Class action suits filed against HP over webOS, earnings | webOS Nation

Class action suits filed against HP over webOS, earnings 70

by Derek Kessler Thu, 15 Sep 2011 8:16 pm EDT

Things haven’t exactly been pretty in webOS land. HP’s still working on the software, but they’re done with the hardware and are privately shopping the OS around to anybody who will take it – but nobody seems interested. Meanwhile, the webOS user and developer community is caught between the old world and the great unknown future, suffocating in the space in between. webOS users have gotten used to taking it on the chin, complaining loudly, and the eventually shrugging it off as just another day.

Lawyers, however, don’t do that. They file lawsuits when they’re in anguish, because well, that’s what lawyers do. And that’s what lawyers are doing towards HP. At least two law firms – Briscoe Law Firm and Powers Taylor LLP and Robbins Geller Rudman & Dowd LLP – have filed class action lawsuits against the Palo Alto-based tech giant, alleging that the company violated SEC disclosure rules by producing misleading statements about HP’s potential for revenue, marketshare, and product intros as related to webOS. From the Briscoe Law filing:

“It has been alleged that during the Class Period, HP and certain of its officers and directors made materially false and misleading statements or failed to disclose material information related to the company's business and operations in violation of the Securities Exchange Act of 1934. Specifically, it is claimed that HP and the other defendants misrepresented and/or failed to disclose the following adverse facts: (a) HP's business model was not working because the company was unable to leverage its extensive portfolio and scale of products and services in a strategically beneficial manner; (b) webOS, the TouchPad and the PC business were not central to HP's business model and webOS would not be integrated across Hewlett-Packard's entire product line; (c) the TouchPad hardware was inefficient, limiting the degree of effectiveness of the webOS operating system; and (d) based on the foregoing, defendants lacked a reasonable basis for their positive statements about HP's turnaround, revenue growth rates, market share, new product introductions, diluted EPS, and the company's ability to deliver upon its long-term growth model. As a result of these alleged false statements, HP's stock traded at artificially inflated prices during the Class Period, reaching a high of $48.99 per share on February 16, 2011.”

As with all class action lawsuits, there’s a great potential reward for the litigator, and should there be a payout or settlement, the amount that makes it to the aggrieved parties (in this case the HP shareholders) would likely be a pittance compared to how much they’ve lost due to HP’s actions. We’re not lawyers here (okay, Jonathan is), so we can’t really judge there’s much of a case here, especially without hearing HP’s side and seeing the relevant documentation. Either way, we’re surprised it took this long to see the suits come to fruition.

Source: MarketWatch, Robbins Geller Rudman & Dowd LLP; Thanks to mpnalvin for the tip!


I love how this makes webOS sound very good and HP sound very bad. KARMA.

i think this whole situation is more ironic than anything... webos can't catch a break. webos is just like the boston redsox playoff push..

Need a class action suit for WebOS users that skipped over Sprint opt-out points based on HP's multiple promises to bring 2.0 to "all devices" "for no cash".

Back that up with them trying to fleece legacy owners out of $600 to get $50 back to "make things right".

So, WebOS users? Want to litigate? Everybody on?

No, you have no grounds for a class-action lawsuit. At all. VZW users with the GPS **** had more of a chance.

People who sign contracts knowing VZ's "crippling" history, have no rights a tall.

In this world of litigation, I'm surprised HP has filed suit against some of its' competition, for webOS copyright infringements.

It would be patent based, not copyright. It is very possible to duplicate the functionality of another device without any duplication of programming code. Still, HP has not properly leveraged the Palm patents against other companies such as Apple, which they could have done and made a HUGE amount of money in the process. Do you REALLY think that Apple did not violate any Palm PDA patents?

HP has those incase someone sues them. Very rarely do larger companies go after other companies. At least, until late with Microsoft and Apple fighting Google and it's partners to death. Not very good business for Microsoft because some of those partners -- like HTC -- are Windows Phone 7 partners as well.

I am not surprised at all that HP hasn't sued the companies infringing on there IP.

hope they stick to HP and stick em hard

Yeah...I think this lawsuit is more about the lost money, and not so much about sour grapes over WebOS being turned off.

