Turmoil at HP: a CEO shakeup, executive exits, and an open source future for webOS

It may have been overshadowed by pricier acquisition deals in subsequent years, but HP's 2010 takeover of Palm remains a milestone event. It was a seemingly perfect combination of a highly competitive mobile operating system with a deep-pocketed hardware juggernaut. HP promised it would fund the future development of webOS and support it with a broad ecosystem of devices. Only a year later, however, the company reversed course and abandoned its touted plans, to the chagrin of hard-hit shareholders.

A class action lawsuit filed in the wake of that decision in 2011 has now been settled by HP at the cost of $57 million. The plaintiffs are primarily pension funds and other institutional investors, whose anger stems from the dissonance between what HP was saying publicly and planning privately. Citing employees from within HP, the lawsuit alleges that the company didn't have plans to build webOS PCs or printers until at least the beginning of 2013, which would have contradicted its bold claims about flooding the market with webOS hardware.

Next week, LG will unveil new televisions running webOS, the ill-fated operating system it acquired in last February. Although LG is expected to retain some form of webOS’ interface, exactly what that will mean on a television instead of a phone or tablet is still a mystery. If LG has any luck at all, it will be more successful than the last consumer webOS products. It's been over two years since HP’s TouchPad and the Pre 3 were released and then discontinued in a surprise decision from then-CEO Léo Apotheker. In fact, most people within HP were blindsided when executives decided to stop hardware production and left the software team twisting in the winds of uncertainty. Apotheker's decision ultimately led to the open sourcing of some parts of webOS and the sale of the rest to LG under current CEO Meg Whitman.

But back in 2011, before and after Apotheker's fateful decision, Palm had been actively working on both new hardware and new software. The Verge has obtained documents describing Palm's plans and even a design prototype of a new smartphone. They tell a story of a company struggling to innovate in the face of daunting competition and perishingly few resources. They also show that, even at the end, Palm’s ambition outstretched its ability.

While LG owns webOS as a project, though, HP kept control of the patents behind it and simply cut a licensing deal with LG. That could pay off now, as CEO Meg Whitman continues her attempts to get the company back on track. LG hopes to release TVs running webOS in 2014, and Bloomberg's sources say that HP's patent agreement won't make it harder to sell off the portfolio. Besides the patents, HP also maintained control of webOS cloud services. Though Whitman has continued to insist that the company can be saved, revenue fell by 8 percent last quarter, with all units underperforming. A plan to increase revenue by 2014, she said after the earnings were revealed, now seems unlikely.

Today is the four-year anniversary of the retail release of the first Palm Pre. It's also a day to reflect on the fact that each and every webOS device has what amounts to a ticking time bomb inside it, set to go off on July 23rd, 2013. A "Root Certificate" will expire on that day, and it's required to safely and securely access online webOS services including backup, restore, app catalog, and even activation. Both HP and the webOS community have been aware of this issue for some time, and many thought HP would need to issue a full OS update in order to save those online services.

Apparently not, as today the company will announce that it's issuing a "mandatory" update to a single app, the App Catalog, which will resolve the issue. If you have a webOS device either in your pocket or — more likely — in a drawer somewhere, you should power it up and install the update. Doing so should update your root certificate and allow your webOS to continue to communicate with HP's servers.

The device above is the all-touch webOS smartphone that never was. Long after HP's misadventure with Palm, a prototype of this previously-rumored phone — codenamed WindsorNot — has been obtained by webOS Nation. The smartphone is said to have identical internals to the Pre 3, and it is centered around a 4-inch, 800 x 480 touchscreen. Unlike the Pre 3, however, it runs webOS 3.x, the same version that was used on the ill-fated HP TouchPad. Instead of a gesture area like that found on the Pre, the WindsorNot has a home button borrowed almost directly from the TouchPad. Unfortunately, the prototype is far from stable, and it can't make it past the account setup screen.

According to webOS Nation, the phone was developed under Jon Rubinstein and was intended to be released after the Pre 3, later in 2011. The Veer smartphone, TouchPad tablet, and 7-inch TouchPad Go were also planned for release that year, and with limited resources the decision was made shift efforts from the WindsorNot to the Pre 3. It was determined that the WindsorNot would have required more development to get to market than the Pre 3 — especially since the software was little more than a smaller version of what was running on the TouchPad. The report says the phone likely would not have been ready until 2012. This timeline caused AT&T to lose interest in the device: the carrier wanted to ship LTE phones that year, and the WindsorNot wasn't equipped with a cellular radio that could support the new technology.

