HP kills TouchPad, Pre, WebOS and PC business; stock drops 20% on the news

HP shutters tablet and smartphone business, largely killing off smartphone pioneer Palm; stock drops 20% on the news

(AP) -- When Hewlett-Packard Co. snapped up Palm Inc. last year for $1.8 billion, it looked like the smartphone pioneer's last chance.

Palm was a year into a major turnaround effort but gaining little traction despite a hip, new CEO known for making the iPod a household name. It had high hopes for its latest handset, the Pre, which ran on the company's new, intuitive operating software, known as webOS. It needed a savior, and HP, which itself needed a boost in the mobile technology market, seemed like its best bet for survival.

It didn't work. With fierce competition from Apple Inc.'s iPhone and smartphones running Google Inc.'s Android software, HP's handsets running the webOS software developed by Palm have been just a blip on most consumers' radar screens. A tablet called the TouchPad, released in July and also running webOS, has also sold poorly.

The market seemed too tough for HP to forge ahead: The technology conglomerate said Thursday that it is shuttering its mobile device business, which includes the webOS-running smartphones and TouchPad.

The announcement came as HP said it also plans to sell or spin off its PC division. Together, the moves would take HP out of the consumer market, though it will continue to sell servers and other equipment to business customers.

Technology developed by Palm (a brand name HP has phased out) may still exist in some form. In an interview, HP CEO Leo Apotheker said the company was disappointed more with the hardware sales than the performance of the webOS software, which it will try to keep alive in some way. HP is studying its options, which could include licensing the software to handset makers or allowing them to use it for free as open-source software, as Google does with Android.

Still, for Palm, the decision sounds largely like a death knell that comes after nearly 20 years of mobile technology innovation, ownership changes and failed efforts to become a leader in the handheld market.

Palm, founded by Donna Dubinsky and Jeff Hawkins in 1992, helped create the handheld computing market with its Palm Pilot "personal digital assistants" in the 1990s. But after Palm reshuffled itself repeatedly -- it was bought by U.S. Robotics, a modem maker that itself was bought by 3Com Corp. in 1997, and then spun off again as its own company in 2000 -- other companies took control of the market. In 2003, Palm acquired Handspring -- a rival startup Dubinsky and Hawkins created-- and spun off PalmSource, which made the PalmOS handheld computing software, as an independently traded company. Japan's Access Co. bought PalmSource in 2005.

Speaking to The AP several months before HP announced it was buying Palm, Dubinsky said all the shuffling took "critical resources and attention from product development." And even though it happened years ago, she called the decision to spin off PalmOS a "huge strategic error."

Since Palm's comeback attempt, the popularity of the iPhone has only grown while phones running Android, which first hit the market in 2008, abound. According to research firm IDC, Apple took the top spot in the second quarter, while Samsung Electronics Co. -- a big maker of Android phones-- took second place in unit sales. Nokia Corp. came in third, while BlackBerry maker Research In Motion Ltd. took fourth.

Rubinstein, currently a senior vice president of HP's personal systems group, said Palm studied a number of alternatives to being bought by HP. He said HP was a good choice because, as the largest computer company in the world, it could help Palm bring its products to more people.

As it turns out, the mobile pioneer will largely cease to exist.

Rumor : Tim Cook, Apple COO, offered the HP CEO job

There are rumors that Tim Cook, 49 years old and Apple COO, was offered the Hewlett-Packard CEO job. No word whether he will or will not accept.

In March 2010, Tim Cook received a $5 million bonus for 'Outstanding Performance' running the company while CEO Steve Jobs was on medical leave.

Cook took the company reins when Jobs, a pancreatic cancer survivor, went on medical leave from January through June 2009.

It was Cook's second stint leading Apple. Cook, who joined Apple in 1998, ran the Cupertino, Calif.-based company for two months in 2004 while Jobs recovered from surgery for pancreatic cancer. His performance then won him the promotion to chief operating officer in 2005.

Analysts credit Cook with solving problems that Apple was having with inventory management. That has been key to Apple's ability to amass $25 billion in cash and short-term investments. Many people consider Cook as Jobs' logical successor.

In the months leading up to Jobs' medical leave, rumors about his health could send Apple's stock soaring and sinking as investors worried that Apple would be lost without his vision.

But under Cook's direction in 2009, the company kept cranking out well-received products including updated laptops with lower entry-level prices and a faster iPhone with many longed-for features. Apple sold more than a million of the new iPhone 3GS during its first three days on the market.

Tim Cook joined Apple Computer Inc. in 1998, as Senior Vice President of worldwide operations.

Prior to that, Mr. Cook served as Vice President of Corporate Materials for Compaq Computer Corporation ('Compaq') from 1997 to 1998 and was responsible for procuring and managing its product inventory.

Previous to his work at Compaq Computer Corporation, he served as Chief Operating Officer of the Reseller Division of Intelligent Electronics. Mr. Cook also spent 12 years with IBM, served as Director of North American Fulfillment, where he led manufacturing and distribution functions for IBM's Personal Computer Company in North and Latin America. He has been Director of Nike Inc. since November 2005.

Mr. Cook studied an MBA from Duke University, where he was a Fuqua Scholar and a Bachelor of Science Degree in Industrial Engineering from Auburn University.

Hewlett-Packard CEO Mark Hurd Resigns After Sexual Harassment Probe

PALO ALTO, Calif.--(BUSINESS WIRE)--HP today announced that Chairman, Chief Executive Officer and President Mark Hurd has decided with the Board of Directors to resign his positions effective immediately.

The Board has appointed CFO Cathie Lesjak, 51, as CEO on an interim basis. Lesjak is a 24-year veteran of the company who has served as HP’s CFO and as a member of the company’s Executive Council since January 2007. She oversees all company financial matters and will retain her CFO responsibilities during the interim period.

Severance Package

In an SEC filing this afternoon, Hewlett-Packard has disclosed details of just-resigned CEO Mark Hurd’s severance package.

• The company will pay Hurd $12.2 million within 30 days.
• HP will also reimburse Hurd for medical and dental premiums per his COBRA eligibility for the next 18 months.
• The company extends to Sept. 7 the expiration of outstanding options for Hurd to acquire up to 775,000 shares of HP common stock.
• Over 300,000 performance-based restricted stock units have now become eligible to vest and be settled in shares of HP common stock.

For more details, here is the full separation agreement.

Hurd’s decision was made following an investigation by outside legal counsel and the General Counsel’s Office, overseen by the Board, of the facts and circumstances surrounding a claim of sexual harassment against Hurd and HP by a former contractor to HP. The investigation determined there was no violation of HP’s sexual harassment policy, but did find violations of HP’s Standards of Business Conduct.

Hurd said: “As the investigation progressed, I realized there were instances in which I did not live up to the standards and principles of trust, respect and integrity that I have espoused at HP and which have guided me throughout my career. After a number of discussions with members of the board, I will move aside and the board will search for new leadership. This is a painful decision for me to make after five years at HP, but I believe it would be difficult for me to continue as an effective leader at HP and I believe this is the only decision the board and I could make at this time. I want to stress that this in no way reflects on the operating performance or financial integrity of HP.”