"(b) webOS, the TouchPad and the PC business were not central to HP's business model and webOS would not be integrated across Hewlett-Packard's entire product line; (c) the TouchPad hardware was inefficient, limiting the degree of effectiveness of the webOS operating system; and (d) based on the foregoing, defendants lacked a reasonable basis for their positive statements about HP's turnaround, revenue growth rates, market share, new product introductions, diluted EPS, and the company's ability to deliver upon its long-term growth model. As a result of these alleged false statements, HP's stock traded at artificially inflated prices during the Class Period, reaching a high of $48.99 per share on February 16, 2011."

It seems as if they are, in part (since the lawsuit isn't all about WebOS) attacking HP for not being upfront and honest about WebOS's poor chances of success. They made investments based on HP's hype, then lost it when the floor fell out.

If HP was upfront about the dismal chances of WebOS, I dont think it would have been an issue at all (and it still would have been shut down, perhaps sooner)

I agree. It is about the lost money. Most of these law suits are. HP stating webOS was their future, would use it on basically everything, than stopping just like that and now saying they will sell the entire PC division which was to have webOS. Let's face it. It was even obvious the Senior VPs had no clue what was happening. Not even the Senior VPs of the effected divisions as was clear by many of their changing tweets, statements, etc. As a potential investor, I found their actions in direct contradiction to their words.

its not that HP wasn't honest about webOS chances. Its that they mislead investors about their business plan. If they knew that the touchpad hardware was not competitive, and that they did not have enough time to release webOS on their entire line of products then they were misleading. If 30days after beginning a marathon, they cuts the legs out from webOS, investors were expecting a long haul push.

The Touchpad hardware is not competitive, it just would not sell for the initial prices. Also, without releasing the Pre 3 first, there would be no chance for a surge in webOS devices prior to the tablet being released.

Apple would NEVER have sold more than 200,000 iPads if the iPhone had not been out and available for several generations first, and the Pre, Pre Plus, Pre 2, etc never got enough traction to draw a lot of people to the Touchpad without a $300 price combined with a LOT of hype in the retail channel, not just a display with no sales people trying to push those products.

I agree with the plaintiffs in this lawsuit, believe it or not. At the event where HP unveiled the Touchpad & Pre 3, they made a promise to investors as well as consumers that they broke by discontinuing work on WebOS devices.

HP done lied. We'd all be using Android, or maybe a WebOS phone made by some other company had HP not made so many false promises about their intent in the mobile sphere. And without consumers, there's no dipping into the mass profits of gadgetry, so no doubt a load of Wall Street hustlers are gonna get litigious.

" At the event where HP unveiled the Touchpad & Pre 3, they made a promise to investors as well as consumers that they broke by discontinuing work on WebOS devices. "

I don't think thats the core issue, I think it goes back further than that. I think after the purchase of Palm, HP knew that the situation was grim for any success of WebOS, but continued on anyway, pretending in public as if they had these great big plans for the ecosystem.

I dont entirely remember the specifics from the earnings call, but it was evident that HP either didn't fully examine WebOS's potential, or knew that it was bad from the outset, and continued forward anyway (only to drop it at their first chance - poor TouchPad sales).

The chances for webos were ok. *If* you really go for it and invest the couple of years a takes to really establish a platform (don't tell me it already had 2 years - most of that was hampered by Palms lack of resources and months of that was interim between Palm and HP).

Poor TP sales weren't the reason HP dropped webos. Planning to get out of consumer hardware was. HP knew as much as anybody that those sales would have been better if they either used better hardware for the price - or sell it for less (and use cheaper parts). Either way it takes a while to build a platform. Android wasn't successful because of the great sales of the G1.

The suit might have merit. But the arguments will get messy. On the one hand a publicly traded company has to be careful what they say or they can be accused of misleading investors. OTOH they must have some room to plan strategy before having to disclose it.

Either way Apotheker can't be very popular at the moment.

"Slower than expected adoption by the market", Jon Ruby, 2010

"It would take too much investment with no real assurance of success", Leo Apotheker, 2011

"The chances were ok", tholap, 2011

One of these statements do not belong.