Last month, during HP's annual shareholder meeting, CEO Meg Whitman told investors about what may be the company's most important product launch of the past few years. "This is not evolutionary innovation, this is disruptive innovation... This could truly be a revolution."

The hyperbole doesn't stop there. The product, which is being launched today, is called Project Moonshot — terminology that should conjure images of Google Glass and a self-driving car — and it's said to be the result of more than ten years of research. It's neither of those things, however: it's a new, low-power server for enterprises.

When Meg Whitman took the helm as HP's CEO, she famously reversed the decision of her predecessor, Leo Apotheker, to spin off the company's consumer PC business. But according to Quartz, HP's board is again toying with the idea of a breakup — a move directors apparently think could improve the financial outlook for shareholders. Quartz Editor-in-chief Kevin Delaney and Gina Chon write that HP's board is considering a variety of breakup scenarios, though it appears executives first want to give Whitman a chance to return HP to profitability as a cohesive unit — a goal she's expressed as unlikely in 2013.

Even so, HP regaining momentum would likely put to rest any prospects of a company split, so the rumor shouldn't be taken as gospel just yet. But combined with Dell's new path forward (which HP criticized earlier today) it does reiterate how yesterday's PC manufacturers are devising ways to keep afloat in today's "post-PC" era.

It's been just over a year since Meg Whitman took over as CEO with hopes of turning the struggling company around, and so far the results haven't gone as hoped. According to Reuters, Whitman said at HP's annual investor meeting that it will take until 2014 for the company's turnaround to become visible, and as such the company will struggle to be profitable over the next year. Along with this news, HP's stock price has dropped 10 percent as of this writing and sits near a nine-year low point. Whitman pointed to lack of clarity around the company's strategy as well as heavy executive turnover for the company's struggles, saying "the single biggest challenge facing Hewlett-Packard has been changes in CEOs and executive leadership, which has caused multiple inconsistent strategic choices, and frankly some significant executional miscues."

It's hard to argue with Whitman — over the last few years, we've seen a large amount of executive turmoil, highlighted by former CEO Leo Apotheker's firing last fall. That change itself followed the dismissal of CEO Mark Hurd for an ethics scandal involving some expense reporting. As for the strategic choices, who can forget HP's purchase and subsequent dismantling of Palm and WebOS, a move that cost the company billions of dollars. It's a move that seems exceptionally rash in hindsight, with Whitman recently saying that HP will "have to ultimately offer a smartphone." While much of that turmoil has been in the rear-view mirror for many months now, it seems the lasting effects will continue to hurt HP for months to come.

Last month we learned that HP was launching a new Mobility business unit with a focus on consumer tablets, but it looks like the company's ambitions may also include smartphones. Speaking to Fox Business News, CEO Meg Whitman said that HP is working on getting into the smartphone market, though no timetable has been set. "We have to ultimately offer a smartphone because in many countries of the world that would be your first computing device," she explained. "We are a computing company, we have to take advantage of that form factor." The news comes as HP is coming off of a flat third quarter in which the company saw a drop in sales for its PCs and printers. HP was previously rumored to be working on an all-touch smartphone codenamed Stingray for its webOS operating system.

We've just been tipped to a memo circulated internally by HP's Todd Bradley — who runs the company's recently-merged Printing and Personal Systems Group — announcing the creating of a new Mobility business unit underneath him that will be responsible for "consumer tablets" and "additional segments and categories where we believe we can offer differentiated value to our customers." The news comes almost exactly one year since HP killed the TouchPad, effectively ending Palm's run as a hardware company and throwing webOS itself into an uncertain future as an open source platform.

Running the new Mobility unit will be Alberto Torres, who departed Nokia after running its MeeGo operations — operations that were doomed once it became clear that CEO Stephen Elop would be taking the company down the Windows Phone path. He'll be reporting directly to Bradley and starting in early September. Interestingly, HP's "soon-to-be launched commercial tablet" will remain in the charge of James Mouton, who runs the PC group.

Thirty-one.

That’s the number of months it took Palm, Inc. to go from the darling of International CES 2009 to a mere shadow of itself, a nearly anonymous division inside the HP machine without a hardware program and without the confidence of its owners. Thirty-one months is just barely longer than a typical American mobile phone contract.

