In a dramatic move, Hewlett-Packard plans to discontinue its tablet computer and smartphone products, and to sell or spin-off its PC arm, as the US firm buys software giant Autonomy for £7.1bn.
HP said the move would be a “full or partial separation”, and CEO Leo Apotheker said the company intends to focus on software.
HP later confirmed it would discontinue support for webOS devices, including the TouchPad tablet.
Gartner analyst Mark Margevicious commented: “Customers are more than happy being heterogeneous. The PC market has very much commoditised and [manufacturers’] ability to differentiate at a product level is almost non-existent.”
The board of Autonomy, listed in both London and the Nasdaq, approved last week’s takeover offer, which now awaits shareholder approval.
Autonomy specialises in the development of business software which extracts key information from “unstructured” sources, such as phone-calls, emails or video.
Founder Mike Lynch will continue to run the company, which has joint head offices Cambridge and San Francisco, serving its 25,000 customer companies.
Lynch hailed the deal as “a momentous day in Autonomy’s history”.
Profits beat expectations
Meanwhile, Hewlett-Packard posted third-quarter profits up from $1.8bn a year ago to $1.9bn on sales increased from $30.7bn to $31.2bn, slightly beating Wall Street expectations.
The company cut its fourth-quarter profit prediction to 44-55 cents a share due to charges including $1bn to close its webOS mobile device business.
HP announced on Thursday that it will take a roughly $100 million charge due to poor sell through of the TouchPad, likely in order to credit Best Buy and other resellers for their unsold inventory.
The company revealed during its quarterly earnings call that it took a $.05 charge per share for the TouchPad, which, given the company’s 2.07 billion outstanding shares, amounts to just over $100 million.
Refocus on software
Commenting on Hewlett Packard’s takeover of Autonomy, Tim Daniels, TMT Strategist at Olivetree Securities said: “It would make perfect sense for one of the big database players to want to own Autonomy – the software is indeed unique and growing in importance. However, a takeout price would have to be large, potentially 2500-3000p to take the stock close to valuations US “peers” trade at. We don’t think Mike Lynch would recommend a sale below top dollar valuations, although once one move were made it would be very possible that counter bidders would be talked of.
“HP would be buying this as part of a refocus of the business on software. They have been talking for a while about a focus on software – clients now don’t have a problem accumulating data, the problem is the structuring of it – 80% of the data on the web now is unstructured (video, pictures, emails etc). Moves like SAP-Hana and Oracle-Exadata have been focused on this as a product area – HP buying Autonomy would fit into this too. HP aren’t the most obvious database acquirers – this will no doubt raise an eyebrow at the Oracle’s of the world.
“Given the rapidly increasing amounts of unstructured data being created thanks to explosions in digital photographs, videos, music, email, instant messaging and social networking, the need to be able to search different types of data is increasing dramatically. Traditionally structured data, such as that in rows and columns generated by industry thru products such as those offered by SAP and Oracle is becoming less of a focus. Traditional search software isn’t intelligent enough to sort through unstructured data in a speedy fashion – it is unable to understand the contents of a video or a music track.
“Autonomy’s software does all this. The bottom line to Autonomy’s product is that it is able to search unstructured data and work out what is relevant, in a way other products are unable to. The speed and success rates of searches are markedly superior than that offered by traditional software – which is often totally unable to search through unstructured data.”
