Hewlett-Packard plans to fundamentally reshape its business, spinning off some or all of its personal computer and consumer hardware division, doubling down on enterprise software and solutions, and killing off its promising but underperforming line of webOS tablets and smartphones.

Bloomberg first reported HP’s plans to spin off its PC division and spend $10 billion to acquire Autonomy, a UK-based company that makes database search software for the enterprise market. The Wall Street Journal independently confirmed both the acquisition and the spinoff, citing sources familiar with the matter. The WSJ also reported that Autonomy confirms that it is in acquisition talks with HP.

If the company’s broader hardware efforts (including everything from printers to tablets to phones) were spun off along with the personal computing division, this would position a post-breakup HP as an enterprise-facing technology and solutions company, something closer to IBM or Oracle than Dell.

Currently, HP is divided into three major business groups:

• The Personal Systems Group: business and consumer PCs, mobile computing devices and workstations
• The Imaging and Printing Group: inkjet, LaserJet and commercial printing, printing supplies
• Enterprise Business: business products including storage and servers, enterprise services, software and networking

It’s unclear whether Imaging and Printing would be included with Personal Systems or retained as part of Enterprise Business. Palm’s webOS powers HP phones, tablets and printers, and had been planned to be integrated into every HP personal computer shipping next year.

Update: Thursday afternoon, HP issued a press release confirming the following:

• HP is in discussions with Autonomy regarding a possible offer for the company;
• HP will consider a broad range of options that may include a full or partial separation of the Personal Systems Group through a spin-off or other transaction;
• HP plans to announce that it will discontinue operations for webOS devices, specifically the TouchPad and webOS phones.

HP also released the following preliminary results for 3Q11 and estimates for 4Q11:

3Q11 Revenue: $31.2 billion (compared with $30.7 billion one year ago in 3Q10)
3Q11 GAAP diluted earnings per share (EPS): $0.93 ($0.75 in 3Q10)
3Q11 Non-GAAP diluted EPS: $1.10 ($1.08 in 3Q10)

4Q11 Revenue: $32.1 to $32.5 billion
4Q11 GAAP diluted EPS: $0.44 to $0.55
4Q11 Non-GAAP diluted EPS: $1.12 to $1.16

In other words, restructuring and shutdown of webOS devices, plus other costs, will cost HP $0.61 to $0.68 per share after taxes in 4Q11.

FY11 revenue: $127.2 to $127.6 billion, down from its previous estimate of $129 billion to $130 billion
FY11 GAAP diluted EPS: $3.59 to $3.70, down from its previous estimate of at least $4.27
FY11 non-GAAP diluted EPS: $4.82 to $4.86, down from its previous estimate of at least $5.00.

So revised downward estimates, and year-over-year growth that’s either flat or negative after taking inflation into account.

In a series of additional releases, HP named a new head of Enterprise Services (replacing the retiring current VP) and a plan to initiate a “company transformation” to target “enterprise, small and midsize business and public sector customers” through a core product portfolio of “printing, software, services, servers, storage and networking.”

HP CEO Léo Apotheker also outlined the company’s plans for the Personal Services Group:

The exploration of alternatives for PSG demonstrates our commitment to enhancing shareholder value and sharpening our strategic and financial focus… We believe exploring alternatives for PSG could enhance its performance, allow it to more effectively compete and provide greater value for HP shareholders. PSG is a world-class scale business with a leading market share position and a highly effective supply chain and broad reach and go-to-market capabilities. We believe there are alternatives that could afford PSG more autonomy and flexibility to make strategic investment decisions to better position the business for its customers, partners and employees.

According to the release, HP expects that the process could be completed “within approximately 12-18 months”:

The personal computing market is quickly evolving with new form factors and application ecosystems. Given these realities, HP believes it is in the best interests of the company and its shareholders to explore ways for PSG to position itself to address these rapid changes and maintain its technological and market leadership positions.