Leo Apotheker lasted as CEO of HP for less than a year before being replaced by Meg Whitman last September. He hasn't been left hurting for employment, however: he's recently been appointed to the supervisory board of French company Steria. The move was approved by the company's shareholders at a meeting on May 15th. You may recall that Apotheker — who currently serves on boards for Schneider Electric and NGO Planet Finance, as well — was fingered as the individual responsible for the quick end to the three-year plan HP had for Palm after its 2010 acquisition of the company. As for Steria, the company's general manager François Enaud said that "given the widespread changes underway in our industry, Leo's expertise in strategic planning" would be an important asset for Steria.

HP's transitional phase continues — less than six months after being named as HP's chief strategy officer, Bill Veghte has been appointed to the newly-created Chief Operating Officer role. Veghte will keep his strategy role, but he was also previously HP's executive VP in charge of software, a role that will now be filled by George Kadifa. Kadifa previously worked at global technology investment firm Silver Lake, with the somewhat-nebulously named "value creation team." Both Veghte and Kadifa will work directly with HP CEO Meg Whitman as the company looks to rebound after a tough quarter and a forthcoming major round of layoffs. Whitman said that Veghte "has done an excellent job delivering strong results in HP Software, and more recently helping us focus our efforts in the execution of our strategy," and noted that Kadifa's "ability to manage multiple business models will prove extremely valuable to HP as we extend our software offerings in cloud, information and security." Both appointments are effective immediately.

The official blog for the HTML5-based Enyo framework has responded to last night's news that key members of the team are departing for Google, saying that it would like to "clarify some of the news reports you may have read today." Notably, the team — which is an open source project that just happens to be comprised mostly or entirely of HP employees at present — says that "the majority of the engineering and leadership team remains" and that it's "redoubling" efforts to continue development. Everything we've learned from sources in the past day suggests that the Enyo members most heavily invested in the platform have indeed left (those "responsible for 99 percent" of the code, we're told), but it stands to reason that the remaining team would be looking to cast the situation in as positive a light as it possibly can.

The post goes on to say that response to Enyo 2 — the latest version introduced as part of Open webOS — has been positive, and that the team is actually growing both to backfill the departures and to increase net headcount. HP's statement this morning indicated a desire to stick to Open webOS's original roadmap announced in January, which would have a final release in users' hands in September of this year; there's little question it'll need to staff up in order to do so.

What the Enyo team will do at Google is unknown at this point, but there are several logical landing spots. Android would obviously be an option — regardless of its commercial success (or lack thereof), few would argue that webOS is an innovative platform that Android could learn from, and Android's design chief Matias Duarte had previously led Palm's efforts in the run-up to the Pre launch. Alternatively, the team could slot into the Chrome group — web apps factor prominently in the Chrome story, and Enyo would do well as part of a future Chrome Web Store developer framework.

More on this as it develops.

HP has just announced a "multi-year productivity initiative" that will see 27,000 employees leave the company: eight percent of HP's workforce, which numbered 349,600 in 2011. The goal of the restructuring is to generate savings between $3.0 and $3.5 billion for the company, money that will then be reinvested in HP. The company mentioned its three major areas of focus going forward, saying it will invest in cloud, big data, and security, and is trimming elsewhere to direct more resources toward those three. The layoffs are scheduled to run through the end of the company's fiscal year 2014, and some portion of the reduction will be from employees accepting an early retirement plan.

We'd heard before that HP was considering a layoff of this magnitude, and it certainly appears the company's having to take drastic steps to begin moving in the right direction. It comes after two poor quarters for HP, including a just-reported 31 percent decline in earnings in the most recent period.

HP just reported financials for the second quarter of 2012: $1.6 billion in GAAP earnings on net revenue of $30.7 billion. That represents a revenue decline of 3 percent versus the same quarter a year prior and a more striking 31 percent decline in earnings — bad, though not quite as bad as the 38 percent decline HP saw in Q1.

Historically, HP's printer division practically printed money, but cracks have been showing in recent quarters; that trend continues here with a recorded 10 percent decline versus Q2 2011 in the so-called Imaging and Printing Group of the company (IPG). Breaking it down, consumer demand is particularly weak: revenue in that side of the business was down 15 percent versus 4 percent in commercial.

