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Thread: HP looks to spin off PC unit

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    HP looks to spin off PC unit

    Disappointed by HP's stock performance and the company in General.




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    HP looks to spin off PC unit

    By Joseph Menn, Tim Bradshaw, Anousha Sakoui and Helen Thomas

    Hewlett-Packard plans to exit its leading personal computer business, probably through a spin-off to shareholders, as it grapples with a deteriorating economic environment and the overhang from past acquisitions.

    In a slew of announcements on Thursday, the top computer maker also said it had agreed to buy the largest UK software company, Autonomy, for about $11bn and that it was cancelling its attempt to compete with Apple in the tablet business.
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    Lex Autonomy/HP
    HP to buy Autonomy for $11bn
    Apotheker engineers promised overhaul
    Takeover is loss for UK software sector
    HP’s recommended cash offer for Autonomy

    HP investors alarmed at the 79 per cent premium for Autonomy and a much-reduced financial outlook from the Silicon Valley company sent HP shares down 15 per cent in regular and after-hours trading to the lowest point in years.

    In what they described as difficult but realistic profit projections, HP executives listed challenges including those inherited with the acquisitions of technology services group EDS and smartphone pioneer Palm, maker of the software in the now-abandoned TouchPad tablet.

    Former SAP chief executive Léo Apotheker, who took the top job at HP last year, said that the company wants to expand in software, an area that accounted for only 2.4 per cent of HP’s $32.4bn revenues in the previous quarter. Though it has fared better in PCs than many rivals, the margins remain much lower than in software and services.

    Like his predecessors, Mr Apotheker had publicly resisted calls for a PC spin-off until now, arguing that the machines helped HP provide a full suite of offering to large business customers.

    HP has offered $42.11 per share for all outstanding shares of Autonomy. Amid hopes of a counterbid, shares in Autonomy were up 45 per cent higher at $37 by the close in New York.

    Autonomy and HP were expected to agree a 1 per cent break fee to the UK company if the deal falls through. At £25.50 a share, the price represents 23 times forecast 2012 earnings for the company, according to an analyst.

    An Autonomy deal would be the biggest acquisition for HP since its $13.9bn purchase of EDS in 2008. HP bought rival Compaq Computer in 2002.

    Founded by Mike Lynch in 1996, Autonomy has been a pioneer in creating search software that can make sense of complex information. Mr Lynch holds an 8 per cent stake worth more than $800m at the takeout price. He would join HP as the head of its software division if the deal is competed, according to people familiar with the matter.

    Autonomy’s consumer search engine, which launched in 2000, was overshadowed by Google and Yahoo. Since 2005, Autonomy has made a series of acquisitions in enterprise software, including Interwoven, a content management company, for $775m in 2009.

    Its shares have been among the strongest performers in the UK recently, rising more than 250 per cent over five years.

    HP’s PC business faces competition from traditional rivals, such as Dell, Asian manufacturers with lower prices and a resurgent Apple.

    The latter has cut into the market with the success of its iPad tablet device.

    Although some critics have praised HP’s recent entry into the tablet wars, the TouchPad sales were disappointing enough that the company had repeatedly discounted it.

    Mr Apotheker had expressed hopes that the TouchPad would build a customer base by allowing corporate employees to access the same software applications on those tablets as well as their office computers. In an interview, Mr Apotheker blamed the hardware and said that the underlying software could live on and be licensed to other manufacturers.

    Barclays Capital and Perella Weinberg are advising HP, with legal counsel from Skadden Arps and Gibson Dunn. Qatalyst Partners is lead financial adviser to Autonomy.

    Additional reporting by Richard Waters and Neil Hume
    “the misery of being exploited by capitalists is nothing compared to the misery of not being exploited at all” -- Joan Robinson

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    Official Thread Jacker Senior Contributor gunnut's Avatar
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    Things don't look good in HP land. That $1.2 billion buy of Palm and the WebOS is a bust. HP just suspended all work on tablet and phones using WebOS.
    "Only Nixon can go to China." -- Old Vulcan proverb.

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    I am one of the lucky few who has a touchpod. it is used by my kids, but still.....

    Oh, how the once mighty
    “the misery of being exploited by capitalists is nothing compared to the misery of not being exploited at all” -- Joan Robinson

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    Brother just bought 3. I managed to get one online at Best Buy for store pickup but now I've received another email saying that item was not found at the store. :(

    They should have never fired Mark Hurd. What a fiasco.

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    Official Thread Jacker Senior Contributor gunnut's Avatar
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    I missed out on the $100 HP tablet. I just bought a cheapy Android tablet by Coby for $190...and it's defective...
    "Only Nixon can go to China." -- Old Vulcan proverb.

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    Senior Contributor bonehead's Avatar
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    Quote Originally Posted by gunnut View Post
    I missed out on the $100 HP tablet. I just bought a cheapy Android tablet by Coby for $190...and it's defective...
    That sucks.

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