This morning, HP’s stock share price (NYSE: HPQ) hit a 52-week low at $28.80 before spiking to nearly $34 after the rumors hit the markets. At the close of trading, it had dropped to $29.51, and back to under $29 in after-hours trading.

Wednesday, Gartner released research showing an 18% year-over-year decline in PC shipments in Western Europe for the second quarter of 2011; although HP now leads in market share in Europe, its shipments declined by 6.1%. In India, where PC sales are modestly growing, HP fell behind Acer and Dell.

The market for traditional PCs is declining; the once-promising market for low-cost netbooks is evaporating; and global sales are more and more differentiated by regional markets. PCs have always been low-margin compared to HP’s other businesses, but nearly everyone in the industry has struggled for continued growth. That’s what worries investors about HP’s personal computing business, despite its history and strong relative position.

Arguably, the decision is a repudiation of HP’s high-profile acquisitions of Palm in 2010 and Compaq in 2002, and an affirmation of its quieter takeovers of Electronic Data Systems in 2008 and 3Com in 2009. Each acquisition took the company in a different direction; apparently, integrating all four into a high-growth, high-synergy technological giant has proved unsustainable.

Update 2: HP hosted a conference call discussing quarterly earnings at 5PM ET.

CEO Léo Apotheker and CFO Cathie Lesjak were fairly grim for a company announcing an ambitious merger. Lesjak called the forecast for the end of 2011 and 2012 a “tough outlook,” the toughest during her time as financial head at HP. Fiscal 2012, she said, will be about “rebuilding HP’s balance sheets” and staunching the losses. The company is also winding down a plan to buy back its own stock.

“I know our investors don’t like this, and neither do I,” Apotheker said. But the CEO argued for the need for transparency in laying out HP’s long-term prognosis and plans to cope with it, even in the face of uncertainty as to what the ultimate outcome of those plans would be. “I’m taking ownership for these decisions and investments.”

One outcome is definitely certain: Palm got the ax. HP’s webOS devices are being folded as quickly as possible, before the end of FY2011. The rest of the Personal Services Group is being unwound gently; Apotheker et al promise to continue to manage and develop it as an integral part of the company until they can figure out what to do with it.

But besides the crummy economy (which depressed sales everywhere), government cutbacks (which as Apotheker notes constitute about 10% of HP’s business) and the Japanese earthquake (which hurt LaserJet toner & hardware production), no part of HP’s business came in for as much abuse as Palm’s phones and tablets.

During the Q&A, Lesjak bluntly attributed the bulk of a $300 million loss in the webOS group directly to Palm. HP had high expectations for immediate uptake of its webOS tablet — too high, probably — priced it above its competition, and couldn’t reconcile the two without further investment and further losses over 1-2 years, “creating risk without clear returns,” as Lesjak said.

The software and development teams cost pennies relative to the revenue they bring in. The devices lost money. The software was widely praised; the hardware disappointed.

So what’s the future for webOS? According to Apotheker, the company is exploring “all business models” to monetize webOS, “from licensing to any other possibility.”

In an interview with The Verge’s Joshua Topolsky, webOS Global Business Unit VP Stephen DeWitt said the webOS team was being reduced but not folded, HP was “not walking away from webOS,” and the company most likely intended to license the OS to other hardware companies.

An analyst was skeptical about this, noting that for webOS to make up the $300 million it had lost, it would have to license 60 million devices at $5 per device. (This is what prompted Lesjak’s comment that the software team hadn’t lost the money; the hardware and marketing teams had.) And as HP VP Todd Bradley observed, webOS is currently built only to work with Qualcomm chips: HTC, Samsung or other manufacturers who build Android and WinPhone7 smartphones and tablets would most likely want the code rewritten to work on other chipsets.

If HP could license the OS to other manufacturers rather than sell it outright, it could still use the operating system as planned in its printers or enterprise devices. Otherwise, HP may simply strip webOS to use in this handful of high-margin use cases and control or license Palm’s IP — like Cisco shuttering Flip, times a thousand.