NEW YORK/SAN FRANCISCO/LONDON (Reuters) ? Hewlett-Packard Co is in talks to buy British software company Autonomy and is pondering options for its personal computing division including a spinoff, as the tech giant steps up an overhaul aimed at rekindling growth.
HP, a storied Silicon Valley icon that dominates the personal computing industry, announced it will discontinue the WebOS-based "TouchPad" tablet computer and phones, which have failed to catch on with consumers.
The news coincided with HP's earnings report, which the company released earlier than expected on Thursday. It said fiscal third-quarter revenue rose to $31.2 billion from $30.7 billion a year ago, in line with Wall Street expectations.
Shares of HP had climbed briefly into positive territory on a Bloomberg report about the moves, as Wall Street cheered its bold foray into the high-margin software arena and the hiving-off of a struggling personal computing unit.
But they backtracked ahead of HP's earnings, declining 3 percent to $30.45 before they were briefly suspended from trade. The stock was down more than 7 percent at $29.17 shortly before the close.
HP CEO Leo Apotheker, a former chief of European software giant SAP AG, had been expected to drive an expansion of the company's relatively small but very profitable software division -- including through major acquisitions.
REVENUE OUTLOOK SLASHED AGAIN
HP's Personal Systems Group -- which may be up for sale -- includes smartphones, tablets, the WebOS operating system and PCs. The unit generates about $41 billion in revenue but accounts for only about 13 percent of profit.
Its low-margin but high-volume PC business had been seen as a spinoff candidate for a while, given intense competition and the slide in consumer PC demand.
HP's decision to discontinue the TouchPad -- which hit store shelves in July with a large marketing budget -- follows poor demand for the WebOS-based tablet. It was discounted by $100 a month after it was launched in a booming market dominated by Apple Inc's iPad.
"You know that consumer PCs is the thing that's dragging that segment down," said Kim Forrest, analyst with Fort Pitt Capital Group. "Because people aren't willing to pay up. They want the sexy iPad."
The TouchPad was the result of the $1.2 billion acquisition of Palm last year, which was overseen by Todd Bradley, head of HP's PSG group and former Palm CEO.
Going forward, HP expects further pressure on its revenue and cut its full-year forecast for the third straight quarter.
HP said it now expects full-year revenue of $127.2 billion to $127.6 billion, down from a previous estimate of $129 billion to $130 billion.
The company also cut its earnings per share estimate to a range of $3.59 to $3.70, down from its previous forecast of at least $4.27.
(Reporting by Poornima Gupta; Editing by Richard Chang)
Source: http://us.rd.yahoo.com/dailynews/rss/software/*http%3A//news.yahoo.com/s/nm/20110818/bs_nm/us_hp
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