Experts have classified Hewlett-Packard’s acquisition of British information management software and services provider Autonomy as a good deal for its shareholders, but a questionable omen for the UK’s software industry.
"HP’s offer [for Autonomy] is a 78% premium to yesterday’s close and a 53% premium to the 100-day average share price," wrote Rajeev Bahl, an software analyst from investment bank Matrix Group. "We feel this is a rich valuation for Autonomy on a standalone basis at this point in time and, as such, a good outcome for Autonomy shareholders."
Another investment bank, Jefferies, referred to its earlier analysis that "it is almost anomalous that Autonomy remains an independent quoted company given the extent of the consolidation that has taken place in the software industry over the last 10 years.”
"The deal gives HP an exceptionally strong starting point in the enterprise software market," it added.
One shareholder was not so positive, however. Richard Holway of TechMarketView commented that although he himself will profit from the deal, it is not good news for what remains of the UK’s software industry.
"Autonomy’s HQ is in Cambridge," he wrote last night. "It created jobs not just for entry level graduates in the UK, but in all the support activities like brokers, advisers, legal beavers, accountants etc. It created a beacon that others aimed for."
Although HP has said that Autonomy will remain in Cambridge, operating as a separate division under CEO Dr Mike Lynch’s leadership, Holway questioned how long that arrangement might last.
"As an ‘olde’ analyst, I can ‘write the book’ on what happens when US companies take over UK software houses. There are no happy endings."
"I hope this will be one of the first such acquisitions that has a ‘happy ending’." ‘Hope’ and ‘the reality’ are often different."
Holway also wrote that he had not wanted to sell Ovum, the IT analyst company he founded, to Datamonitor in 2006 but had been encouraged to do so by his advisors.
Speaking to Information Age about the Cambridge technology cluster last year, Holway remarked that the existinence of strong, UK-based technology companies is essential if IT is to be a viable career for British people.
“If there is no career path fo […] graduates, if there are no entry-level jobs, then there will not be a next generation of managers to take on the IT director and CIO jobs in the future," he said. “The creation of successful UK technology firms is something that should concern anyone with an interest in IT.”
Need for a strategy
Holway’s fellow TechMarketView analyst Angela Eager told Information Age this morning that while HP is on the right track by focusing its software and cloud strategy on information management, it needs to articulate a clear strategy.
"There’s an opportunity for HP to take Autonomy somewhere special, but equally given HP’s inexperience outside the infrastructure management and application development side of software, they don’t have a record here," she said. "I’m looking to see what other acquisitions they will make in this area, but more importantly a coherent strategy about how they are going to make the cloud and information management central."