Hewlett-Packard to stop selling iPods

Updated: Aug 1 2005, 05:30am hrs
It was with great fanfare that Hewlett-Packard announced in January 2004 that it would begin selling Apples digital music player, the iPod, in a deal that was cast as a major step forward for both companies. Last week, however, Hewlett-Packard quietly retreated from that deal when it informed Apple it would stop selling the iPod.

A spokeswoman for Apple suggested that the move hardly mattered given how minor a role Hewlett had played in the spreading popularity of the iPod. In the quarter that ended June 30, Apple sold 6.16 million iPods, said Katie Cotton, a spokeswoman for Apple. Hewlett sold fewer than 500,000 units during that three-month period, Cotton said, accounting for just under 8 percent of all iPods sold that quarter. HPs iPod sales have counted for on average for 5 percent of all iPods sold since the deal was originally struck, she said.

Ross Camp, a spokesman for Hewlett, did not dispute those numbers, but added that in general our Apple iPod sales met and exceeded our expectations. Asked why the company had stopped selling the iPod, Camp said, basically we determined that reselling the iPod did not fit within our current digital entertainment strategy, but were not providing any other details on that decision right now.

The decision, four months into the tenure of Mark V. Hurd, the companys chief executive, represents the pulling of the plug on yet another program begun by Carly Fiorina, the former chief executive who was fired by the board in February.

One Hewlett insider, who declined to be named given the companys decision to limit its public comments on the move, said that it was difficult for the company to earn profits on its iPod sales given the terms of the deal hammered out by Fiorina. Neither company would reveal the financial terms of the deal.

The original agreement between the two companies was announced at the start of 2004 in Las Vegas at an annual consumer electronics trade show. The announcement came only after a lengthy negotiating session between Fiorina and Steven P. Jobs, Apples chief executive, that ran late into the night.

At the time, the deal was viewed as a major departure in strategy for both companies. From Apples perspective, it represented the first time Jobs had stepped away from Apples go-it-alone strategy, which he had pursued since he returned to run the company in 1997.