Double FacePalm: HP Blew Billions on webOS

Hewlett-Packard’s decision to acquire Palm and “double down” on its webOS operating system has so far proven a regrettable and costly mistake. How costly?

HP investors, grab your Mylanta …

HP spent $1.2 billion to buy Palm in 2010. Reporting fourth-quarter earnings Monday, the company said it had been forced to write off a record $3.3 billion, about half of which was “related to the wind down of its webOS device business.”

From HP’s earnings statement:

Non-GAAP earnings and operating profit information excludes after-tax costs of $3.3 billion, or $1.56 per diluted share, related to the wind down of HP’s webOS device business, impairment of goodwill and purchased intangible assets, amortization of purchased intangible assets, restructuring charges and acquisition-related charges.

Update: I originally read that list of items as all connected to webOS, but the related expenses seem to break out like so: $885 million from the “impairment of goodwill and purchased intangible assets” was largely tied to webOS and Palm, and $775 million in one-time charges were related to the wind down.

So $1.66 billion to wind down webOS, the crown jewel of HP’s Palm acquisition. That was $1.2 billion well spent …

10 comments
Johnny Lee
Johnny Lee

The numbers are mostly accounting gimmickry, part of every big company's usual game of fixing numbers to manage wall street expectations. The webOS IP is clearly still worth something and I'm guessing they're understated on the books right now.

But financials aside, the deal has been a disaster from a wealth / productivity creation point of view. A promising technology and team was poorly guided and not given the chance to truly test itself in the market. This all part of HP's general mismanagement. Let's hope they get their act together soon.

F2
F2

While it is indeed a double-facepalm, you need to understand that the "impairment to goodwill" and the acquisition are the same money in a non-accounting sense: when you spend 1.2 billion to buy something, the books reflect it as the value bought (whatever it is) and if that's not enough to reach 1.2 Bln, the rest goes down as "goodwill".

When you kill WebOS, you need to take that "goodwill" off your books. 

narg
narg

The only thing I buy from HP any more is printers.  And even those are starting to look not so good these days.  HP is about to tank IMHO.

Arturo Ryes
Arturo Ryes

webOS failure is due to HP, I wonder how they still are in business with their poor marketing strategies and lack of product innovation. They did not even bother to try harder, I really hope a good company buys webOS because it is a good OS.

baba12
baba12

HP Board consists of a majority White male group, advisers to HP on this deal and the deal to buy Autonomy for $11 Billion happen to be white males. If a majority of the board was women I don't think they would have made for a cluster fuck like this.
Yes I think there is a pattern to be looked at carefully.In the end who benefits from all this not shareholders just the folks who made these things happen on both sides of the equation. Money made advising HP to acquire Palm and money made to divest from Palm going to those bankers. If I were a significant owner of stock in HP I'd fire every board member, fire all bankers advising. They all have fucked up big time.

Charles Knight
Charles Knight

It's not over, next quarter will see additional costs (not as high as this) from winding down the software division after they fall to sell it on to anyone.

Spinfusor
Spinfusor

I wonder why HP even bothered. It never had its head in the game and never really tried.

stupidcommentsystemchange
stupidcommentsystemchange

Insanity.

And they COULD have simply hired a company like Teal Software (Tealpoint?) to simply clone the interface on Android AND Windows AND any other underlying operating system they wanted and probably have paid no more than a few tens of millions absolute maximum.

Insanity.

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