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HP hurting over webOS fail, market uncertainty

Rumours as to HP's future plans for its consumer PC division in the wake of the fire sale of TouchPads and webOS-powered smartphones are coming thick and fast, but shareholders appear incredulous at the company's actions.

When HP announced it was spinning off its consumer PC division and buying UK software giant Autonomy in an attempt to focus more on enterprise software products, it came as a surprise. When the company followed that up with the announcement that it was killing off its flagship webOS devices, investors started to panic.

In trading since the announcement, HP has seen more than $10 billion wiped off its market cap as investors struggle to see a way for the company to make a smooth transition - and judging by some of the reports circulating at the moment, it's hard to blame them.

An estimate by AllThingsD suggests that the company's fire sale on webOS hardware - which has seen the cost of the entry-level TouchPad tablet dropped from £500 to just £89 in the UK and $99 in the US - could cost HP upwards of £180 million in hardware costs alone. When logistical costs are taken into account, that figure is sure to rise considerably.

Despite the fire sale - which has seen the TouchPad become the best-selling product on every site that has gone live with the new pricing - recent comments by HP suggest that webOS isn't going away quite yet. Although the TouchPad is a dead platform, the company has suggested that updates for the TouchPad could continue, making the £89 tablet something of a bargain even without the third-party development support for which the company had originally hoped.

The TouchPad is also the focus of efforts to port alternative operating systems to replace webOS, including work to make it run Google's Android - complete with a $1,500 reward for the first person to achieve a fully-functional port - and even the Ubuntu Linux distribution in its ARM-friendly form.

That's great news for those who managed to beat the crowds and snag one of the cut-price devices, but still leaves the company - and its shareholders - in a precarious position. While its plan to spin off the consumer PC division might be the saving of the company, many in the financial markets believe that its current share price dip means that HP as a whole is ripe for a takeover.

Numerous analysts speaking to Bloomberg have expressed the opinion that HP's current market cap - at just five times estimated profit, which is around 70 per cent less than that of the average high-tech company - mean that it could be a target for an outside company to buy and break up, spelling the end for a company which has been at the heart of technology since its foundation in 1939.

While nobody is tipping their hand just yet, Oracle has been named as a possible suitor for the company. If true, the company would likely break HP up, keep the server-oriented parts to boost its own efforts in that area, and spin the rest off - including the company's still-profitable printer business. Such a plan would leave the company's personal computer unit up for grabs, too, with the likes of Samsung, Lenovo, and numerous far-eastern OEMs named as interested parties.

One thing seems clear: HP's dramatic failure to leverage its Palm acquisition has harmed the company deeply, and could have knock-on effects for others in the industry. Research in Motion, as an example, will find it much more difficult to sell its QNX-based PlayBook tablet now that everyone who doesn't care about software compatibility has a cut-price TouchPad.

Other companies, however, stand to benefit from HP's decline: Microsoft has offered webOS developers a free Windows Phone device and training to tempt them into developing for its own smartphone platform, with WinRumors claiming the company has received an impressive amount of interest from between 500 and 1,000 webOS developers.

While HP could still bring this back from the brink, the dogs are circling.