August 18, 2011 6:28 pm

HP plans to buy Autonomy for $10bn

Hewlett-Packard is planning to buy Autonomy, one of the largest UK technology companies, for as much as $10bn and spin off its own personal computer business, according to several people familiar with the plans.

The moves would dramatically reshape HP, which has come under investor pressure to move into higher-margin businesses. Though HP has fared better in PCs than many of its rivals, the margins remain much lower than in software and services, where IBM and others are stronger.

The moves were on the brink of being announced on Thursday night with HP’s quarterly earnings report. However, some people involved in the deal were warning that the Autonomy acquisition had not yet been signed. Both companies declined to comment.

Former SAP chief executive Léo Apotheker, who took the top job at HP last year, has said the company wants to expand in software – an area that accounted for only 2.4 per cent of HP’s $32.4bn of revenues in its latest quarter., and 4 per cent of its operating profit, or $154m.

Like his predecessors, Mr Apotheker had publicly resisted calls for a PC spin-off until now, arguing that the machines helped HP provide a full suite of offering to large business customers.

This is the biggest acquisition for HP since its $13.9bn purchase of IT services company EDS in 2008 under former CEO Mark Hurd. Years earlier, HP bought major rival Compaq Computer.

HP’s PC business faces competition from traditional rivals such as Dell and Asian manufacturers which list lower prices as well as a resurgent Apple. The latter has cut into the market with the success of its iPad tablet.

Though some critics have praised HP’s recent entry into the tablet wars, the TouchPad, sales have been disappointing enough that the company has repeatedly discounted it.

Mr Apotheker had expressed hopes that the TouchPad would build up a customer base by allowing corporate employees to access the same software applications on those tablets as well as their office computers.

Autonomy is the UK’s largest software company. Founded in Cambridge by Mike Lynch in 1996, the company floated on the stock market in the first dot-com boom. It Autonomy has been a pioneer in creating search software which can make sense of complex, unstructured information such as emails and phone calls.

But its consumer search engine, which launched in 2000, was overshadowed by Google and Yahoo. Since 2005, Autonomy has made a series of acquisitions in enterprise software including Interwoven, a content management company, for $775m in 2009.

Its shares have been among the strongest performers in the UK recently, rising more than 250 per cent over five years.

Reporting Joseph Menn, Anousha Sakoui, Helen Thomas, Tim Bradshaw, Richard Waters and Neil Hume

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