By the way, webOS already had 2 year to develop, and you're not wanting to count them does NOT change that.

The point is that we saw the original Palm Pre hit the market in June of 2009, then Verizon and AT&T offered the Pre Plus in the first half of 2010. Since that time, the Pre 2 never really sold in the USA until Verizon started offering it six months after it was actually ready to go(remember those developer-only units with webOS 2.0?).

No other device that was even aiming for a mainstream audience was offered. The Pixi and Pixi Plus came out alongside the Pre and Pre Plus, but we saw no other devices. The Veer was never going to be a mainstream device, being even smaller than the Pre devices.

The Pre 3 was the first device that would not be considered SMALL by the general public, and it was going to be released LAST out of the small/medium/large trinity announced by HP in February? That is what killed the chances of getting some attention by the public, plus, doing a 1 release per year just doesn't cut it unless you have a working ecosystem that has the public pushing for it.

Throw Leo in the stocks! I've got some fruit sitting in the sun with his name one it.

Can I sue to get my palm name back?

well it just all seems like hp had planned all along to get out of the hardware business when they hired leo. i dont understand why they attempted to stay on course with hardware with the veer and tp if they intended to get out of that business. they deserve to get sued in my opinion. for being such dumb a$$es.........

because as a stipulation for the purchase of Palm ... HP was required to finalize the launch of pre 2 complete the TP and launch a phone of their own and bring them all to market.

Makes no sense. If they weren't interested at the time they simply would have never bought Palm.

They simply had a different vision last year.
Under Hurd they were still trying to be more like Apple. A few months ago even Apotheker talked about being cool like Apple.

Meanwhile they decided to be more like IBM.

For the Apple strategy they needed webos.
For the IBM strategy they need to get rid of consumer hardware.

I'm an attorney and I'm sorry there is no case, its a bunch of greedy **** looking for a handout. Cases like this is what makes me sick about our legal system. People, businesses fail everyday day, just because they might have been mismanaged is not grounds for a lawsuit. I love the quote about the touchpad hardware. I'm sorry after doing some tweeks with preware the hardware is more than sufficient .

I am also an attorney. Having just gone thru my corporation's annual insider trader training (how NOT to do it ;-)) if Leo's and everybody else's exaggerated praise of HP's plans for webOS wasn't a material intentional misstatement of fact intended to induce buyers to buy both hardware and stock, then Enron was wrongly prosecuted for its business being mismanaged and its company failing.

On more than one occasion, Leo and crew, made material statements and commitments that within six weeks or less, fully reneged from.

Futile. Leo is in his last three months of reign. Jon should be out the door by the end of the month.

Enron was about a complete fraud. Special purpose entities to hide failed worthless power plants. Specifically they set up fake companies, the spe's, then sold power plants to them. Then booked the sale as profit. But they didn't the SPE was them. There was no profit. They sold them to themselves. Then reported them in their Quarterly reports as earnings. That is not even close to what is asserted here. Enron they where hiding lawless and forging SEC filings. There isn't even such a claim here.

I think unless there is actual proof of intent to make false statement i don't see this as having a ghost of a chance. They talked good about a product, it didn't sell, they said so much at the earnings report. To find them liable merely because the product failed would be a massive can of worms. Rimm had a **** quarter, does merely saying something positive about their products in the prior quarter make them liable? And if that's the case how many companies would be liable. Then you'd be forcing companies to say nothing and i highly doubt The SEC's goals is to promote no disclosure.

short of more this strikes me as pretty frivolous.

I don't think the suit is about product failure.
As you say - it can't be.

It's about the time period between the decision to change strategy and publishing that.

Apotheker had been fairly quiet for a while.
And those who promised #1+ didn't seem to know about the new strategy. So the individual persons didn't actually lie.

But - it will probably be argued that Apotheker should have held back the division from making announcements that the company no longer actually intended to implement.
If the decision to change strategy and dump the consumer parts (let's not forget that webos is actually only a small part of HPs strategy change) has been made several months ago (perhaps even as part of hiring Apotheker as has been rumored somewhere) then HP could be in trouble.
If the period is short enough (perhaps a few weeks) then they will probably be ok - as a company needs time to decide, think and implement without telling investors every new idea they discussed over golf.

