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HP Shifts Shape, Ditches WebOS

HP's updated share price has been added to this story.

PALO ALTO, Calif. ( TheStreet) -- HP (HPQ - Get Report), desperate to boost its margins, unveiled a major corporate and strategic overhaul Thursday, which will involve ditching its WebOS devices and potentially spinning off its PC business.

>>Check out our HP blog recap

HP turned on a firehouse of announcements , reporting its preliminary third-quarter results and confirming the buy of U.K. firm Autonomy, which makes data analytics software.

Investors responded negatively to the slew of announcements and HP's slim beat of estimates, pushing its shares down about 6.37% at market close. Shares were dipping $2.87, or 9.73% in the after-hours session.

After intense speculation about a possible HP breakup, the company confirmed that it wants to get rid of its PC business.

HP's board of directors has authorized the exploration of "strategic alternatives" for its Personal Systems Group (PSG), according to a statement released just after 3 p.m. ET. "HP will consider a broad range of options that may include, among others, a full or partial separation of PSG from HP through a spin-off or other transaction," it said.

The company's WebOS-powered TouchPad tablet, which has struggled to challenge Apple's (AAPL) iPad, is a big victim of HP's new strategy. HP confirmed in its statement that it will discontinue operations for WebOS devices, specifically the TouchPad and webOS phones. "HP will continue to explore options to optimize the value of webOS software going forward," it added.

HP CEO Leo Apotheker has been highly vocal about his desire to push HP into high-margin areas such as software, cloud services and connectivity, although the scale of Thursday's changes came as a surprise.

The firm's third-quarter numbers just edged analysts' estimates, with HP bringing in revenue of $31.2 billion and earnings of $1.10 a share, excluding items. Analysts surveyed by Thomson Reuters were looking for sales of $31.17 billion and earnings of $1.09 a share. HP reported revenue of $30.7 billion and earnings of $1.08 a share in the prior year's quarter.

With consumer spending weakening and a major overhaul of its business on the horizon, HP offered up tepid guidance, predicting revenue between $32.1 billion and $32.5 billion and earnings between $1.12 a share and $1.16 a share. Analysts were looking for sales of $34 billion and earnings of $1.31 a share.

--Written by James Rogers in New York.

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