HP Exits Tablet Business

Update: The 16 and 32 GB Touchpads have been marked down to $99 and $149 respectively.  But hurry, inventories are dwindling…

A month and a half after HP released the TouchPad, HP is discontinuing it.

HP announced it will no longer produce hardware running its webOS mobile operating system, discontinuing operations on future TouchPad tablets and the Pre smartphone devices.

“HP plans to announce that it will discontinue operations for webOS devices, specifically the TouchPad and webOS phones,” the company said in a statement. “HP will continue to explore options to optimize the value of webOS software going forward.”

“Our WebOS devices have not gained enough traction in the marketplace with consumers,” said HP CEO Leo Apotheker in a conference call on Thursday. “Continuing to execute our current device approach in this space is no longer in the interest of HP or its shareholders.”

In its first major push into mobile in years, HP launched its TouchPad tablet in June. The tablet runs the webOS mobile operating system. The company also launched its Veer smartphone earlier this year.

But HP’s proprietary mobile platform, acquired from Palm just over a year ago for $1.2 billion, hasn’t taken off. Major competitors Apple and Google dominate the smartphone arena with their respective iOS and Android platforms, while RIM’s BlackBerry OS and Nokia’s Symbian round out the competition. Along with Microsoft’s puny Windows Phone OS, HP trails behind all the other leading platforms in market share.

“It’s obvious that they were using the TouchPad as a make or break event for webOS devices,” said Ben Galbraith, former director of developer relations for webOS, in an interview.

The news comes in the wake of a huge announcement from Google earlier this week, when the Mountain View company announced its acquisition of hardware company Motorola Mobility Holdings for $12.5 billion. Traditionally a software-only company, Google is making its first foray into the hardware business. (The company did test the waters slightly with recent partnerships with Samsung and Acer, which both make the Chrome OS-powered Chromebook.)

The news of the Motorola acquisition set the technology world abuzz, with pundits speculating that Google would alienate its other hardware partners — HTC, Samsung, LG and Sony Ericsson. The new relationship between Google and Motorola could make Google’s partners wary that competitor Motorola may be privy to inside information on Android, cutting others out of the loop.

Tech pundits speculated that rivals HP and Microsoft could potentially capitalize on Google’s acquisition by licensing webOS and Windows Mobile OS out to these manufacturers.

“OEM’s like Samsung, HTC, and LG are looking to hedge their smartphone strategy in the wake of Google’s Motorola acqusition,” said Forrester analyst Sarah Rotman Epps in an interview. “They’re looking at Windows, but potentially webOS is now in the mix.”

HP CEO Leo Apotheker said recently that the company had plans to license its software to third-party manufacturers.

“We’re looking at all business models, from licensing to any other possibility for webOS,” Apotheker said in a conference call on Thursday.

HP’s TouchPad tablet arrived DOA, despite an extensive TV ad campaign that features actor and comedian Russell Brand and Glee star Leah Michele (seen below). Best Buy retailers offering the tablet for sale are reportedly sitting on hundreds of thousands of unsold units, according to AllThingsD.

It’s also possible that HP could follow in Motorola’s footsteps, putting its patent portfolio on the market for a hefty sale. Google claimed multiple times that its acquisition was important for Motorola’s valuable trove of software patents, which would help protect Google from the deluge of lawsuits the company is currently facing.

“They made the first official mass-consumer smartphone. I’m sure they hold some very valuable patents,” said Galbraith.

In the wake of this week’s news, all eyes are now on key mobile players Microsoft, Nokia and RIM — the three major companies trailing clear mobile industry leaders Apple and Google — to see which OS will take on iOS and Android.

“There’s absolutely room for three operating systems out there,” said Rotman Epps. “The question was whether there was room for a fourth or a fifth. HP just answered that question.”

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