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    Friday, August 19, 2011

    Reuter site - Autonomy/HP deal spotlights data deluge

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    Autonomy/HP deal spotlights data deluge

    Fri, Aug 19 09:11 AM EDT

    LONDON (Reuters) - Hopes Hewlett-Packard's $11.7 billion bid for Autonomy will be the first of many in the European software industry could be misplaced because Autonomy has an appeal that others cannot match.

    Shares in European software makers jumped in a falling market on Friday after news of the deal.

    But analysts said Autonomy has a one-off appeal through its enterprise search software, which helps companies unravel and connect vast quantities of complex and varied data like video, pictures and emails.

    Investigators use it to track people it suspects of terrorism and to probe complex white-collar fraud, and information companies put it to work connecting news and data.

    Other European market leaders such as SAP or Nokia offer more traditional products in slower-growing markets.

    "Traditionally structured data, such as that in rows and columns generated by industry through products such as those offered by SAP and Oracle, is becoming less of a focus," said Tim Daniels of brokerage Olivetree Securities.

    "Traditional search software isn't intelligent enough to sort through unstructured data in a speedy fashion -- it is unable to understand the contents of a video or a music track," added technology, media and telecoms strategist Daniels.

    BURGEONING DATABANKS

    The amount of data in the world is doubling every two years and is expected to reach 1.8 zettabytes this year, equivalent to every global citizen having 215 million high-resolution MRI scans every day, according to IT research firm IDC.

    This has created a market for so-called "big data" and high demand for hardware and especially software that can store, process and make sense of it.

    HP has agreed to buy Autonomy in a strategy change that will also see it spin off its personal computer business, the world's largest, beginning a reinvention of itself as a higher-margin, software-focused business.

    Shares in companies unrelated to "big data" rose on the back of the news. Germany's Software AG rose 1.5 percent, Swiss computer-mouse maker Logitech rose 2.9 percent and Finnish cellphone maker Nokia rose 1.9 percent.

    Rajeev Bhal, software analyst at British financial services firm Matrix Group, said he saw British IT company Micro Focus and Swiss banking software maker Temenos as likely targets for specific reasons.

    Micro Focus shares rose 2.4 percent on Friday, while Temenos rose 4.7 percent

    "We continue to see Micro Focus (BUY, 420p TP) as a likely bid candidate given multiple approaches already in place and the attractive valuation," Bhal wrote.

    "Temenos has a strong product and routinely tops industry league tables for new customer wins, and has demonstrated in the past its ability to recover from setbacks."

    Bhal said he saw Software AG and British accounting software maker Sage, as "red herrings."

    British financial software maker Misys has also been the object of bid interest, and its shares rose 5.1 percent on Friday.

    Shares in British chip designer ARM, which like Autonomy is part of a technology cluster in the English university town of Cambridge, also rose 2.9 percent.

    One London-based technology banker who asked not to be named said he did not expect more multi-billion-pound technology deals to emerge in Europe on the back of the Autonomy-HP deal because of a "dearth of targets."

    "For the few potential larger deals, eyes will be on SAP and maybe ARM. Think IBM and Oracle," he said.

    But the banker added: "SAP has been more of a consolidator, however, and ARM is expensive and independently minded.

    (Reporting by Victoria Howley and Georgina Prodhan; Editing by Andrew Callus)

    Reuter site - Instant view: HP plans PC exit, Autonomy buy; cuts outlook

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    Instant view: HP plans PC exit, Autonomy buy; cuts outlook

    Fri, Aug 19 04:49 AM EDT

    NEW YORK (Reuters) - Hewlett-Packard said on Thursday it is considering a sale or spinoff of its personal computer unit, will halt production of its webOS devices such as the TouchPad, and agreed to buy British software firm Autonomy Corp for $10.2 billion.

    At the same time, it reported fiscal third-quarter earnings earlier than expected, and lowered its full-year financial forecasts. The following is immediate reaction from investors and analysts.

    PETER MISEK, ANALYST, JEFFERIES & CO

    "It's not sustainable what was going on. We think they had to act. They're going to get leaner and meaner to get faster."

