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.
