Industry experts react to HP-Autonomy deal

Tools

HP (NYSE: HPQ) dropped a bombshell on the technology world Thursday afternoon when it announced it was buying Autonomy for more than $10 billion, and axing WebOS and its new tablet less than 7 weeks after its launch. To round out the announcement, it signaled it would be exiting the personal computer business. It was quite an afternoon.

Analysts and industry experts contacted by FierceContentManagement had a variety of reactions about why HP and Autonomy were getting together.

Robert Rose, who runs content consulting firm, Big Blue Moose says HP Chief Executive Leo Apotheker is clearly changing the direction of the company with this move. "I think we're finally starting to see the impact of Leo Apotheker on this company; and in theory I really like what they're doing. If they really do abandon the PC business--and try for an IBM-like transformation into an enterprise software and services business--this acquisition makes perfect sense," Rose said.

Meanwhile Craig Carpenter, general counsel and VP of marketing at eDiscovery vendor Recommind said the chief benefit for Autonomy was the huge payout--well over market value. He said Autonomy couldn't resist an overture that paid nine times the market value.

Irina Guseva, an analyst at Real Story Group said the deal was a surprise on a number of levels, especially given the hefty price tag.

"The first shocker is the $10B sticker price, which looks to be hugely overpriced," she said. She added that it was especially curious given HP's historical emphasis on hardware and infrastructure, rather than software and services.

But it's the software and services side HP clearly hopes to emphasize moving forward. Tony White, president and founder of content management consulting firm Ars Logica said this is all about moving toward a higher-margin software-services model.

"HP no doubt looks to Autonomy to improve profitability through higher margins," he said. But how successful HP will be in that regard really depends on how they approach the business, said White. "The software margins are huge and very scalable (expansion of the product lines, and so on). Professional services margins are moderate and only linearly scalable," he said.  

"For this acquisition to produce at its potential," he added, "HP will need to focus more on the continued strategic evolution of Autonomy's products over the long term, rather than on shorter-term, tactical, tangible software-integration revenues."

Scott Liewehr, an analyst at Gilbane Group, agreed the deal signaled a tilt toward software services, but he thought it might have more to do with the cloud, especially given Autonomy's recent purchase of Iron Mountain's cloud assets.

"I think this probably does a lot in terms of moving their cloud strategy forward since Autonomy is huge in this area and I don't believe HP has a cloud offering. All the giants are moving this way swiftly, and I believe it would put HP in a great position (it would also be good for both it's archiving platform, and certainly for TRIM)," he said.

Recommind's Carpenter saw the deal through his company's eDiscovery prism, saying it was validation of the value companies like HP are placing on eDiscovery, the cloud and big data. "HP undoubtedly sees a huge growth opportunity in information management, and an Autonomy acquisition will help them compete against the likes of IBM. Essentially, this is a bet that corporate data volumes will continue to rise, that litigation will increase and that regulation will tighten. Given the triple-figure growth we're seeing in hosted eDiscovery, I'd say that's a smart bet," Carpenter said.

But RSG's Guseva saw this as more of a content management play, "For HP, this acquisition is a competitive ECM/WCM nod in IBM and Oracle's direction. Note how the spin-off of the PC business mimics that of IBM. Autonomy's powerhouse of technology lends some interesting potential opportunities though, as long as the direction doesn't revolve entirely around IDOLization," she said.

Whatever the reason, and however HP chooses to use Autonomy's assets, this deal signals yet more consolidation in the content management space, and fewer independent vendor choices for content management consumers moving forward. 

For now, HP has made a clear bet on software and services, and away from hardware. How that plays out in the future is anyone's guess, but it is clearly a monumental shift for HP--one that could have a big impact on content management and HP's growing role in the space.

For more information:
- see the HP press release

Related Articles:
Autonomy buys digital pieces of Iron Mountain 
Merger and Acquisition Roundup: Who Changed the Game in 2010 
Autonomy buys Interwoven for $775M