HP is shutting down its mobile hardware business and will stop making the TouchPad tablet and smartphones as the company looks to sharpen its focus on cloud, solutions and software for enterprise, commercial and government markets.

HP said it will discontinue operations for webOS devices during the fourth quarter of this year because the devices have not met internal milestones and financial targets. The news means the end of the line for mobile devices under the Palm brand, which HP acquired last year.

?Consumers are changing their use of the PC,? said Léo Apotheker, president and CEO of HP, Palo Alto, CA, during a conference call to discuss the company?s third quarter results and the news. ?The tablet effect is real.

?Sales of the TouchPad are not meeting our expectations,? he said.

Growing competition
HP also said it will continue to explore options to optimize the value of webOS software going forward.

Mr. Apotheker pointed to marketplace dynamics, growing competition and an increasingly complex marketplace as contributing to the company?s decision to cease operations for its webOS devices.

He also said that webOS is a respected platform and that HP will explore options for how to derive value from it in the future.

HP recently suggested it might be open to licensing the webOS software to other hardware manufacturers.

WebOS was one of the factors in HP?s decision to acquire Palm for $1.2 billion last year. HP had said it wanted to bring the operating system to a wide variety of mobile hardware devices, including tablets, laptops and desktops.

WebOS currently runs on HP?s Palm smartphones, as well as the TouchPad tablet. 

The iPad factor
It has been tough for hardware manufacturers to gain traction in the tablet space because of the popularity of Apple?s iPad tablet. There have been reports that retailers such as Best Buy were asking HP to take back TouchPads because they were not selling well.

Still, HP was not expected to exit the business so quickly.

?There had been indications if you look at the news from Best Buy asking HP to take back a large number of the TouchPads and others in the marketplace saying it was not selling well,? said Rhoda Alexander, director for monitor research at IHS iSuppli, El Segundo, CA.

?Still, it came as a surprise, the swiftness of the decision that HP made,? she said.

?I think it reflects the challenges that you are seeing across the board as companies that haven?t necessarily had a foothold in this space try to enter it. It?s a challenging environment and there are a lot of players in there already, so trying to carve out a niche presents a lot of challenges.?

At the same that it made the announcement about exiting the mobile hardware business, HP also said it will explore strategic alternatives for it Personal Systems Group, including a full or partial separation of its PC business through a spin-off.

Revenue for the Personal Systems Group declined 3 percent year over year. Commercial client revenue for the group grew 9 percent and consumer client revenue declined 17 percent.

Overall for the third quarter, HP reported net revenues totaling $31.2 billion, up 1 percent from the prior-year period. 

HP also said it has acquired Autonomy Corp., which makes enterprise software.

Final Take
Chantal Tode is associate editor on Mobile Marketer, New York