Autonomy loses its autonomy

 
HP sign HP will stop making traditional hardware like PCs, tablets and phones to refocus on software

When news broke last night of this week's second huge technology deal, I found myself answering this question from a social media contact:

"Do you see it as a great deal or another British champion going into US hands?"

After a moment's thought, I replied both.

There's no doubt that the £7bn sale of Autonomy to HP is a great deal - for the company's shareholders, at least.

At a time when the markets are in state of nervous collapse, and when the prospects for any software firm cannot be that certain, they are getting a premium of 64% on the value of their shares on Wednesday night.

One shareholder, the founder and CEO Dr Mike Lynch, will reap £510m from this deal.

Good luck to him - remember in the crazy days of the dotcom bubble his stake was worth even more, yet he has stuck in there through the thin times, quietly determined to build a British software giant.

And there is no way that his board would have allowed him to reject such an offer.

Whether its such a great deal for HP is far from clear.

On last night's conference call one extremely sceptical analyst told the CEO Leo Apotheker he was paying a fantastic price - 15% of the American firms market capitalisation for a business with 1% of its revenues.

Transatlantic transfer

And while there's a promise that Autonomy will be run as a separate business, with Mike Lynch still in charge, this still looks like a sad day for British technology - and for Cambridge in particular.

Back in the early 1990s I was making a television programme about Cambridge's prospects as a high-tech cluster.

We found a clutch of tiny firms, but nothing substantial - and one interviewee told us nothing would change until the city had some billion-dollar businesses to act as an anchor.

Dr Mike Lynch Mike Lynch still owns an 8% stake in the company

By the end of the decade, Autonomy, along with the likes of ARM and CSR, was proving that Silicon Fen was more than a marketing slogan.

Now, like so many other fast-growing British firms, it has sold out to a transatlantic firm - though it stayed independent longer than most.

If the brilliant scientists praised by Mr Apotheker last night stay in Cambridge, and HP allows the firm to retain much of its independence, that may not matter too much. After all, our motor manufacturing sector is doing pretty well in foreign hands.

The trouble is, software development is a lot easier to move overseas than a car factory.

And HP, which according to its own CEO is at a critical point in its existence, may not be the most reliable of parents. In April last year it bought Palm, describing the ailing mobile devices business as providing an ideal platform to expand HP's mobility strategy.

Last night that strategy fell apart, as HP admitted that nobody had been interested in buying the WebOS-based Touchpad, and it was ditching the whole product range.

Now HP is promising that Autonomy symbolises a radical change in direction, which will see it move out of personal computing and into software and services.

Let's hope, for the sake of Autonomy and Cambridge, that this strategy works out better than the last one.

 
Rory Cellan-Jones Article written by Rory Cellan-Jones Rory Cellan-Jones Technology correspondent

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  • rate this
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    Comment number 22.

    sagat4 wrote:

    "Well this will be my first and last purchase of a HP laptop for sure as i won't be getting an hardware support when or if it happens. This is what happens when you employ a CEO from a software background"

    Not to mention hiring a non-American that would have no interest in preserving an American icon. I doubt the founders of HP would have been happy about that.

  • rate this
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    Comment number 21.

    HP clearly has 'blinked' in the mobile hardware sector and taken an IBM-style jump into software consultancy/authority. The way we receive our online information needs curation, a structure and a point-of-view. The way we engage with that information will be structured by the changes companies like Autonomy are developing.
    It is sad that HP, who led the drive towards Slate computing, now misnamed Tablet, did not move fast enough before Apple captured consumers (mind &soul). Already, commentators are suggesting that Apple = Tablet and there are no significant competitors. That's a worry - Apple has a history of sitting back when it feels it has locked up a market. It is the biggest company in the world (market cap) and so we could see its native arrogance translated into a more dangerous internal business culture (c.f. Microsoft) that, eventually loses the plot.
    IBM turned the ship around; Microsoft did the same, then went off-course.
    I hope that HP can reinvent itself and maybe the Autonomy purchase, at the market cap price, can form the new base.

  • rate this
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    Comment number 20.

    The funny thing is i just got a new HP laptop two weeks ago. Well this will be my first and last purchase of a HP laptop for sure as i won't be getting an hardware support when or if it happens. This is what happens when you employ a CEO from a software background to a hardware company. They won't be like IBM for sure so it is an early RIP to a once great company

  • rate this
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    Comment number 19.

    Under the terms of the £6.1B deal Lynch will stay on & run the business, which produces software that TRACKS data across a range of sources such as emails, phone calls & video. Lynch said Autonomy will be the cornerstone of Hewlett-Packard’s drive for new technology, and that was key for his decision. A spokesman for Autonomy added that its 400 engineers are expected to keep their jobs at in Silicon Fen, where many of the UK’s cutting-edge technology firms are clustered.
    Autonomy has enjoyed double-digit growth in recent years, boosted by a string of acquisitions that have seen its revenues leap from £58m in 2005 to £525m last year. That being said, it's still much smaller than HP which last year produced massive revenues of £76B & employs 324,000.
    Lynch now wants to make computers more intelligent for the 16,000 clients who buy his software, which include Procter & Gamble, NASA & THE US DEPT OF HOMELAND SECURITY. The next big step change is to get computers to operate more intuitively. Thinking computers serving AMERCAN Homeland Security. Actually, I find the proposition a bit unnerving.

  • rate this
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    Comment number 18.

    The current management are a disaster for HP. The PC business is a source of brand loyalty. That's why apple keeps its desktops and laptops even though they are a legacy product. You can't model everything on SAP.

    On the subject of British computer companies, let's not forget that ARM received its big break from the public sector in the form of BBC home computers. ARM is an example of successful public sector investment.

    My perspective from the ground (in Manchester) is that I see less technology jobs every year. Wages have fallen about 40% since 2000 and the average age of technical staff is increasing. I believe the UK technology sector is in decline.

 

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