Hewlett Packard’s Spin Off and Purchase Usher in the Enterprise Era

Hewlett Packard (NYSE:HPQ) announced plans to spin off its PC business, which also makes HP tablets and phones, in order to focus exclusively on software. HP also plans to buy U.K. software firm Autonomy Corp. (LON:AU) for $10 billion. Don’t Miss: Hewlett Packard Co. Earnings Cheat Sheet: Third Consecutive Quarter of Profit Growth.

The company’s board of directors is exploring a sale of its personal systems group, which includes the company’s PC-making business — the largest in the world — while it will discontinue its webOS devices, including the HP Touchpad and smartphones.

As recently as March, HP announced that it would be integrating its webOS operating system into all of its future hardware. But webOS failed to compete with Apple’s (NASDAQ:AAPL) iOS, which operates on Apple’s iPad tablet and other mobile devices, or Google’s (NASDAQ:GOOG) Android operating system.

While HP’s (NYSE:HPQ) hardware business is significantly bigger, its software business has been more profitable. Rumors have been circulating since chief executive Leo Apotheker took office that HP would try to expand the profitability of its software while divesting itself of its hardware business.

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The pending deal to buy Autonomy for $10 billion, a 75% premium on the stock’s closing share price Wednesday, would be the first big step toward the changeover. Autonomy specializes in pattern-recognition technologies which will help HP (NYSE:HPQ) compete in the enterprise software market with IBM (NYSE:IBM).

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