Hewlett-Packard Gets Out of Apple's iPod Pie

Updated from 3:31 p.m. EDT

Apple Computer(AAPL) said Hewlett-Packard(HPQ) is suspending a deal with Apple to license and sell iPods.

Apple spokesperson Natalie Kerris confirmed a report on The Wall Street Journal's Web site Friday that H-P, which has accounted on average for about 5% of overall iPod sales, would stop reselling the popular digital music player. H-P notified its retail distribution partners that it would phase out iPods, the Journal said.

"H-P has decided that reselling iPods does not fit within the company's current digital entertainment strategy," said Kerris. "As a result, H-P plans to stop reselling iPods by the end of this September."

Kerris said that H-P would continue to support iPod warranties and bundle the Apple's iTunes software on its PCs. H-P did not immediately return a call seeking comment.

The end of the deal was driving down the stock prices of Apple and further hit Synaptics(SYNA), which supplies parts for the iPod.

Apple's stock, which had been trading as high as $44.38 Friday, closed down 2.6% at $42.65. Hewlett-Packard's stock was up 0.5% at $24.62.

Synaptics, already having a bad trading day after issuing dismal guidance after the bell Thursday, ended Friday trading down 25% to $15.85.

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