HP exploring PC spinoff, buying Autonomy

Hewlett-Packard, the world's top personal computer maker, announced Thursday it is exploring a spinoff of its PC unit in a historic shift away from the consumer market. In line with a strategic realignment towards software and solutions for businesses, the Palo Alto, California-based HP also announced it was buying British enterprise software company Autonomy for $10.24 billion.
HP said it will purchase all of the outstanding shares of Autonomy for $42.11 (£25.50) per share in cash, a premium of 64 percent over Autonomy's closing price on the London Stock Exchange on Wednesday. It said the deal had been unanimously approved by the boards of directors of both companies and should be completed by the end of the year. In a further move away from the consumer space, HP said that it was stopping production of its TouchPad tablet computer, its rival to Apple's iPad which was introduced just seven weeks ago, and phones based on the webOS mobile operating system acquired from Palm last year for $1.2 billion.
HP shares lost 5.99 percent on Wall Street on Thursday to close at $29.51 and shed another nine percent in after-hours electronic trading following the series of block-buster announcements. HP's low-margin PC business has been the subject of separation rumours for months and HP shares have slumped this year amid investor concerns that the company is being overtaken by younger, nimbler Asian rivals.
Leo Apotheker, a former top executive of German business software giant SAP who took over as HP's chief executive in November, said the moves were part of a "transformation to position HP for a new future." "The transformation starts today," Apotheker told financial analysts.
Explaining the decision to sell or spin off the PC business within the next 12 to 18 months, the HP CEO said the weak economy was having an impact on PC sales but there is also a "clear secular movement in the consumer PC space." "Consumers are changing their use of the PC," Apotheker said. "The tablet effect is real and sales of the TouchPad are not meeting our expectations."
The purchase of Autonomy, which was founded in 1996 and makes software for companies to search and manage huge databases, fits the strategy of "building a successful software business," he said. "Autonomy brings to HP higher value business solutions that will help customers manage the explosion of information," he said. "Autonomy has an attractive business model, including a strong cloud based solution set, which is aligned with HP's efforts to improve our portfolio mix."