If this goes to court the discovery should be interesting. We would learn a lot of things we can now only speculate about.

i read the complaint. It's a claim they made a material misrepresentation. it's a 10b-5 claim and then they have a section 20 claim that incorporates controlling persons that contribute to a fraud.

the suit argues they made a misrepresentation in releasing press statements and making public statements that, for example, webos would be profitable, would help their bottom line, be a centerpiece for there future pcs and tablets.

you can read the complaint here.

It's largely a 10b5 claim. But to prevail they have to prove that they not only that hey lied but they intended to misrepresent at that time. Negligence isn't enough. That is its not enough that they made a statement and it later turned out to be not to be true. To find those facts alone actionable would be to make any failed product actionable. They have to prove that they knew all of those statements in the complaint or any added later were knowingly false at the time they were made. That's a very tough case to make if you don't have some sort of inside documents stating like, "this will never ever ever work but i'm gonna release it to the press anyways." And before the press releases. But the problem is they released phones and tablets and stuff and marketed the devices and had commercials and developer events. All those things are good indications that they had a good faith belief that these products would sell and were merely wrong. Which cut against the idea that they never intended do what was in the press release.

And if the plaintiff, as i think he is is merely some shareholder, i'm curious as to how he'd know that Leo never intended to carry out the statements in the press releases. Sounds like he's merely mad and is speculating. I mean are their internal memos of a lie or fabrication? Maybe but at this point we don't know and the complaint doesn't actually touch on any actual evidence.

And we haven't even touched whether he can get a class certified.

It could be argued that 1.5 months is not enough time to properly evaluate the potential of something, but that is how long from SOFT launch of the Touchpad to hardware cancellation announcement there was. Release a product, and 24 hours later decide that it didn't do well enough on the first day to bother trying to sell just doesn't cut it. Trying to get a new product into the market at the same price as established dominant player without REALLY trying to push that product(TV commercials and nothing else doesn't count as a very hard push these days) also means they could not expect to sell said product in large volumes.

HP claimed that HP could use its size to get webOS products out and popular, yet it clearly did not. The Veer, Pre 3, and Touchpad should ALL have been pretty much ready to go in May, at the same time, and with a really big push in the retail channel, with HP employees out at many retail outlets, not just to train the local store employees, but to actually sell the product to potential customers.

veg you should read the complaint. There's very little there. it just two counts. But the interesting one is the 10b5 complaint. because it's supported by tons of press statements of largely opinion. And it claims intentional misstatements but all it really gives are opinions and what i don't see is intent and a 10b5 claim requires scienter. I really don't see it. It's only a complaint so maybe more is coming in an amended complaint but i'm not seeing much at all.

here's the complaint

Respectfully, I disagree. I also don't think your characterization of public stockholders is very rational either. Companies need investors. If they all thought of investors as you do and if they all treated investors the way HP has treated them, much less the stock price drop, NOBODY would ever invest.

I understand some business decisions go bad. I work for a company that has made a few. I have also been an investor for over 20 years now and I think Leo easily misled his investors; in fact, I think many of the employees up to and including the Senior VP level were misled.

I expect either stockholders will win a judgment or will get a settlement from this.

they have to prove they KNOWINGLY lied. You can believe they lied. But you have to prove by a preponderance of evidence, that is like 51%, that they knowingly lied. I'd say without some tangible proof there is no case. I'd ask you, just to flush out your point of view, What evidence like document or something can you point to that proves they new a material statement was false then made that statement.

Because that is exactly what a court will demand. They need inter office memos, email, etc not just saying it's a touch road, or it will be hard but "it won't work it will never work" but we should tell the public it will work in so that they'll keep buying stock.

Time and discovery may provide just that. By your standards, it would be virtually impossible to prove any case a week after filing the complaint. Claimants actually do win some of these.

I would be surprised the way Leo and other executives talked publicly about webOS & other things at HP if there aren't a few interesting tidbits floating around in the electronic trail.

