Hendry has won the most ranking titles - 36
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Seven-time world champion Stephen Hendry failed to qualify for the last 16 of the Royal London Watches Grand Prix after a 4-3 defeat to Paul Davies.
Hendry needed to beat the Welshman, who was already out of contention, in his final round-robin group match.
Meanwhile, world champion John Higgins beat Ryan Day and Nigel Bond to book a tie with Marco Fu.
Higgins, Ronnie O'Sullivan, Peter Ebdon and Alister Carter all finished the group stages unbeaten.
As a result of Hendry's defeat, Barry Hawkins booked a spot in the quarter-finals and a meeting with Ebdon.
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I'm not a big fan of the round-robin stage
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Irishman Michael Judge prevented former world champion Mark Williams from making it into the next round following a 4-2 win over Ricky Walden.
Williams, the provisional world number 42, lost 4-1 to Ken Doherty and the exit now leaves the Welshman in serious danger of failing to secure a top 32 starting rank next season.
Earlier, Ali Carter and Stephen Maguire also booked their places in the last 16.
Carter faces Joe Perry after a 4-0 win over Irishman Fergal O'Brien.
"It's nice to win four out of four," said Carter.
"It's nice to be here and playing some matches. It's been a long time since (the World Championship in) Sheffield. I didn't really feel as though I was in China (at the Shanghai Masters)."
Maguire, who beat Davies 4-0 to book his passage, said he did not approve of the unique format.
"I don't like it to be honest," he said.
"I'm not a big fan of the round-robin stage. Last season it was just impossible to follow it. I'd have preferred to have played one match and, if I had lost, then I would have been quite happy going home.
"It's very cut-throat for my liking. Even though the matches are now longer, best-of-seven frames are still a short sprint."
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