The BusinessWeek runs a story about HP exploring ways to come up with their own OS to offer something simpler than the still ill-reputed Windows Vista.
The netbook vendors led by Asus have shown how that works offering Netbooks with Linux variants that surprisingly work well. Microsoft could last minute squeeze in XP to still be part of that computer segment.

HP has nice hardware like the Touchsmart, which have what it takes to compete with Apple hardware. Apple has the better cards though with their straight forward OS X that is a very attractive choice for many consumers that can afford the Apple hardware tax.
More details on the potential HP OS plans can be found in this article on BusinessWeek.