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
    +2

    Comment number 3.

    No2

    Yes we can dream - we need to get the "chocolate fountain" flowing. High tech entrepreneurs re-investing their exit gains in new start-ups and joining VC firms has been the real reason for the success of the Silicon Valley VC firms. They have tech-savvy partners whilst the reason that the UK does not have much high tech Venture Capital is that most UK VCs have no understanding of high tech.

  • rate this
    +1

    Comment number 6.

    Rory, you'd claimed in the Technology section article that IBM have moved out of the hardware market. Not true I'm afraid. IBM had moved out of the Desktop market after selling to Lenovo. However, the majority of IBM's revenue, for as long as I can remember, has come from servers and big iron; iSeries and zSeries, as well as Mainframe. Is HP going the same way? They certainly have a number of decent server products. IT shops invest a lot in particular infrastructure and switching to something else tends to be expensive and complicated. Hence, once an IBM shop always an IBM shop. Same with Sun or HP. Proprietary applications on distinct flavours of Unix tends to do it.

  • rate this
    0

    Comment number 4.

    If you say there is no Venture Capital then do something about it. How do you think Venture Capitalists start, they aren't all born into money, some just generate investor groups, it's just dependent on how good they are at organising such groups and identifying where to reap a return. (obviously a discussion on "how much is enough" could continue) As for HP's reasoning for change, you only have to look at the contractual market where components from many different companies are all made in the same factories, or where various patents have likely reached their limitation. Software patents are a new and there is no limit to what can be done with software. Companies make a lot of money from patents alone.

  • rate this
    0

    Comment number 5.

    Also beware the potential for a substantial UK impact through the HP side. HP has a large presence - and employment - in the UK. Although the majority of that is in sales and support, a significant proportion is in R&D and by no means exclusively in software. The danger lies in HP losing high tech jobs in the UK too as it moves its business to software. (Plus an extra, nostalgic sadness as HP was always known as a premier technology innovator - that is, hardware.)

  • rate this
    0

    Comment number 1.

    If a company or product is worth more to someone else than to the current shareholders / owners then it's right to sell it.

    That's a shedful of cash that can be invested in new ventures to bring about a few more success stories over the coming years, generating more growth than a mature Autonomy may have done.

 

Comments 5 of 22

 

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