Hey HP: You may not rate Autonomy, EDS, but buyers do
VCs are circling, true, but so are tech firms - reports
Posted in Management, 17th January 2013 12:17 GMT
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Potential buyers are probing Hewlett-Packard over EDS and Autonomy, according to reports.
Bloomberg reports that HP has received an “increase in enquiries” following a recent regulatory filing saying it would dispose of businesses that don’t meet goals.
The Wall St Journal says overtures have come mainly from other US tech companies or their representatives.
According to Reuters, HP regularly gets touched up by bankers, representatives from private equity and technology companies but enquiries have increased since it emerged Dell’s in talks with Silver Lake about a possible $15bn buyout.
HP in its 10-K filing said it was evaluating the potential disposition of assets and businesses that “may no longer help us meet our objectives".
EDS and Autonomy are prime targets for buyers, both being outside HP’s core PC, server and printer business and both coming into the company through departed CEOs, the result of wild strategy swings, and at great cost. EDS was bought for $13.9bn in 2008 by Mark Hurd to turn HP into a services company but four years later HP wrote $8bn off of the deal. Under Hurd's replacement, Leo Apotheker, software was the new future. The firm went on to spend $11.7bn on UK enterprise search specialist Autonomy in 2011 but that deal was also written down - also to the tune of $8bn.
In November, HP accused Autonomy of accounting impropriety and of misrepresenting its value during the purchase, and referred the matter to UK and US regulators. Autonomy’s founder and former CEO Mike Lynch - aka: "the British Bill Gates" - has denied any wrongdoing.
HP is in the midst of a corporate turnaround and restructuring under current chief executive Meg Whitman - who has said that she doesn’t expect it to pay off until 2016.
Announcing the strategy and justifying the long turnaround time, Whitman said: “My belief is that the single biggest challenge facing HP has been changes in CEOs and executive leadership, which has caused multiple inconsistent strategic choices and frankly some significant executional miscues.”
Whitman appeared to be referring to Autonomy, EDS and their CEO sponsors. Autonomy and EDS are prime candidates for sale to either private equity or another tech company - either one within the sector which is looking for expertise or customers or trying to break in.
That said, it’s not like the PC business is a particularly healthy segment for HP to remain in - at least without any major changes. Global sales are falling and during HP’s most recently reported quarter, revenue for the Personal Systems Group (PSG) fell 14 per cent year on year; the unit's business and consumer sales were down 13 per cent and 16 per cent respectively.
On Tuesday, Gartner reported that although HP was seated at the top of the PC heap - it has become a dwindling one. Also, PC-makers' last hope, Microsoft’s Windows 8 operating system, resolutely failed to reignite sales during the fourth quarter covering Christmas, the analyst explained. According to Gartner, Microsoft's brand-new operating system: "Did not have a significant impact on PC shipments in the fourth quarter." ®
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COMMENTS
Wild strategy swings..
Sounds like banking in the 80's/90's/00's. Banks with their core business of lending, savings, mortgages and expensive letters telling you that you are 30p overdrawn, suddenly decided to get into all sorts of stuff they didn't understand.
Abbey National lost £243m on the whole Cornerstone Estate Agency project.
Bradford and Bingley sold it's estate agency arm to Countrywide.
HSBC actually made money on their sale of Eversholt Rail which owned train rolling stock but I've still no idea why they were involved in it...
I'm sure there are plenty of others.
Re: Dodgy accounting
Surely any increase in value would be due to the brilliant turn around that HP have managed to execute at Autonomy?
What are these accounting irregularities you speak of?
> EDS was the only profit making part of HP for the first 2 years ???
HP make billions every quarter and have done for as long as I know of.
They can write down 8bn on a regular basis and still make money - if they weren't a bunch of suits from a huge multinational (US?) company maybe they wouldn't lose 8bn on a regular basis which would be nice... Still maybe some of Mike Lynch's money will stay in the UK & maybe he'll pay some tax.
EDS was not a basket case
EDS was the only profit making part of HP for the first 2 years and paid for itself. Poor management by HP was the reason for any decline.
Shying away from established markets and not following up on leads because services could not make the hardware margin (40% or more) was what screwed an otherwise good business.
The men in suits were the death of EDS and HP had the biggest suits.
subtle hints
>Whitman said: “My belief is that the single biggest challenge facing HP has been changes in CEOs and executive leadership, which has caused multiple inconsistent strategic choices and frankly some significant executional miscues.”
Translation: "keep me, keep me".
Kidding aside, HP's board needs to be more vigilant about vetoing dumb CEO moves, but at the same time it does need to let Meg get on with her work. Hopefully her own Skype writedown will have taught her some lessons about signing big cheques.
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