HP’s stock reacts to yesterday’s announcements by dropping 26%

By Mike Dunn August 19, 2011

It has been an exciting two days for HP. First it announced it was stopping production of webOS hardware, and then said that it wanted to separate its consumer PC division. Today there was a drastic reaction to the announcements, the company’s stock plummeted 26 percent. At the close of market HP’s stock fell $5.91 down to $23.60.

With the purchase of enterprise software company Autonomy for $10.2 billion dollars HP is betting on software for the future of the company. HP’s hope is to get out of the low profit margins of making computers, and focus on the high profit margins of making software. Problem is it doesn’t really make software right now, and wants to operate Autonomy as a separate company.

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This is the lowest HP’s stock has been since August 2005, months after Carly Fiorina was ousted as CEO. So clearly investors don’t have much faith in the direction that HP wants to go in the coming years. You can’t blame investors for being worried, when it seems as though HP isn’t even sure of its plans. It is already back pedaling from its webOS announcement, but is it too little too late?

The future of HP is very unclear for the time being, but you can bet we will be keeping a close eye on them. One possible bright spot from all this news is that if HP is planning on being a software company maybe they will keep webOS alive. Just because it isn’t planning on selling any future webOS hardware going forward that does not rule out licensing out the webOS software to others.

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