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)