What is HP thinking? Is it a stroke of genius or a major miscalculation?

Only the future may tell but on Friday shares of Hewlett-Packard (News - Alert) plummeted after the company announced many stunning changes – including that it may spin off its PC business. PC sales represent about one-third of HP's business, according to media reports.

The stock is being watched carefully and the results could impact the roller-coaster stock market and the wider struggling economy.

HP's stock dropped nearly $7, some 23 percent, to about $23 a share, according to news reports on Friday. The stock fell 15 percent in pre-market trading on Friday. MarketWatch said HP stock has dropped 30 percent during 2011.

CNNMoney reports that $23 a share is the lowest price for HP shares since August 2005. In addition, HP lost more than $12 billion in market value on Friday, with a half-dozen analysts downgrading the stock, according to news reports.

HP also announced it was reducing its sales forecast for 2011, and will no longer be selling in the tablet and smartphone markets.

The company will also no longer offer hardware built on the Palm webOS, CNNMoney reported. It appears HP wants to focus on software, servers and corporate technology, as well as imaging, consulting and printers, according to media reports.

Servers are the area where HP ranks first among all companies, CNNMoney said. On the other hand, CNNMoney reported that software represents about 2 percent of HP's overall sales.

In other HP news, TMCnet reported this week that the company plans on acquiring Autonomy (News - Alert) Corp., a British business software company, for $10 billion. Autonomy is the largest software company in the United Kingdom based on market cap, TMCnet added. Shares in Autonomy Corp. jumped 76 percent on Friday from the news, according to a report from The Wall Street Journal.

In a statement on Thursday, new HP CEO Leo Apotheker said the company was now “focused on improving performance across the business.”

“HP is taking bold, transformative steps to position the company as a leader in the evolving information economy. Today's announced plan will allow HP to drive creation of long-term shareholder value through a focus on fewer fronts, thereby improving its ability to execute, invest in innovation and drive a higher-margin business mix,” he added.

Apotheker was named CEO last year. A European and a company “outsider” – rather than someone who had roots in Silicon Valley – Apotheker’s selection came as a surprise to several analysts, TMCnet reported.

Apotheker was previously CEO of SAP and led the company through periods of growth and profitability.

Reuters (News - Alert) said he had a quick exit from SAP in February 2010 amid investor criticism.

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