"HP objectively evaluated the strategic, financial, and operational impact of spinning off" the Personal Systems Group," new chief Meg Whitman said in a statement issued last week. "It's clear after our analysis that keeping PSG within HP is right for customers and partners, right for shareholders, and right for employees. ... HP is committed to PSG, and together we are stronger."
What she didn't say is what role WebOS would play in powering PCs, tablets, and smartphones. The Guardian newspaper and others are reporting that it won't play a role and will instead be dumped because HP can't find a buyer. Talk about a turnaround.
Can I say "I told you so"?
Last year at this time I argued that HP was worth shorting because it wouldn't be able to generate enough value from its purchase of WebOS, especially in light of competition from Apple
"In each case, HP badly overpaid. Just as it has with most every move it's made lately," I wrote at the time. The stock is down more than 38% over the past year, badly trailing the 5% gain racked up by the Dow Jones Industrial Average
Now HP is apparently thinking about abandoning WebOS, confirming my fears and resulting what could be $1 billion or more in writeoffs related to goodwill and intangible assets. (HP recorded $879 million in goodwill, $344 million in intangible assets, and $80 million in in-process research and development on its balance sheet at the time of the Palm deal, according to SEC filings.)
Only the most Pollyanna-ish of optimists would expect short-term earnings growth knowing all this. If anything, Whitman has a huge amount of restructuring work to do.
Please bring back the "Invent" sign
More than anything else, the apparent end of WebOS means that HP has neither the time nor the resources to invest in blue-sky measures that could alter the balance of power in tech's biggest markets.
Instead, Whitman is to today's HP what Michael Dell was to his namesake company back in 2007: a cost-cutter with a purpose. The whole thing makes HP's most recent tagline, "iInvent," seem like longing for an identity lost with the passing of Bill Hewlett and David Packard.
Where the company goes from here is anyone's guess, but judging from Whitman's comments and the rumor mill we can expect two things:
- HP will continue to make computers and other consumer gear.
- Despite earlier hopes, WebOS won't power these devices.
Whose software will? Easy: Microsoft
Don't forget the "thank you" card, Mr. Ballmer
HP's loss would be Microsoft's gain, in other words. Welcome news for a company whose Windows franchise is already under attack from Google
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Fool contributor Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team. He owned shares of Apple and Google at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Google+ or Twitter, where he goes by @milehighfool. You can also get his insights delivered directly to your RSS reader.
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