HP to spin off PC business and buy Autonomy

By Dawinderpal Sahota
19 Aug 2011 View Comments
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HP is looking to sell off its PC business and go back to its roots, focusing on software.

The company has also agreed to acquire enterprise search firm Autonomy for $10.24bn (£6.2bn).

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In addition, HP will discontinue operations for webOS devices, specifically the TouchPad and webOS phones. The firm said the devices have not met internal milestones and financial targets.

By acquiring Autonomy, HP will be inheriting software that powers a range of mission-critical enterprise applications, such as customer interaction solutions, information governance, business process management, web content management and web optimisation.

"HP is taking bold, transformative steps to position the company as a leader in the evolving information economy," said Léo Apotheker, HP's president and CEO.

"This plan will allow HP to drive the creation of long-term shareholder value through a focus on fewer fronts, thereby improving its ability to execute, invest in innovation and drive a higher-margin business mix."

The news received praise from analysts, who believe HP is making a shrewd move.

Sarah Rotman Epps, consumer product strategy analyst at Forrester, welcomed the announcement, saying that HP shareholders do not want its low-margin PC business pulling on its high-margin enterprise services business.

"HP's competition is Apple on the high end, which has justified higher margins based on offerings such as its Genius Bar, iTunes and App Store," she said.

Craig Carpenter, vice president and general counsel at predictive information management firm Recommind, said the acquisition of Autonomy will spur HP's growth.

"HP is buying Autonomy as it undoubtedly sees a huge growth opportunity in four major ways: revenue growth; new market opportunities, including information governance; the explosion of data in the enterprise; and a solid future in cloud offering," he said.

"Given the hypergrowth we've seen in corporate data in particular, as well as the rise in legislation and regulation, the information management industry is the right place to make this move – it's a smart bet for HP."

However, Richard Holway, chairman at TechMarketView, had reservations about a successful British firm being bought by the US giant.

"Autonomy's HQ is in Cambridge. It was a magnet for the area. It created jobs not just for entry-level graduates in the UK, but for support staff such as brokers, advisers, legal beavers, accountants and so on," he said.

"Autonomy CEO Mike Lynch has said that HP's software operations, which he will lead, will be based in Cambridge, UK. Indeed, it is being lauded as 'a significant boost to the UK tech sector'. I, of course, hope this will be the case. I hope this will be one of the first such acquisitions that has a happy ending."

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