HP buys software company Autonomy: bank or bust?

I’m sitting here pondering the HP acquisition of Autonomy. I can’t really make sense of it. Can you?

On the one hand it is a tacit admission that the PC hardware business is commoditised and therefore not valuable any more. IBM figure that out years ago and ditched its PC division to Lenovo. Big Blue is smart and it built an excellent services division around it – which has grown, whilst the hardware division shrinks year on year. People just don’t buy those expensive UNIX servers any more.

HP are pretty woeful right now. They’re dead in the UNIX server market – Intel is sunsetting the Itanium CPU it is built on and Oracle have removed support for it. This makes me laugh, because HP are suing Oracle over a platform that they also know is dead. What for? Presumably to show some face to their beleaguered customers.

They’ve also made some bizarre decisions in mobile – the botched Palm acquisition, the TouchPad which has a proprietary OS and isn’t selling well: Apple have them stitched in the market and Best Buy have 245,000 out of 270,000 sitting on a shelf somewhere. Or probably on a delivery lorry back to HP.

To add to this, they bought EDS (which UK magazine Private Eye called “probably the worst consultancy in the world” – like the Carlsberg ad) in 2006 – pulling it into HP Consultancy Services – but not getting anything like the traction that IBM have.

And in an interesting move this year, they employed ex-SAP CEO Leo Apotheker – who left SAP after a hellish 18 months at the helm. Leo never worked well in SAP and in the market we’ve been wondering if he would fare better in HP’s culture. I don’t think this has played out yet and we’ll see what he has to offer in coming months.

But as to the Autonomy acquisition, it just looks bizarre at first glance. It’s a standalone software company that does niche database search products and sells to some big customers. Great, it will diversify HP’s software business but I don’t see the attraction of such a niche?

Either I’m missing something and it is an Apotheker stroke of genius, or HP made a bad call employing him. Let’s sit on the sideline and see how it plays out in 6 months from now. Because HP has already lost 25% of its stock value in 2011 and if this is another bad business decision, HP will pay dearly.

Advertisements
This entry was posted in Technology. Bookmark the permalink.

8 Responses to HP buys software company Autonomy: bank or bust?

  1. John,
    I disagree completely on the hardware business, I grant you that it is a low margin business due to the competition and commoditisation of it, but it still brings in a hell of a lot of revenue. Look at the mainframe business which everyone has been saying is dead – it brings in over $27 Billion in revenue, which is up 8% on the previous year. Of that $27bn over $3 billion was net income, which is a handy chunk of change in anyone’s pocket.
    So I propose a different statement – Selling Unix servers has become a lot more difficult as the x86 alternatives have caught up in the other architectures like SPARC, Power, Itanium in performance and providing good TCO.
    Chris

    • John Appleby says:

      Hi,

      I think we’re at crossed purposes. It’s a low margin but necessary business. And UNIX/Mainframes are an important part of this, and it will continue to exist for the foreseeable future – at the least to maintain existing software environments, many of which have a 25 year lifespan from now (AS/400 etc.)

      That said, Itanium is dead and HP has no replacement. It’s down to Oracle/Solaris and IBM/AIX. I have better formed views on this, for another blog another day 🙂

      Regards,

      John

  2. Pingback: HP acquiring Autonomy - is this its IBM moment? | ZDNet

  3. John, as I understand it, HP are not, yet, proposing to sell off their server business – that’s not part of their PSG. Is that right? And yet you seem to think their server business is in big trouble too. Is that going to be next to be cut, or can they rescue it?

    • John Appleby says:

      Right – but the HP-UX group is separately in big trouble – not connected to the sale of the PSG, but rather that Itanium is a dieing platform (it never really got off the ground), they ditched PA-RISC and there is no more support for Windows on Itanium after Windows 2008, or Oracle…

      As for the server group, I think the x86 team is in good shape and there remains margin in that industry. Same with storage and networking.

  4. Pingback: Autonomy Accounting Issue Is HP’s Latest $8.8 Billion Disaster | zowchow.com

  5. Pingback: HP & Autonomy: What Went Wrong? - semanticweb.com

  6. Pingback: Autonomy’s Irregularities Give HP An $8.8B Headache | iPad Expo

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s