HP to pay £6bn for Autonomy

Steve Dinneen
Follow Steve
HEWLETT-PACKARD is buying the UK’s most valuable software company Autonomy for $10.2bn (£6.2bn), in the latest takeover of a major British company by an American firm.

The deal was announced last night as HP unveiled its third quarter earnings and is part of a massive shake-up at the US computing giant, which is also exploring a spin-off its struggling PC business.

Chief executive Leo Apotheker, who recently joined from German rival SAP, said “bringing Autonomy into the HP world will be seamless and highly complementary”. He expects to complete the acquisition by the end of the calendar year.

“We are building a strong HP software business... The acquisition of Autonomy will build on that momentum and accelerate our software strategy,” he said.

Autonomy has recommended the all-cash deal to its shareholders. Its founder and chief executive Mike Lynch, who will continue to head up the company, still owns 8.2 per cent of the firm and stands to make around $820m.

Autonomy’s intelligent software is designed to make sense of human conversation. It allows companies to search huge audio and video databases – such as phone logs – and quickly retrieve relevant information.

The software was used in the recent case against French rogue trader Jérôme Kerviel, of Société Générale, where it analysed thousands of hours of taped phone conversation and selected the most important extracts.

The bid will also come as a personal validation for Lynch, who used to carry a card in his pocket reading “its different over here” to brandish every time he was spoken down to by his US counterparts.

Since then Autonomy has flourished in North America, establishing a joint head quarters in San Fransisco and boasting Coca-Cola and the SEC among its clients.

Before the bid was announced after the bell in the US, Autonomy closed down in London by 8.3 per cent with a market cap of $5.7bn, meaning HP is offering a premium of almost fifty per cent.

HP has struggled against intense competition from Dell and Apple in the laptop and desktop markets and its latest tablet offering has failed to set the market alight.

As part of its overhaul, HP announced plans to axe its tablets and smartphone business, after its products failed to gain traction in the market.

The company, which lowered its fourth quarter guidance for the third time this year, reported diluted earnings per share of 93 cents on revenue of $31.19bn, compared with 75 cents and $30.7bn a year earlier.

“The challenges and the transformation we are undertaking will take several quarters to fully resolve,” Apotheker said.