All Things Digital is reporting that Hewlett-Packard Company (HPQ), currently the world's largest maker of personal computers, is in the process of laying off 525 employees in its webOS business unit.

A spokesperson for the company comments, "As communicated on August 18, HP will discontinue the development of webOS devices within the fourth quarter of fiscal year 2011, which ends Oct 31 2011. As part of this decision, the webOS GBU [general business unit] is undergoing a reduction in workforce. Today’s actions are part of this initiative. During this time, we stand by our commitment to our webOS customers and will work to ensure that support and service for customers are not adversely affected. HP is exploring ways to leverage webOS software."

The layoffs are yet another sign that webOS is nearing a full death.  

HP acquired the mobile operating system when in purchased Palm in April 2010 for $1.2B USD.  At first it continued to develop the operating system and release new hardware [1][2].  But with the arrival on new CEO Léo Apotheker, the company decided to ditch its family of mobile products.

It pulled its TouchPad tablet after less than seven weeks on the market, to webOS fans' dismay.  While HP insists that it may still use webOS in other applications (such as printers), the prospects of webOS continuing to be a serious mobile device operating system look bleak given the staff cuts and internal reports that development on the platform is grinding to a halt.

HP recently announced plans to spin off its PC business, the Personal Systems Group (PSG). When that happens, there's a slim chance there could be a webOS revival.  Alternatively, the PSG (the HP unit responsible for mobile devices, personal computers, etc.) may opt to adopt a third party operating system, such as Microsoft Corp.'s (MSFT) Windows Phone 7 or Google Inc.'s (GOOG) Android operating system.

A sale of webOS remains a possibility, as well, should a player like Google express enough interest.

Many shareholders are quite upset about HP's decision to kill webOS and spin off their PC business.  A consortium of top shareholders have filed suit and are seeking class action status, claiming Mr. Apotheker deceived shareholders by failing to disclose plans of the radical changes in advance.  As a result, the shareholders argue, HP's stock price was artificially inflated.