HP to acquire enterprise player Autonomy for $10.3B (updated)

HP will buy UK-based enterprise software company Autonomy for $10.3 billion, the company announced during today’s quarterly earnings call.

Autonomy shareholders will receive $42.11 a share, which is a 64 percent premium over Autonomy’s closing share price yesterday. If the deal is approved by regulators, HP will be making a strong push into enterprise software.

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“HP wants to make a dramatic entry into information management,” Whit Andrews, Gartner vice president and analyst, told VentureBeat. “This would be a very visible entry into the enterprise market with a focus on unstructured information.”

HP also today confirmed it will explore spinning off its huge personal computing business. Additionally, HP said it would kill off its webOS device unit, specifically the HP TouchPad tablet that has failed to sell many units.

The $10.3 billion Autonomy acquisition, if it goes through, would be one of the largest deals in HP’s history. In the past year, HP bought 3PAR for $2.35 billion as well as ArcSight for $1.5 billion.

“HP has been sitting on the sidelines partnering with software companies rather than being an enterprise software company for several years now,” Melissa Webster, IDC vice president of content and digital media technologies told VentureBeat. “With Autonomy, HP can make a strong bid with eDiscovery, archival software, and governance, risk, and compliance solutions.”

The bid to buy Autonomy and to spin off its PC business would mean HP wants to be a major software and business solutions player. Bloomberg’s report said HP CEO Leo Apotheker has placed the company’s emphasis on software and services.

“HP has been struggling for years with how to shift into software,” Andrews said. “Buying Autonomy would give them a new direction for software with strong clients, strong software, and a strong position in the market.”

HP’s stock price fluctuated wildly on the news, with its share price going up on a day when tech stocks were hit hard. But the price quickly retreated back sharply into the negative as traders digested the news, and the share price closed down 5.8 percent. In after hours trading, HP lost another 5 percent and it’s share price will likely continue to fluctuate.