It sounds like the tough times may be continuing for HP — according to Bloomberg, the company is considering laying off approximately 25,000 employees due to declining demand for its computers and services. A layoff of this size would represent a 7.2 percent cut of HP's 349,600 employees. 10,000 to 15,000 of those employees would be cut from HP's enterprise services group, though there's no word on which specific departments would absorb the rest of the layoffs. The exact number of job cuts under consideration appears to be in flux, with Business Insider reporting that HP could lay off as much as 15 percent of its workforce.

These layoffs would all be part of CEO Meg Whitman's plan to turn HP around in the wake of continued poor financial results that have continued since Whitman replaced former CEO Leo Apotheker. While the majority of those under the gun will simply let go, "several thousand" people may instead be offered an early retirement option — small consolation, but better than losing their jobs entirely. This layoff may not be a sure thing yet, but it certainly seems like HP is at least considering some fairly dramatic actions to help its balance sheet. We're reaching out to HP for more information, though "no comment" has been the response to other outlets so far.

In November 2009, he told Sramana Mitra he had "the most fantastic job in the world," but Prith Banerjee, head of Hewlett-Packard's research division HP Labs, is apparently departing the company. AllThingsD obtained an internal memo from HP CEO Meg Whitman that says Banerjee's last day is April 15th, meaning the former dean of Engineering at the University of Illinois probably won't get to see projects like the memristor and flexible displays commercialized before he leaves.

AllThingsD's anonymous source suggests that Meg Whitman is looking for HP Labs to focus on faster innovations that can be brought to market, which if true could possibly go against the philosophy that Banerjee espoused in 2009. He explained that HP had tens of thousands of engineers working on short term innovations:

For a program that's already on shaky ground with no new hardware in the pipeline, the lack of a solid organizational foundation seems like a big problem. Fans of webOS and the Open webOS project will be happy to hear HP reiterate the program's schedule, then, which is expected to hit 1.0 later this year. Though we don't know who's going to fill Greenblatt's shoes — or the circumstances under which he left, for that matter — webOS Nation is reporting that Bill Veghte, who was recently named to a chief strategy role overseeing webOS's open-source transition, remains in place.

HP has just confirmed its rumored reorganization, and will merge its Imaging and Printing Group with its Personal Systems Group (PSG) to make — wait for it — the Printing and Personal Systems Group. Printer boss Vyomesh Joshi will retire, making room for Todd Bradley to head up the new division, after running the PC group since 2005. The move comes after HP notoriously mulled spinning off its PSG last year, but decided to keep it. At the time of the decision to keep PSG in-house, new HP CEO Meg Whitman said that "HP is committed to PSG, and together we are stronger" — and now it appears that PSG will be made stronger by tying it to HP's more profitable printing business.

HP says it will also be streamlining other areas of its business, including folding its international account sales organization into its newly formed HP Enterprise Group, which will include enterprise servers, storage, networking, and technology services. Whitman says that the reorganization will result in "a faster, more streamlined, performance-driven HP that is customer focused" — something HP will need to turn around its first quarter earnings.

HP declined AllThingsD's request for comment; we'll update the story when we know more.

This isn't exactly a surprise, as the company recently moved the software into an open source stage of development, and dedicated resources at HP are likely far less necessary. It also appears that many of the cuts were focused on hardware-related positions. This does cast a shadow over CEO Meg Whitman's statements that the Palo Alto-based PC-maker was still interested in producing webOS hardware — particularly tablets. That seems less and less realistic given this dramatic cut in workforce on the project, and waning interest in the also-ran platform.

The AP is reporting that HP has awarded its new CEO Meg Whitman a $16.5 million pay package, but to reap the full amount she'll have to resurrect the company's stock price over the next two years. While performance-based CEO pay packages of this magnitude are not uncommon at Whitman's level, it appears as if HP is dialing back its executive compensation: Whitman's predecessor, Leo Apotheker, floated off the company's payroll with a $25 million cash-and-stock severance package after controversially scuttling WebOS devices and mulling the end of HP's PC business.

As for Whitman, her rights to 800,000 stock options will vest on her one-year anniversary at HP if the company's share price closes above $28.31 for 20 consecutive days, with another 800,000 shares vesting on her two-year anniversary if the stock price closes above $33.03 for 20 consecutive days — as of this morning, HP's stocks sat at $28.83. While Whitman stands to have a nice payday if HP's fortunes continue to improve, it seems that the company's board is making it clear that it's serious about results.