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HP to kill TouchPad, may spin off PC business, buy British firm

August 18, 2011 |  1:01 pm

Touchpad

Hewlett-Packard Co. may spin off its personal computer business -- the world's largest -- as well as continue to reconfigure itself as a corporate technology provider by acquiring the British software firm Autonomy Corp. 

The company said it would discontinue production of its TouchPad tablet computer and related smartphones, which have not sold well.

"HP confirms that it is in discussions with Autonomy regarding a possible offer for the company," the Palo Alto, Calif., computing giant said in a statement Thursday before the close of the stock market. 

The company added that HP's board of directors had "authorized the exploration of strategic alternatives" for its PC unit that could include "a full or partial separation of [the unit] from HP through a spin-off or other transaction."

Hewlett-Packard, whose early roots as a garage start-up also helped establish Silicon Valley as a technology nerve center, has seen increasingly anemic growth in its PC business in recent years. Its worldwide shipments of PCs grew only 3% in the second quarter, reflecting a general slowdown as consumers opted to purchase smartphones and tablets rather than desktop and laptop PCs. 

But HP's TouchPad tablet has had trouble competing with Apple Inc'.s popular iPad. Nearly 95% of tablet owners surveyed by research firm Robert W. Baird & Co. owned an iPad, while only 10% had purchased a TouchPad. Samsung's Galaxy Tab and Motorola's Xoom were each purchased by about 9% of the more than 1,000 consumers surveyed.

HP said that, as well as discontinuing the TouchPad, it would stop making all smartphones based on the webOS operating system it inherited after its purchase last year of phone maker Palm Inc.

Cambridge, England-based Autonomy makes software that allows firms to organize and retrieve email, documents and other media. Its stock jumped nearly 50% on the news, up $11.96, to $37.76.

HP's stock, which had spiked almost 13% in trading earlier Thursday, later swung back to a nearly 6% loss, down $1.76 to $29.63 near the closing bell.

[Correction: This post has been corrected to reflect the accurate share price and market activity for Autonomy during the day Thursday.  The company's stock was up 50% on the day, rather than dropping 8%, as stated in an earlier version of this post.]

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-- David Sarno

Photo: A Hewlett-Packard TouchPad at a Best Buy store in Orem, Utah. Credit: George Frey / Bloomberg

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