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HP seeks to dump PCs and build up software

by Lou Whiteman | Published August 18, 2011 at 5:28 PM

Hewlett-Packard Co. said Thursday it will seek options for its sprawling personal computer business, discontinue mobile device development and acquire U.K. software company Autonomy Corp. plc. for $42.11 per share, or about $10.8 billion.

The moves, which come as CEO Léo Apotheker puts his stamp on the struggling tech giant, reverse a decade-long strategy for the world's largest computer maker. HP assumed that title thanks in part to its landmark $18.7 billion purchase of Compaq Computer Corp. in 2002. The mobile device unit to be discontinued was acquired by HP just last year via its $1.2 billion purchase of smartphone maker Palm Inc.

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

Palo Alto, Calif.-based HP said it would consider "a broad range of options" for the personal computing group, including a full or partial separation or a spinoff. The company said it will also continue to explore uses for webOS, the mobile operating system it acquired as part of the Palm deal.

In place of hardware, HP intends to focus on software and services. The company late Thursday announced the acquisition of London-based Autonomy for about $10.8 billion, a significant premium to the target's £3.5 billion ($5.7 billion) value on the London Stock Exchange before reports of the deal began circulating.

HP's announcement comes on the same day the company said its quarterly earnings-per-share and revenue figures were within estimates, but warned that sales and earnings for the current quarter and full fiscal year would be well below estimates.

Apotheker, the former CEO of SAP AG who took over as chief executive at HP in September, has signaled his preference for software and services over lower-margin PCs. The company this year announced deals for business analytic software maker Vertica Systems Inc. and managed print service provider Printelligent Corp. to lessen the company's dependence on hardware sales.

HP in shedding its PC business would be following in the footsteps of IBM Corp., which sold its personal computer division to Lenovo Group Ltd. in 2005 for $1.75 billion to focus on services.

In March, Taiwanese media outlets reported HP could sell its PC division, listing Samsung Corp., Lenovo and Foxconn Electronics Inc. as potential buyers, with Samsung considered the most likely fit due to its heft. HP at the time issued a statement calling the reports "irresponsible."

Autonomy, which makes software that helps business customers process data, would be the largest purchase for HP since its $13.9 billion deal for Electronic Data Systems Corp. in 2008. The company generated Ebitda of £410.69 million on sales of £931.1 million in the 12 months ended June 30 and ranks as the largest software company in the U.K.

The company earlier in May announced plans to acquire the digital division of Iron Mountain Inc. for $380 million in cash to expand its cloud offerings.

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HP seeks to dump PCs and build up software

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