Originally Posted by MacRumors

Update: According to The Wall Street Journal, HP will be exiting the tablet and smartphone hardware business, although it will continue work on webOS and presumably license it out to third-party manufacturers.

As part of Hewlett-Packard's planned spin off of its personal computer business, it will keep the webOS software business but let go of the hardware, meaning H-P is shutting down its tablets business, people familiar with the matter said. H-P's tablet is the TouchPad, an iPad rival that went on sale in July starting at $499. Earlier this month, H-P cut its price 20%.

H-P got webOS when it acquired Palm Inc. in April 2010 for $1.2 billion. H-P may license the webOS software to others, the people added.
Update 2: HP confirms the rumors.

Update 2: HP also reported that it plans to announce that its board of directors has authorized the exploration of strategic alternatives for its Personal Systems Group (PSG). HP will consider a broad range of options that may include, among others, a full or partial separation of PSG from HP through a spin-off or other transaction.

In addition, HP reported that it plans to announce that it will discontinue operations for webOS devices, specifically the TouchPad and webOS phones. HP will continue to explore options to optimize the value of webOS software going forward.