Deal Focus: HP To Buy Autonomy, Spin Off PC Business

In yet another example of cash-rich companies flexing their wallets, HP announced last week that it plans to acquire enterprise information giant Autonomy for $10.9 billion (EV). HP is paying $42 per share for Autonomy, valuing the company at 11.7x LTM revenue, a 43% premium over the 30-day trading price.

HP is no stranger to paying big for its acquisitions – the company has paid above 5.0x revenue five times since 2008: Vertica Systems (5.4x); Arcsight (7.7x), Exstream Software (7.8x) and 3PAR (11.5x). Autonomy’s valuation, however, is one of the highest it has ever paid, not to mention one of the highest in the IT sector this year.

HP also announced that it is seeking to spin off its personal systems group (PC hardware, mobile) assets and will shut down its WebOS mobile platform and Palm mobile device division. This is a similar to what IBM did back in 2004 when it sold off its PC business to Lenovo to focus on data centers instead. The fact is, a number of companies that started out in hardware are moving into the software and services arena. The shift not only provides better margins but also allows companies the ability to navigate more diverse product lines, which is increasingly more important now that the tech landscape is swiftly moving towards more mobile, tablet and cloud-based devices.

Over the last five years, Autonomy has grown its revenues at CAGR 55% and purchased Iron Mountain earlier this year to bolster its digital archiving and online backup business. Founded in 1996, Autonomy’s Intelligent Data Operating Layer (IDOL) platform allows computers to harness the richness of information, forming a conceptual and contextual understanding of any piece of electronic data, including unstructured information, such as text, email, web pages, voice and video.

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