    "It makes a ton of sense for them to exit as much as possible the consumer business. The consumer has become massively competitive, commoditized, and frankly Apple is the only one that's shown it can make money in the space."

    AVI GREENGART, ANALYST, CURRENT ANALYSIS

    "(WebOS) was a great operating system. Everybody was pulling for it but a lot of people weren't buying it."

    "It's hard to compete against not just Apple but the ecosystem Apple has built which includes apps content and services. There were also a lot of missteps such as launching it (the TouchPad) a month before it was ready and pricing it the same as the iPad 2."

    "HP is really following the IBM model of becoming a services business and selling off your PC."

    "If they spin (WebOS) out with the IP it could be very interesting for a company like HTC."

    "If Google keeps Motorola and gives it a competitive advantage over other Android licenses, one of those licensees may want to hedge their bets by buying WebOS."

    MILAN RADIA, ANALYST, JEFFERIES & CO (LONDON)

    "It was inevitable that one of the big guys would come in and buy Autonomy, the question was timing. It's a large bite in the current market environment for anyone."

    "Autonomy is an inevitable acquisition target because of its unique position in unstructured data -- there's not an obvious rival and there's strong growth in the unstructured data market."

    "The challenge for HP would be to deliver a knock-out blow. $10 billion is 25 times 2012 predicted earnings, which is a good price after recent falls in Autonomy's shares, but it would not be deemed an excessive valuation."

    "There's no reason why any of the big four or five names should not be interested."

    SHEBLY SEYRAFI, ANALYST, FBN SECURITIES

    "Without saying so, (HP) is saying 'I want to be more like IBM'. What did IBM do many years ago? They divested their PC business and they got more involved in software."

    "The PC industry is a very challenged one because of the slow growth in that sector. For those companies like HP which don't' have a strong tablet offering, they are victims of the encroachment of Apple's iPads and tablets on their notebook business. So they're vulnerable to losing share."

    "Leo was brought over partly because they wanted HP to get more involved in software. So what he's doing is basically considering spinning off a hardware related business and getting more involved in software. Therefore this Autonomy acquisition is part of that strategy. Analytics is a hotter segment in the software area."

    "This webOS discontinuing is sad but necessary. They were fighting a losing battle. The winners were already decided before they even launched their TouchPad in the marketplace, and the winners are android and (Apple's) iOS."

    BRIAN WHITE, ANALYST, TICONDEROGA SECURITIES

    "Although results are in-line with our estimates, the company's fourth-quarter outlook is well below our projections and the Street."

    "Despite weakness in the stock on this announcement, we still advise investors to stay on the sidelines as we believe more bad things could be lurking around the corner."

    RAJEEV BAHL, CO-HEAD OF RESEARCH, SOFTWARE & IT SERVICES, MATRIX GROUP

    On potential bids for Autonomy:

    "Would expect both IBM and Oracle to take a good look at Autonomy. For HP it seems a less natural move given their lack of a database or enterprise content platform."

    "For IBM, Autonomy fits well as a piece of their infrastructure offering alongside Cognos and DB2, for Oracle (an existing Autonomy OEM) it expands their market reach significantly into the unstructured data world."

    "Autonomy's SPE product (which extends Autonomy's unstructured data capabilities into structured data) would be a hook for both companies."

    KIM FORREST, ANALYST, FORT PITT CAPITAL GROUP

    "None of this should be surprising, in light of what's happening to the consumer with respect to the amount and the type of PCs they're buying and also the fact that even before Leo (Apotheker, the new CEO) took over, the company had been moving more into software and services, specifically targeted at businesses."

    "You know that consumer PCs is the thing that's dragging that segment down. Because people aren't willing to pay up. They want the sexy iPad. And they may need a cheap PC, but they're not willing to pay up. All consumers seem to have eyes for is the iPad."

    On Autonomy: "I think it's a move for the future, but I don't think it's going to be a boost to the bottom line immediately."

    (Reporting by Alexei Oreskovic in San Francisco, Sinead Carew in New York, Paul Sandle in London)

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