It appears Hewlett-Packard CEO Leo Apotheker is making good on his promise to increase HP's software sales.
HP will acquire Autonomy Corp., a developer of information management and infrastructure software, for $10.3 billion, the company said Thursday.
The buyout is one of HP's largest acquisitions and likely its largest software vendor acquisition ever.
HP and Autonomy directors have both approved the deal, which requires shareholder approval. HP said it expects to close the deal by the end of calendar 2011.
Autonomy, based in Cambridge, U.K., markets database search, information governance, information discovery, records management, archiving and Web content management software. Autonomy made news in May when it spent $380 million to acquire technology assets from Iron Mountain Digital, including digital archiving, e-discovery, and backup and recovery services.
Autonomy's product portfolio has made it a major player in the market for cloud-based data management services. The company reported sales of $870 million for fiscal 2010 ended Dec. 31, up 18 percent from $740 million in fiscal 2009.
"Autonomy presents an opportunity to accelerate our strategic vision to
decisively and profitably lead a large and growing space," Apotheker said in a statement.
"Autonomy brings to HP higher value business solutions that will help customers manage the explosion of information," Apotheker said. "Together with Autonomy, we plan to reinvent how both unstructured and structured data is processed, analyzed, optimized, automated and protected. Autonomy has an attractive business model, including a strong cloud based solution set, which is aligned with HPs efforts to improve our portfolio mix. We believe this bold action will squarely position HP in software and information to create the next-generation Information Platform, and thereby, create significant value for our shareholders."
Autonomy is HP's largest software acquisition, eclipsing the company's 2006 buyout of Mercury Interactive for $4.5 billion. But it still wouldn't exceed HP's acquisition of Electronic Data Systems for $13.9 billion in 2008 or come close to its 2002 buyout of Compaq Computer Corp. for $25 billion.
HP's more recent acquisitions include smartphone maker Palm ($1.2 billion) and data storage technology vendor 3Par ($2.35 billion).
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Given Autonomy's relatively broad portfolio of software technologies, the acquisition would mark a significant step in meeting Apotheker's goal of increasing HP's software sales, which only accounted for about 3 percent of the company's $126 billion revenue for fiscal 2010 ended Oct. 31.
"Doubling it wouldn't be too bad," Apotheker said of HP's software sales, speaking in a conference call with reporters in November, shortly after he took the reins as HP CEO. "Tripling it would be even better!
"We need more software both as a category and also across the portfolio so that we can differentiate our individual products and services," Apotheker said. "We have an opportunity to better integrate our software and services strength across the company and we will be focusing on that."
Apotheker previously worked at German software giant SAP, where he served in a number of executive posts including CEO before stepping down in February 2010 after the company's poor financial performance in 2009.
Solution providers said HP's acquisition of Autonomy will be a great move for HP as it would help the vendor get a solid foot in the cloud services business.
Investing in Web-based solutions for the cloud is absolutely key for HP's future business, said Dave Butler, president of Enterprise Computing Solutions, a Mission Viejo, Calif.-based solution provider and HP partner.
"As I look at my own business, I'm always looking at what cloud-based business means to me," Butler said. "As an HP partner, I'm interested to see what the manufacturer is doing."
Butler said that, if he were an investor, he would definitely be picking a cloud-based services business over a PC business.
"HP, by spinning off its PC business and investing in Autonomy, is making a move like in poker," Butler said. "It's trading in a pair of Jacks for a potential full house. I think HP is right on the money. I like the idea of HP investing in a cloud-based services business."
HP's reported plan to acquire Autonomy is a big opportunity for the vendor to make itself more of a cloud services company, agreed Geoffrey Lilien, CEO of Lilien Systems, a Larkspur, Calif.-based solution provider and HP partner.
"It's definitely very 'Leo (Apotheker)' to go after something like this," Lilien said. "It's consistent with what IBM is doing to go to the cloud and big data. It's what Leo's been talking about--going to the cloud."
Acquiring Autonomy would mean that HP is "all-in" on both cloud and business analytics software, said Jillian Mirandi, an analyst with Technology Business Research, in a report.
"TBR maintains that communication and systems management lie at the core of future cloud adoption core strengths for the Autonomy portfolio," the report said. "CEO L�o Apotheker would prove his ongoing commitment to software as a main driver of HPs corporate future with an Autonomy acquisition, particularly as the speculated price point is in excess of SAPs 2010 $5.8 billion Sybase purchase and at par with Oracles 2004 $10.3 billion PeopleSoft acquisition."