HP announces major shake-up: ditches WebOS and PCs, buys Autonomy for £7bn

In a major strategic shake-up, HP has announced it is to scrap its Touchpad tablet range, seek a potential buyer for its PC division, and buy software firm Autonomy

In a major strategic shake-up, HP has announced it is to ditch its Touchpad tablet range and seek a potential buyer for its PC division, while simultaneously confirming it is to acquire UK software company Autonomy for £7.1bn.

The move is the company's boldest step yet toward software and away from PCs.

In a dramatic announcement that took the IT industry by surprise, HP revealed that:

  • Autonomy has accepted a bid of £25.50 per share, worth £7.1bn - a 64% premium on the software firm's share price at the time. Autonomy founder and CEO Mike Lynch will make about £500m from the sale.
  • HP will discontinue its WebOS devices, including its smartphone and tablet ranges. HP released its Touchpad tablet device in the UK only last month, making the product one of the most short-lived in IT history.
  • HP will examine "strategic alternatives" for its PC business, which could lead to the division being spun-off or sold. HP is the world's leading PC supplier, generating $41bn in revenue in 2010.

The announcements suggest an end to two of HP's biggest previous acquisitions, sold off in favour of buying one of the UK's most successful independent software companies. HP bought PC specialist Compaq for $25bn in 2001, and WebOS developer Palm for $1.2bn in 2010.

In statements to accompany the announcements, HP CEO Léo Apotheker was clear that the latest developments are part of a strategic shift to focus on higher margin businesses such as cloud computing, software, and what he called "the next-generation Information Platform". He acknowledged that the HP Touchpad was not gaining traction in the market – even though the product was launched barely 49 days ago.

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"The exploration of alternatives for Personal Systems Group (PSG) demonstrates our commitment to enhancing shareholder value and sharpening our strategic and financial focus," said Apotheker.

"In March we outlined a strategy for HP, built on cloud, solutions and software to address the changing requirements of our customers. Since then, we have observed the acceleration of these market trends, which has led us to evaluate additional steps to transform HP to meet emerging opportunities. We believe the acquisition of Autonomy, combined with the exploration of alternatives for PSG, would allow HP to more effectively compete and better execute its focused strategy," he said.

"Autonomy presents an opportunity to accelerate our strategic vision to decisively and profitably lead a large and growing space. Autonomy brings to HP higher value business solutions that will help customers manage the explosion of information."

HP also announced its financial results for the third quarter 2011, with revenue of $31.2bn compared with $30.7bn last year. The supplier estimates full-year sales will be approximately $127.2bn to $127.6bn, down from its previous estimate of $129bn to $130bn.

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