You are already asking for the conclusion--a preponderance of the evidence. Seldom is the case solved before discovery, etc. Why do you need the case to be over when it has just been filed?

In my previous comment, I was responding to VegetableLasagna who claimed those who filed were "greedy **** looking for a handout." I didn't like his general characterization.

I hope not all lawyers look at investors that way. There actually are some legitimate complaints in cases. I don't know how this will pan out, but it isn't surprising to me that this lawsuit was filed & maybe others will follow.

Another law firm just started looking into HPQ as well: Securities Arbitration Law Firm of Klayman & Toskes. At this point, they are just investigating.

It's great having all us lawyers on here! I used to whip my Pre- out in the halls at court and show off... well, that was over two years ago...

I only wish I worked at one of those class action firms, so I could cash in. Never did like the attorney's fees provisions in these types of cases where some attorney gets a ton of do-re-mi,while the actual members of the class get $3.98 each. Of course, my opinion is subject to a 180-degree reversal if I am asked to work as an attorney on the case.... Then, I absolutely agree with the very reasoanble attorney fee structure.

Classic BAIT & SWITCH!!! (I learned that term in a Junior Achievement class)

Let me think about that...


Nope. Nothing like it. Bait and switch would be:

TV Commercial: "HI! Come to our store to buy this really nifty bridge to get across that river!"

Sales Guy at store:"Oh... right... ummm... well we 'just sold out' of that bridge.. but HEY! We have this nifty raft you can buy to paddle across that river!"


Or, if it Best Buy: what bridge are you talking about? You mean, our company annouced the sale of a bridge?! We're supposed to have it in the store? Really? It's listed on the website AND the weekly flyer?! Well, would you like to buy an iPad instead>

(let's see how many negatives I can get with THIS cold dose of reality)

These are common lawsuits when stocks take a nosedive. It's about how shareholders were duped into buying the stock under plausibly false statements made by Leo and crew. WebOS is merely the stick with which plantiff's counsel wishes to flog HP.

In the last few years, almost every stock has taken a nose dive. Some have recovered, but many have not and they may have declared Ch 11 or have liquidated. Not all of them had law suits filed against them. In fact very few have. Their is a difference in making an investment w/some inherent risk and feeling you have been misled by Mgmt. Few CEOs make the brash statements Leo did and almost all of them have been incorrect or misleading. MOST CEOs crouch their statements to be conservative so they can pleasantly surprise to the upside.

For example, if you ever hear airline executives talk, they always talk about the unpredictability of fuel prices, labor unions, and possible government intervention. It doesn't mean they don't try to mention the positives of their Company. They need investors, good credit ratings, lines of credit, lower insurance costs, they lobby to get international routes, etc, but they most assuredly mention the downside as well.

and HPQ is down about 50% from that Feb 16 high. Maybe they opted for artificial inflation so that they can sell some company stock for their pockets. But then that would be fraud...

there is a problem. the stock was up then it dropped. The didn't really inflate it and build it up. It was up then it fell.

It fell due to inept management that made a big announcement, then failed to continue talking about the new products they had tried to hype. This is the problem that Palm had too, they announced, then waited six months for product to become available.

about time. not that much will come of this and HP will move forward with the Autonomy purchase, death of WebOS and PSG, but at least someone finally stood up to these clowns!

This can only be bad for WebOS and it's users. After a few lawsuits surrounding the failure and lack of interest in the OS, who in their right mind would invest in the platform?

Doesn't have that much to do with the platform actually.

This is about investors feeling misinformed. About the whole strategy and vision of HP

And while this is a webos site and therefore webos is what we care about - this whole mess is hardly about webos.
HP is the worlds biggest seller of PCs. After aquiring Compaq they pushed Dell from the #1 spot a while ago.
HP is trying to get rid of all of that. webos is a small, small part of that business.

If HP wanted to compete i consumer hardware then they needed (something like) webos to be competitive in this area and get to higher margin products (like Apple).

But now that they want to be like IBM, they want to divorce themselves from the consumer hardware - and therefore also from webos. One goes with the other.

All this does is make some sleazy lawyer money. Does nothing for the true comsumer.They do it in the name of consumers and they get nothing. The lawyers make a boat load.

