will no longer produce webOS devices, he said.

2:11 p.m.: Apotheker has appointed John Visentin for the company’s enterprise cloud division, and he will report directly to Apotheker. Visentin takes over for Ann Livermore, who stepped down from the position in June.

2:12 p.m.: HP is doing “everything it can” to protect its customers from “Oracle’s anti-customer behavior,” Apotheker said.

2:15 p.m.: HP expects to complete the Autonomy acquisition by the end of the year, Apotheker said. Autonomy will continue to operate separately and report directly to Apotheker, he said.

2:17 p.m.: “We are building an excellent software business,” Apotheker said. No mention of hardware — or even printers.

2:18 p.m.: “All of the decisive moves I’ve made will provide a definitive return to shareholders,” Apotheker said. “We’re focusing on what needs to be fixed, what needs to be shut down and what needs to be separated.”

2:19 p.m.: “These challenges and the transformation we are undertaking are taking several quarters to resolve,” Apotheker said in response to lowered guidance. “I know investors don’t like this and I feel their pain, but as CEO I believe in transparency. I’m taking ownership of these decisions.”

2:20 p.m.: HP’s CFO Cathy Lesjak is going over the numbers for the company’s third quarter. You can find a full report of the company’s earnings here.

2:23 p.m.: “About a year ago, we made a bet on webOS and set clear metrics and milestones. The sell-through of the product was not what we expected,” Lesjak said. “Our intention was to solidify webOS as a clear number 2 for mobile platforms. It quickly became clear that pricing parity would not improve.”

2:24 p.m.: “We would expect a larger loss in Q4 if we continued to operating webOS in its current form,” Lesjak said. “Continuing investing in webOS would take one to two years and increase risk without a clear return.”

(As a side note, HP’s TouchPad was on the market for 49 days before the company decided to kill off the webOS hardware division. By comparison, Microsoft’s Kin phones were on the market for 55 days before Microsoft killed that platform. Seems like the shelf life for experimental mobile tech is sometimes pretty short.)

2:32 p.m.: Revenue from HP’s software division was up 20 percent year-over-year. Its security software is generating double-digit growth, Lesjak said.

2:37 p.m.: “This effort will require patience, but the clear objective is to drive long-term shareholder value,” Lesjak said.

2:39 p.m.: Business in Asia-Pacific grew while business in other regions declined, Apotheker said. Consumer business declined while commercial business increased, he said.

2:41 p.m.: One analyst asked, “Did you cut enough?” Apotheker replied indirectly, saying that investors have to recognize that the restructuring is a “multi-quarter journey.”

2:43 p.m.: HP’s imaging and printing group (IPG) is an important and profitable business for HP, Apotheker said (unlike webOS, obviously). “They have been disrupting traditional printing markets as more markets shift to digital,” he said.

2:45 p.m.: “With the acquisition we announced today, we can accelerate that strategy and provide IPG with additional differentiated IP in verticals such as public service and financials,” Apotheker said.

2:49 p.m.: HP plans to spin off HP’s personal systems group (PSG), but Apotheker won’t comment on how that might happen or how it will be accounted for on HP’s books.

2:50 p.m.: “The (webOS) software has been received very well. The developers like it and users like it, and we are looking at all the options for people who need this kind of software,” Apotheker said.

2:59 p.m.: “We have one issue in our company: That’s productivity and salesforce. We want to build a better platform so we can extract way more value out of our salesforce, and we’re going to have regular cadence and discipline,” Apotheker said.

3:01 p.m.: “We expect the ongoing operating expenses in the remaining pieces of the webOS business is probably 1 to 2 cents a quarter, the run-rate expense is coming down dramatically,” Lesjak said. “The loss of $332M in corporate investments, you can attribute that pretty much to Palm.”

3:02 p.m.: Autonomy will be run as a separate entity, but the company will look to “identify as many synergies as they can as quickly as possible,” Apotheker said. The first is to give Autonomy access to HP’s market channels.

3:05 p.m.: Revenue from 3Par, which HP acquired last year, is up triple-digits, Lesjak said.

3:06 p.m.: “PSG is part of HP and it will be managed in a very normal way. The team and everyone at HP will continue to work with PSG as if they are a normal day-to-day business, that’s the expectation we have,” Apotheker said.


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