* Liquidation follows closure of larger rival Circuit City
* Firm of ex-Hollywood Entertainment CEO owns stake
* Hewlett-Packard owns stake
NEW YORK, Feb 10 (Reuters) - Ultimate Electronics, a home entertainment and consumer electronics retailer partially owned by Hewlett-Packard Co (HPQ.N), has decided to liquidate after filing for bankruptcy protection last month.
In a court filing, Ultimate Electronics said it plans to hold going-out-of-business sales at its 46 stores nationwide to dispose of inventory, saying such sales will offer "the highest and best value" for creditors.
The Thornton, Colorado-based company said it has been unable to obtain financing needed to keep operating. It said its secured lender, General Electric Co's (GE.N) GE Capital unit, refused to let it use cash collateral to buy inventory.
Ultimate Electronics employed about 1,500 people before filing for Chapter 11 on Jan. 26, court records show.
It is the latest retailer to fall victim to the recent U.S. recession and subsequent uneven economic recovery, which also claimed larger rival Circuit City.
Ultimate Electronics also filed for bankruptcy in 2005, when it was bought by investors including by Mark Wattles, who leads private investment firm Wattles Capital Management LLC.
Wattles had been chief executive of Hollywood Entertainment Corp prior to that video rental chain's 2005 sale to Movie Gallery Inc MVGRQ.PK.
According to court records, Wattles Capital owns about 71 percent of Ultimate Electronics' parent, while Hewlett-Packard owns 25 percent.
Movie Gallery decided last year to liquidate following its second Chapter 11 filing in less than three years.
The case is In re: Ultimate Acquisition Partners LP et al, U.S. Bankruptcy Court, District of Delaware, No. 11-10245. (Reporting by Jonathan Stempel in New York, editing by Maureen Bavdek)