The money is hardly sleazy, and it is delivered by bank truck, which is conveniently backed up to our offices.

The way I read this, plaintives are saying the TouchPad sucks. HP knew it sucked, and sold it anyway as if it was the next iPad killer. Heck! If that is illegal, there goes the teck industry.

On the other hand, could there be a class action against certain PC forum posters who, by their overly enthusiastic posts, pretended the TP was better than it was, and deceived many people into buying one based on overly positive reviews and FUD about competitors. Hmmm… Probably not. Oh, well.

a) TP doesn't suck
b) They probably ḱnew it wasn't top of the line anymore. looks like they used last year windows tablet hardware and put webos on instead.

Nobody in his right mind can really have thought that the TP was going to be an ipad killer.

When you try to establish a new platform (especially while 2-3 others are already well entrenched) it's not about the first device. It's getting to the 2nd or 3rd.

G1 wasn't a big success. Didn't keep Google and partners from pushing out many more devices until they got to number 1 platform.

WP7 is not a success - doesn't keep MS from pushing further. They also say they are in a marathon. But MS actually follows up on marathon strategies. I have many bad things to say about MS - but one thing I always respected them for is not easily giving up.
The first versions of Word were ****
First XBox cost them a ton of money.
Many MS products (some of them now fairly to very successful) started slow and without much market share. But MS got out version 2 and 3 and 4 and kept pushing (sometimes illegally and often with cross-subsidizing - but that's another story).

Having opinions is not basis for law suits (unless you slander somebody personally).

HP *might* be liable of misleading investors - and a publicly traded company has obligations that forum users here don't have.

The problem is how much they emphasized that their investment in the webOS platform was a "marathon" and not a sprint. Granted, the party line is that they only dropped out of the race with respect to hardware and not software, but confidence in the entire ecosystem was shattered when they so hastily pulled the plug. That showed no intent to live up to the marathon claim and duped investors to believe they should back a company with stamina to succeed.

the problem is you have to prove that when they made that statement that here was that day, intent to defraud the given class of people.

I have no clue how they expect to prove that.

I am not a lawyer, but I did watch Law & Order last night. :-)

The burden of proof in a civil trial is relatively low as compared to a criminal trial. For example, if the govt wanted to put Leo in jail (a criminal trial), their burden of proof would have to be "beyond reasonable doubt." In a civil case, the burden of proof is much lower. In a civil case, you only need a "preponderance of the evidence"--a much lower standard than beyond a reasonable doubt.

I'm not sure that changes in a class action law suit; the biggest hurdle, I think, in a class action law suit, is being "certified" as a class. Once that is done, then you must show a preponderance of the evidence. If it gets that far, I wouldn't be surprised to see HP settle. Up to this point, I expect them to fight w/everything they have.

If you can believe it I actually am a lawyer and have been for a long time. And many years ago did some securities law and did a class action suit. Regardless you are right that the burden of proof in a civil case is a preponderance of evidence, that is "more likely then not." Some term it 51%. That is if you sue me and it's my word against yours and there is no other evidence, i win because you need to get to 51% and we are even, my word against yours. The problem here is there will likely be an enormous amount of evidence that indicates a good faith belief by HP that their statements were truthful. The plaintiff will need to offer some evidence of as they said in the complaint a "scheme" and evidence that they knew statements were false when they made them.

And then there is the question of is it fact or opinion. generally they are not liable for opinions that are wrong and earnings reports are basically opinions but that is grey are in securities cases.

And now that i think about it the U.S. Supreme Court recently had a decision that makes it harder to get a class certified. I don't totally recall the case but it was something to the effect of having different monetary remedies could prevent a class being certified. And the more i think about it every class member in this case would have a difference loss depending on the specific amount they invested. Meaning the damage to all would not be the same thus the remedy would be different. I wonder if that would prevent certification. It's been like ten years since i've worked a class action case so forgive me. And they also said that during the certification process courts can look into the merits. Before they courts said they couldn't. Supreme court said yes they should. So that could effect certification. Also how do they prove everyone in the class period relied on these statements to buy stock? But courts have certified classes in that situation so it's not a lock that that would prevent certification but it's hurdle.

