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    Weekend Tech Blog: Hewlett-Packard implodes before our eyes

    The company abruptly kills off its highly promoted TouchPad tablet after only two months.

    So much for the summer doldrums in the tech news business.  The news from HP, Google, and Motorola Mobility amount to major game changes in the consumer tech business.

    HP made major news in the tablet market that was not the kind it — or anyone else — expected it to make.

    For the last several weeks, if you watch any commercial TV, you’ve probably been bombarded with ads by hip entertainers including Lea Michele, Manny Pacquiao and Russell Brand holding full size computer tablets in front of their faces — with their "live" faces creepily coming out of the tablets — extolling the virtues of the new HP TouchPad.

    The joy was obviously limited to the commercials. 

    On Thursday(Aug. 18), HP announced it was killing off the TouchPad: one of three major announcements effectively amounting to a major restructuring of the company. Reports surfaced during the week that the tablets, with webOS as its operating system, have done an über-belly flop in the marketplace. Giant consumer electronics retailer Best Buy reportedly has over 270,000 Touchpads in inventory — and has sold only 25,000. According to a Wall Street Journal report, the cancellation also includes ending webOS smartphones.

    HP introduced the TouchPad with great fanfare in February and started selling it in late June. Less than 18 months ago, HP acquired the assets of Palm, the legendary PDA maker, in what was essentially a $1.2 billion fire sale. The crown jewel of the deal was the webOS system. As recently as two months ago, HP executives saw webOS as the center not only of its tablet strategy, but a system that would work its way onto PCs and ultimately into the company’s “cloud” plans: a cornerstone of its rivalry with Apple and Google.

    Where this week’s news leaves the well-regarded webOS operating system technology is anyone’s guess, although CNET News reported that HP planned to "explore options to optimize the value of WebOS software going forward."

    HP CEO Leo Apotheker noted the key factor in the changeover may be the consumer’s increasing reliance on tablets and less on traditional PCs, as quoted by ZD Net: “Consumers are changing the use of their PC . . . The velocity of change in the personal device marketplace continues to increase as the competitive landscape is growing increasingly more complex especially around the personal computing arena.” Added CFO Cathy Lesjak: “Our intention was to solidify WebOS as the clear No. 2 platform for tablets, but with such a young ecosystem and poorly received hardware we were unable to achieve our target.”

    My take is that people generally accept the tablet battle is a two-horse race between the iPad and Android OS tablets. Yet another operating system, one virtually untested in the marketplace, plus few apps available for it, did not bode well for HP’s webOS success.

    The rest of HP’s news was also a major surprise, including a sobering report that HP may be spinning off its computer business — but not its printers, storage devices, or networking gear.  The Journal report noted the company’s board had approved exploring “strategic options” for its PC business including a “full or partial separation” of the PC division over the next 12 to 18 months. HP also announced a $10.3 billion offer to buy British software maker Autonomy, a maker of search software for emails and documents.  Ordinarily that would be the major news on any other day, and in fact may be extremely important to HP's future direction, but in light of the other announcements it was almost a footnote in the day's news.

    The three announcements were emblematic of a shift at HP to make it more competitive in the services and business world, and less dependent on high-volume but low-margin consumer businesses.

    *  *  *

    By now the news that Google plans to purchase Motorola Mobility for $12.5 billion in cash is old news.  If you’ve not read much about it, here’s a thoughtful summary from Time Magazine blogger Harry McCracken.

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