HP buys Autonomy - but will it keep its autonomy?

HP has paid £7bn for the software company. Good news for founder Mike Lynch - but a sad day for the UK tech industry.

by Emma Haslett
Last Updated: 30 Sep 2011
Hewlett-Packard, the US technology manufacturer, has announced a £7.1bn takeover of British software firm Autonomy. Given that he stands to make £556m from the deal, Autonomy founder and CEO Mike Lynch is, presumably, delighted – as will be the company’s shareholders: HP has offered £25.50 per share, which represents a not-too-shabby 64% premium. But there have already been grumbles among other UK technology firms, who say it’s a shame to see yet another one of their own being absorbed by the Yanks…

It’s the biggest-ever takeover of a UK technology business, and the biggest takeover of a UK business since last year’s £11.5bn acquisition of Cadbury by Kraft. Apparently, the acquisition is all part of plans by HP’s new CEO, Leo Apotheker, to move away from its technology manufacturing side (it’s the largest laptop manufacturer in the world) and into cloud computing: iPads and their tablet brethren are eating into the laptop market, so HP wants to get out. By all accounts, it was a controversial decision: with half the world’s technology companies all turning to the cloud for extra revenue, Apotheker could be accused of bandwagon-jumping.

That said, there’s no question Autonomy will be a good fit: its main proposition is search software that trawls through ‘unstructured data’ such as emails, documents and voice calls. It’s regularly used by fraud squad-types: it was used to uncover dodgy dealings at Enron, and by rogue trader Jerome Kerviel at Societe Generale. And the other side of Autonomy’s business will be even more attractive to HP: earlier this year, it spent $380m on a digital archiving business, which allowed it to get into cloud-based data hosting, with clients including Nestle and the US Securities and Exchange Commission.

Would-be detractors argue that too many British technology firms have sold out to Americans – in fact, there’s a sense that American companies see more potential in the technology coming out of the UK than the UK does. So there’s no doubt that it’s a sad day for British technology: Autonomy was one of three technology firms on the FTSE 100. That leaves chip designer ARM and software firm Sage.

The good news, though, is that Autonomy will (ostensibly) retain its, er, autonomy: for a start, it’ll continue to be based in Cambridge, and it will still be run by Lynch – so on the surface, nothing much will change. On the other hand, fears have already been voiced about HP’s reliability: as the BBC’s Rory Cellan-Jones points out, last year it bought Palm, saying it was an ‘idea platform’ to expand its mobile offering. Last night, though, it admitted the reception to Palm’s products had been ‘lukewarm’, and that, as a result, it was ‘ditching the whole range’. Arguably, Palm was already ailing, while Autonomy delivered an 18% rise in year-on-year revenues last year. But still: let’s hope Autonomy has better luck.

- Read MT’s interview with Mike Lynch

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