As for the burden of proof it would not change. In a civil cause of action the burden of proof is on the plaintiff to prove a rule 10b-5 cause of action by a preponderance of the evidence.

That said, hey maybe they get lucky and they have some smoking gun email or they catch insiders in some bad trades.

Thanks for the good, thorough discussion. Was it the recent WalMart case you were referring to when the "class"--not certified--claiming EVERY woman who ever worked at WalMart supposedly sexually harassed? Or something like that.

I disagree w/your statement above that "earnings reports are basically opinions." They may express opinions going forward, but maybe I just don't understand what you mean. As an investor, I read & listen to earnings reports & conference calls quite closely. Usually, it is obvious to tell when they are giving opinion: "I think...," "Going forward...we project...'" "We expect..."

Many other things are factual: "the cost of labor was...'" "the cost of fuel was..." "Our pension liabilities next quarter are..." "Revenues were..."

BUT, even the opinions given are usually truthful intent. When things change, usually guidance or statements are given in the interim. It was obvious to me that Senior VPs were surprised and shocked at what happened, much less those just hired in the specific divisions. There was no interim guidance.

There may be no case here, but I think it is worth looking into. When Investors lose about $50B--you can bet people will look into it (unless it is govt spending-Ha!) and they should look into it, IMO.

Is this going to be on the Bar exam?

Ignoring just about everything else in this story, Derek, that is one seriously fine piece of photoshopping on the pic associated with this article.

agreed. i got zero photoshop skills.

So stipulated.

As a previous Palm stock holder, I was entered into a class action lawsuit against HP for their purchase of Palm at a perceived to be, grossly under-valued price.

Still awaiting a verdict on that one.

so basically the lawsuit is saying that HP knew all along that webOS was a pig, and that HP fraudulently put lipstick on the pig to fool investors and artificially inflate stock value.

that may not be how most of us like to view it, but it's legally actionable.

the rub of course is to prove it.

Nope - that's not what it's saying.

And neither is that what HP did.

No doubt HP did plan to be more like Apple in 2010. They were already #1 in PC sales, but it looks like the mobile market is where all the action and buzz is and so HP needed a mobile (tablet and smartphone) strategy to remain/get into higher margin sales.

Nobody with realistic expectation thought that establishing webos as a big platform can be done with the first couple of devices in the first few months. This takes a while. No doubt HP knew all that and at the time had appropriate plans for that. The did talk about a marathon at the time after all.
And the Palm deal was initiated under the former CEO.

At some later date HP decided on a new (IBM-like) strategy. Get out of consumer hardware, concentrate on enterprise, cloud storage, services, etc... and seek higher margins there. Therefore dump consumer hardware (including, not restricted to, webos devices).

The problem is - I think - the time period.
A company must be free to choose, re-evaluate and eventually change strategy. Even drastically.
At the same time investors have rights to be informed. There needs to be some room between the 2. A reasonable time period where top management can plan strategy without having to publish every single step and brainstorm.

To me it boils down to:
a) Was it just a few weeks or many months since the decision to switch strategies
b) is the top management responsible for holding back company representatives (who themselves didn't know better at the time) from making grand announcement that will clearly no longer be implemented under the new strategy.

pretty close. basically saying HP new it wasn't going to sell, new they were never going to use webos in pcs, and they knew it the entire time they made press releases and statement. Then they argue that they traded on those false statements at a loss and they are owed.

You've got to remember that when HP bought Palm it was Mark Hurd at the helm, not Leo Apotheker.

LA has always been a software guy and no doubt his pitch to the HP board in his interview would have been around repositioning the company around software & services not hardware.

The seeds for all this were sown when he became CEO - Apotheker and the HP execs just handled it all appalingly badly.

So badly in fact that I would fire Apotheker for the damage he has caused the company, financially and reputationally - but it's well known the HP board are incompetent so don't expect that to happen soon (and when it does expect it to be handled poorly!).

Don't forget that hp also got rid of 5 old Board memebers and brought in 5 new people: only one of the new people even worked at a company that made anything, let alone personal computer technology. They were finance, IT/software, investment consultants - oh, and Meg Whitman from eBay.

