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August 19, 2011

7 Reasons Why the Autonomy Acquisition Makes Sense for HP

With HP's annual meeting coming up this week CEO Leo Apotheker is looking for a way to put some lipstick on his new baby: he wants to acquire Autonomy. PC sales are declining and Apple is eating their lunch in pads AND buying the old HP Cupertino campus. Apparently they will keep the server divisions.Bill and Dave must be beside themselves.

But wait! The knight in shining armor from England is here for the rescue. Autonomy announced just last month they were 'likely to beat expectations' for their fourth quarter. They have enjoyed huge success in eDiscovery.. they claim to 'own search'.. and sponsors its own football team, Tottenham Hotspur FC.

At first blush, the two seem like strange bedfellows. HP, the leader in PCs worldwide, with a well acknowledged reputation for management style - the HP Way. Autonomy has a rep like that of a great professional footballer: skilled and aggressive, known to occasionally feint an injury for his benefit after a rough hit; and perhaps booked for a card a few times every season. But still, a champ and damn good at what he does.

When you think about it, the deal isn't as odd as it may seem. Consider:

1. PC sales are down; they are being replaced by smart devices like Android and iOS devices. WebOS? Too little, too late, too expensive.

2. HP acquired EDS a couple of years back to compete with IBM in consulting services. Among enterprise class search engines, 'consulting services' certainly comes to mind - bring lots.

3.  IT managers, not C-level execs, buy PCs. Chief Risk Officers buy eDiscovery and compliance solutions so he and his fellow executives can sleep well at night. Rarely is there a spending freeze on compliance tools.

4. HP is rumored to be spinning out its PC products, but it seems the server business is staying in Palo Alto. IDOL likes lots of really big servers: HP wins on all three: servers, software, and consulting.

5. Iron Mountain: records management. See (3) above.

6. We used to speculate that SAP might be a buyer for Autonomy at some point in time. Now, the HP chief is Leo Apotheker, who came to HP from... SAP. Coincidence?

7. 'The cloud': HP needs one, HP gets one - enough said.

Still, it may not be a 'made in heaven' match.

1. You may recall that when Microsoft acquired FAST, they soon found some odd accounting issues - something about numbers overly optimistic, and booking revenues prior to firm orders were received. Until you dig deep into the details, there may be no way to know for sure until the deal is sealed.

2. And as mentioned earlier, personnel and policies seem relatively incompatible.

3. HP is along time Microsoft partner, uses SharePoint extensively, and just rolled our FAST search on its public facing web site. That should be interesting.

4. Finally, I seem to recall that when Autonomy bought their larger competitor Verity, part of the rationale for Autonomy being the surviving company was the cost of annual SarBox compliance if they were a US company. HP must be willing to pick up the tab, because I sure can't see Palo Alto moving to Tottenham.

Stay tuned, and let us hear what you think!


Full disclosure: I was an HP employee for 10 years, and during my time there was fortunate enough to be the PC support guy for Bill Hewlett, Dave Packard, and Dave Packard Jr. HP is not the same company as it was when they were running the show. I recommend Mike Malone's "Bill and Dave" as a great explanation of what made HP great for 40 years, and successful for 72 years so far.




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