Terrible move, IMO, but all is not lost.
I hope HP realizes that potential WebOS OEMs (e.g. Samsung) make hardware for two different OSs already, WP7 and Android. IMO, from the OEMs' point of view, Android is the best value proposition. First of all, OEMs don't pay for an Android "license" like they do with WP7 and WebOS. Also, by putting their own skins on Android devices, OEMs can make their devices stand out against competitors, something which they cannot do with WP7. Lastly, Android has enjoyed tremendous growth over the past few years while WP7 sales have been very anemic. Unless OEMs see potential for WebOS devices, they're not very likely to back them.
Also, if HP chooses to go the licensing route, it should completely shut down its smartphone business and sell it off to a competitor. Unless HP imposes hardware requirements (like Microsoft) for WebOS devices, licensing out WebOS will squeeze HP's margins. What's to stop a competitor from putting out a substandard device running WebOS just to undercut HP's devices on price? It either has to be HP and no one else making WebOS devices or HP should quit producing phones and concentrate on WebOS itself. It's simple as that. IMO, if HP continues to make WebOS devices and chooses to license it out, that will amount to financial suicide for HP.
With that said, I'm trying to understand why HP wants to do this. I can understand Microsoft or Google doing that. Microsoft doesn't make Windows hardware. The only hardware it makes is related to the Xbox. It used to make related hardware for the Zune. Google doesn't make any hardware and it has never been about hardware. But HP has been making hardware for years. What does HP hope to gain from licensing WebOS?