Exclusive: HP weighing sale of webOS unit

NEW YORK/SAN FRANCISCO Tue Nov 8, 2011 1:35pm EST

A man walks past the Hewlett Packard logo at its French headquarters in Issy le Moulineaux, western Paris, in this September 16, 2005 file photograph.   REUTERS/Charles Platiau/Files

A man walks past the Hewlett Packard logo at its French headquarters in Issy le Moulineaux, western Paris, in this September 16, 2005 file photograph.

Credit: Reuters/Charles Platiau/Files

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NEW YORK/SAN FRANCISCO (Reuters) - Hewlett-Packard Co is looking to sell Palm's webOS mobile software platform, a deal that could fetch hundreds of millions of dollars but less than the $1.2 billion that HP paid last year, four sources close to the matter said.

Advised by Bank of America Merrill Lynch, HP is trying to figure out how to recoup its investment in Palm, viewed by many analysts and investors as an expensive foray into the smartphone market that has not paid off.

Several technology companies have expressed an interest in buying the division, which is seen as attractive for its patents, the sources said.

Amazon.com Inc, Research In Motion, IBM, Oracle Corp and Intel Corp are considered to be among the companies likely to be interested in the asset, industry sources said.

The future of the unit, which HP acquired when it bought Palm in 2010, was in jeopardy after the company decided to kill its webOS-based TouchPad tablet following poor sales.

An HP spokesman said "we are exploring ways to optimize the webOS software," and declined to further comment.

HP is still mulling the software's future, including if it should build a new webOS-based tablet, HP's new chief executive Meg Whitman said in a recent interview.

"The question now before us is what do we do with webOS software and do we come back to market with webOS devices," Whitman said. "It obviously will not be the same device but it will be version 2.0."

In October, HP ditched a plan to spin off its personal computers unit, a month after the ouster of CEO Leo Apotheker whose idea would have cost billions of dollars in expenses and lost business.

The boutique investment bank Perella Weinberg, which had been hired by Apotheker at the time to explore alternatives, has since lost the mandate as HP's adviser, the sources said.

Perella Weinberg was not immediately available for comment. Bank of America declined to comment.


But one of the sources said that any auction would not fetch a high price, given webOS has not received significant investment in over a year. "This won't be the most robust auction in the world," the source said.

Palm's former CEO Jon Rubinstein, currently in a product innovation role at HP's Personal Systems Group, which houses the webOS division, is an Amazon board member.

HP decided to buy Palm for over $1.2 billion in cash last April, billing the acquisition as a way for the company to participate more aggressively in the red-hot mobile market. HP acknowledged at the time that Palm housed "significant IP assets."

HP bought Palm mostly for the patent value and tablets were not an important strategic direction, said a fifth source familiar with the acquisition. The patents held by webOS could be used as defense by potential buyers to ward off patent infringement lawsuits, experts say.

Apotheker made webOS a central strategy, announcing in March that HP planned to incorporate webOS across most of its products. The TouchPad was to be the flagship device for the operating system.

Then HP discontinued the TouchPad in August -- little over a month after it hit store shelves with costly fanfare -- following poor demand for a tablet priced on par with Apple's dominant iPad.

WebOS is widely viewed as a strong mobile platform, but has been assailed for its paucity of applications, an important consideration while choosing a mobile device.

Also, the market is now mainly dominated by Apple and Google Android-based products. Microsoft's Mango platform comes a distant third.

(Reporting by Nadia Damouni in New York and Poornima Gupta in San Francisco; Editing by Phil Berlowitz)

(This story corrects spelling in paragraphs 10 and 11 to Perella Weinberg from Parella Weinberg; the error first appeared in UPDATE 1)

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Comments (10)
This is why HP will never be Apple. The corporation is too disconnected from the wants and needs of average consumer. WebOS was a beautifully designed, unique, and user-centric mobile operating system. It was a refreshing breakaway from iOS and the UGLY and “mass produced” Android OS. Unfortunately, however, it was relatively sluggish and was running on hardware that upon launch was inferior to the iPad yet, for some stupid reason, was just as expensive as the iPad. What HP should do now is optimize webOS and then release a 7-8 inch tablet costing no more than $149. The company will probably make no money on hardware sales, but the mass adoption of a BRAND NAME $149 tablet will pave way for a profit via app sales and cloud/subscription services.

Don’t get me wrong, cheap tablets DO exist (ranging from $70-$150), but they’re made by no-name-brand chinese manufacturers that use mutilated versions of Android OS, which in its purest form is still a P-O-S. The insecurities that those cheap tablets bring force buyers to opt for the more expensive tablets like iPad. However, IF people can get their hands on an affordable tablet ($99-$149), with a unique and user-friendly OS (webOS), from a respected brand (like HP), then by all means they will rip them off the store shelves.

Nov 07, 2011 8:17pm EST  --  Report as abuse
cultofone wrote:
WebOS is a very nice operating system.
The multi tasking is the best on the market. I would love to see somebody give it some love and add to the app store. My Touchpad was one of the best impulse purchases I have ever made. Come on somebody, give webOS a good home.

Nov 07, 2011 9:54pm EST  --  Report as abuse
bdkennedy1 wrote:
They killed their tablet and are contemplating relaunching another one? HP should merge with Netflix and form one gigantic company that has no idea what they are doing anymore.

Nov 08, 2011 12:33am EST  --  Report as abuse
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