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The Autonomy + HP deal – we add our comments

So we thought we'd say something about the HP acquisition of Autonomy for $10billion (and please remember a UK billion is now the same value as an American billion).

The first point is this is not a legal IT deal – the legal market bit represents a tiny part of the overall deal – this is all about HP reinventing itself by buying itself a killer software business.

Why did Mike Lynch of Autonomy chose to sell now? We reckon it is because he realised the game was up and that long term he was not going to win the Autonomy IDOL versus Microsoft FAST search engine war. And, given the parlous state of the global IT industry, he probably reckoned the HP deal could be the best offer on the table for a long time.

As for the iManage Worksite etc DMS part of the equation, given the ruthless way HP is spinning off businesses it no longer regards as core, we wouldn't be surprised if iManage is also spun off in the near future. Given some of the grumblings we are hearing from US law firms about the attitude of Autonomy – and its pricing policy – a 'let go' iManage might actually represent a better deal for law firms.

So win, win all round – and now we are going to fantasize about counting all Mike Lynch's money.

3 replies on “The Autonomy + HP deal – we add our comments”

There isn't a Microsoft FAST vs. Autonomy IDOL software war, sorry. Microsoft bought FAST, announced they would stop developing on Linux/Solaris and are rewriting the whole thing in .Net as an add-on for Sharepoint (tough if you don't want Sharepoint). However while all this has been happening there's a huge rise in open source search, which is far more interesting in terms of market change.

This has absolutely nothing to do with Lynch thinking he will lose to FAST. He knew as long ago as 2005, when Autonomy acquired Verity, that FAST were a major threat – they were growing considerably faster than Autonomy even then, prior to both the acquisition and the FAST accounting scandal. Once MSFT acquired FAST, they were always going to become the gorilla in the space. Autonomy's business is large and diversified, and although IDOL unperpins much of it as a technology, the traditional IDOL serach/KM technology is no longer a big part of it. FAST is just another piece of Microsoft now and not a focus for Autonomy.
Lynch hit a glass ceiling. The company is at a point where they need to make bigger acquisitions and they ran out of options, despite a large cash war chest. On a personal level, Lynch has other aspirations, including politics. For him, the time is right and given the economic situation, the opportunity may not come again, especially as most companies will struggle to grow for at least the next 24 months. This was too good an opportunity to miss financially.
A smart move by Lynch, but you have to ask if it is a smart move by HP, spending over $10Bn of their $12Bn cash reserves on a British software company, with a dismal attrition record, questionable management structure and unrelated business to HP.

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