Hewlett-Packard had high hopes for its HP TouchPad: being the largest vendor of desktops and laptops and after paying $1.2 billion for its platform -- it was optimistic that its tablet would be able to compete with Apple's iPad.

With the "HP" brand, the TouchPad was launched in July at $499, the same price as the market leading iPad 2. The webOS has its own unique features: a cards system for swiping through open apps, built-in Skype support, wireless printing, and syncing with Google Docs, QuickOffice, Dropbox and Box.net.

Although it is selling more PCs than Apple and has more sales channels, and in-depth connections with enterprises, HP's tablet has barely made ripples in the market.

"HP will discontinue operations for webOS devices, specifically the TouchPad and webOS phones. The devices have not met internal milestones and financial targets. HP will continue to explore options to optimize the value of webOS software going forward," said in a statement on Friday.

The announcement though is not entirely surprising to those closely following the mobile devices industry.

Apple has sold 29 million units of the iPad since the release of the device in April 2010. While device makers have put up their own tablet offerings -- among others, BlackBerry maker Research In Motion's PlayBook, Apple nemesis Samsung Electronics Inc.'s Galaxy Tab, Netbook pioneer Asus' Eee Pad, HTC's EVO View 4G, and Motorola Mobility Holdings Inc.'s Xoom -- Apple continues to hold an estimated 75 percent of the market.

In July last year, HP acquired Palm, Inc., for $1.2 billion. Palm was a smartphone manufacturer that was responsible for products such as the Pre and Pixi as well as the Treo and Centro smartphones. Palm's devices ran on its own operating systems platform, the webOS.
HP had said during the acquisition that Palm's unparalleled webOS platform will enhance HP's ability to participate aggressively in the fast-growing, highly profitable smartphone and connected mobile device markets.

Since its acquisition of the Palm HP and WebOS have not gained any traction in the mobile computing market. Apple is dominating the tablet market. While Nokia is undergoing transition, Apple and Android-based device makers have been taking most of the smartphone sales this year. Even Asian manufacturers like HTC and LG are outselling HP's smartphones.

Thus, comes the quick road to oblivion for the Palm WebOS' and one of HP's biggest mistakes ever.

GOB Sales

Just a week after the release of the TouchPad, HP removed Jon Rubinstein as head of its Palm unit, signaling weak sales of the tablet. Rubinstein is the most prominent carry-over from the Palm acquisition a year ago. Rubenstein has been credited not only for driving development of webOS 3.0 but of the platform's roadmap.

Last week, HP lowered by $100 the price of its TouchPad -- just one month after introducing the tablet -- to $399.99 (for the GB version).

And on Thursday, HP announced that it would kill the WebOS, signaling its exit in the mobile devices market. Hence, we'll possibly see the HP TouchPad being sold at $299 or even less during the holiday season in some sort of "going out of business" sale for the webOS device. But the sale would be somewhat like an "as is, where is" type as the TouchPad can no longer be customized with additional apps -- developers will no longer be producing apps and software for a platform that is nearing extinction.

HP's TouchPads are now selling as low as $99.99 for the 16 GB model.

Leaving the Business While No. 1

HP's not only shedding off its mobile devices business, it's also giving up its PC business.

HP announced that its board of directors has authorized the evaluation of strategic alternatives for its personal computers business (the Personal Systems Group), including the exploration of the separation of its PC business into a separate company through a spin-off or other transaction. HP had annual revenues of approximately $41 billion in fiscal year 2010 from the sale of PCs.

HP expects that the process could be completed within 12 to 18 months.

Following the spin-off, HP expects it would continue to help its customers manage the information explosion and address their most critical needs through a portfolio that spans printing, software, services, servers, storage and networking.

HP has been aiming to lessen its dependence on PCs, where growth has stalled as consumers flock to smartphones and tablet-style computers like those made by Apple, according to Bloomberg News.

While in the second quarter Hewlett-Packard continued to be the world's largest PC maker, with an 18.1% market share in the second quarter, HP saw its U.S. sales decline by 0.6% decline from last year's. HP achieved solid growth in the professional PC market, but it continued to face challenges in the consumer segment, according to research firm Gartner Inc. last month.

HP stock declined 30 percent this year, and is now worth only $61.2 billion based on market value.

In contrast, Apple, after posting record revenue of $28.57 billion and record net profit of $7.31 billion, is now worth $340 billion.

Opportunities From HP's Exit

The tablets' popularity has skyrocketed and PC sales have been softening, but see the figures: just under 20 million tablets were shipped in 2010, compared to almost 350 million desktops and laptops. Thus the PC industry will continue to be a cash cow though competition has brought very low profit margins at present.

Without HP, it would be an interesting race among PC sellers. During the second quarter, Dell was the no. 2 PC vendor with a 12.9 percent market share, but China's Lenovo (the only top five vendor to have posted double digit growth in the quarter) is not far behind with a 12.2 percent market share. While Apple is the third largest PC seller with its iMacs and MacBooks in the U.S., it doesn't have HP's reach outside the U.S. According to analysts, possible bidders could be South Korea's Samsung Electronics Co. (who's yet to penetrate the PC market) and Lenovo (in order to gain more ground outside China).

Google Inc., developer of the Android platform for smartphones and tablets, is poised to become a mobile device vendor itself after it signed a deal to purchase Motorola Mobility for $12.5 billion. It could also become a PC vendor if it sets it sights on HP. Intel Corp. and Microsoft, tech giants that greatly rely on PC sales, have enough cash for any acquisitions. Having HP PCs running on Apple's Mac OS X Lion could also be interesting.

As for the smartphone industry, it will likely be a three-way race. With Research In Motion losing its grip with business users (and the BlackBerry maker being a potential target) and Nokia retiring the Symbian, the fight would be among the Microsoft's Windows, Google's Android and Apple's iOS platform. A possibility though if Samsung (the number one user of the Android OS) purchases the webOS from HP and uses the platform for its own mobile devices.

Hewlett-Packard will go behind the scenes, but it hopes to remain relevant. It intends to follow the footsteps of International Business Machines Corp., which after selling its personal computing business (including the popular ThinkPad line) to Lenovo Group for $1.75 billion, has risen as a highly profitable IT firm now worth $195 billion.

While its purchase of Compaq a decade ago vaulted HP to the top of the PC business, founders of Hewlett-Packard Co. had opposed the purchase anyway. They never liked the low-margin PC business -- what they envisioned was inventing one-of-a-kind products and tools for engineers, Bloomberg News points out. Joining Cisco and IBM, HP would be focusing on the less unpredictable, high-growth, and high-margin enterprise/commercial market.

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