That left the Board with zero computer technology members...

what is so intensely frustrating to me is that if HP had simply put their vast resources into focusing on producing a NEXT-generation phone FIRST, a tech leap a full generation AHEAD of the competition - and HP had/has the resources to do that - that webOS phone would have succeeded and their grandios webOS vision well under way.

People will and do jump to the newest and greatest when it is clear, and for all webOS unique advantages, no webOS phone has ever been more than as-good-as or almost-as-good-as the existing iPhone overall at time of release. Produce one obviously more advanced in all ways and it would succeed and gain significant market share.

The phone is the baseline and foundation, and the HP leadership haven't gotten that.

I don't have the exact quotes handy, but from what I remember:
2.0 on the Pre Plus
New device every 2 months
Pre 3 coming in the summer
it's not a sprint, it's a marathon
never release a device until it's perfect
we're going to be number one plus
webOS running on every PC by 2011
that was a soft launch

If I was an investor, these public announcements would not make me happy.

The board, Leo and Ray Lane all have mud on them and need to go.

The board is a mishmash of aging dinosaurs, empty vessels, one hit wonders and Ray Lane a guy with a biblical chip on his shoulder re: Oracle.

They spent most of their available cash on Autonomy (an Info Mgt, eDiscovery vendor which makes nice to have not must have tech) and they are telegraphing their exit from the PC/tablet space before anyone beyond Apple makes hay in the latter. Great way to get the sale price up of that unit.

This is called thrashing and it reeks of desperation not a great strategy that is being poorly communicated.

For their foibles and communication missteps alone the entire board, Leo, Bradley etc should be canned.

In fact with this lawsuit and the others that will likely follow the heat will be so high that Leo and Lane at a min will likely resign by XMAS.

This u boat is going down and its terrible, no abysmal mgt and leadership that is doing it. Ask any HP employee in the trenches. They are trapped in a fog of suits who don't get it.

It was not Palm that failed. It is the people HP put in charge of Palm and the absolute patented inability for HP to innovate and get quality products to market that cause the failure.

Palm had no cash but HP/Palm had no excuse so they are creating one by saying their crystal ball - which is always wrong - told them it was impossible to make a go of Palm (before they even did anything material).

The TP could have be a Samsung Galaxy 10 and the Pre could have been a Droid Bionic or better.

The reason they were not was on mgt up to an including Leo, Bradly et al.

HP's wrap in the valley is they cannot execute and that mgt is out of touch.

How is it then that investments in Autonomy plus the BILLIONs they dropped on storage and cloud infrastructure vendors in 2010 will turn to gold.

So far those cloud deals are rotting inside HP while they look for ways to make the most of the assets. Sounds just like the plan for WebOS. Smokescreens & delay tactics all.

If anyone believes this brain trust can execute on cloud or any other trendy IT sector your swampland awaits.

At least we'll have great satisfaction on one level: the litigation will force responses from HP about what the heck really went on with the debacle we know and love as webOS and its hardware. If the case isn't thrown out or settled, we may at long last find out the truth. It's out there!!

Not being an attorney, I am trying to take the emotion out of this story. I cannot say for sure, but it appears to me that there are two clear statements that can be made about what is going on:
1) These suits are all about the stockholders and not at all about the users, customers or developers. On that basis, I'd say there is a reasonably good chance for success. The investors have been clearly mislead.
2) There could be a case made for users and developers. Specifically, as a user, I have invested a lot of time and effort in learning, customizing and planning for the use of webOS. As someone else mentioned, I have turned down numerous opportunities for other phones and/or platforms based on the strong promises made by HP and VZW that there would be new hardware [Pre3 and TouchPad] and updates to webOS for my existing Pre+ to bring it to current levels. OTOH, proving financial damages will be very difficult for the end-user class. Developers, should have a much better case, because of their 'investment' and efforts to support the platform, in anticipation of furure revenue based on continued viability of the webOS platform. It does not sound to me like the current legal action has taken this stance, although some smart law firm should certainly consider this and they could expect a lot of support from those of us who frequent this site.