The Palo Alto, Calif.-based giant used its Thursday earnings announcement that it is in talks about spinning the PC operations, and might acquire UK-based software company Autonomy Corp.
According to , the purchase of , would be for about $10 billion.
Specifically, H-P's late-afternoon announcement said that it was planning to announce that its board had authorized the exploration of "strategic alternatives for its Personal Systems Group," and that the company would "consider a broad range of options that may include, among others, a full or partial separation of PSG from H-P through a spin-off or other transaction."
The company said it also plans to announce that it will discontinue operations for webOS devices, , although H-P would "continue to explore options to optimize the value of webOS software going forward." For some, the TouchPad discontinuation was .
In discussing third fiscal quarter earnings, H-P said diluted earnings per share were 93 cents, and non-GAAP diluted EPS $1.10, compared with year-ago GAAP diluted EPS of 75 cents and non-GAAP diluted EPS of $1.08. It said that its non-GAAP diluted EPS estimates excluded after-tax costs, of about 17 cents in the latest quarter, related primarily to the amortization of purchased intangible assets. That compared with 33 cents a share in the year-ago third quarter.
Revenue in the quarter rose to $31.2 billion from $30.7 billion a year ago, it said.
H-P estimated that in its fourth quarter revenue will rise to a range of about $32.1 billion to $32.5 billion, and that GAAP-diluted EPS would be in the range of 44 to 55 cents, with non-GAAP diluted EPS in the range of $1.12 to $1.16. Non-GAAP diluted EPS guidance excludes after-tax costs of approximately 61 to 68 cents, related primarily to restructuring and shutdown costs associated with webOS devices, the amortization and impairment of purchased intangibles, restructuring charges and acquisition-related charges.
H-P said full-fiscal-year revenue would be about $127.2 billion to $127.6 billion, a reduction from its previous estimate of $129 billion to $130 billion. Fiscal-year GAAP diluted EPS is expected to be in the range of $3.59 to $3.70, down from its previous estimate of at least $4.27, while fiscal-year non-GAAP diluted EPS is expected to be in the range of $4.82 to $4.86, down from its previous estimate of at least $5. FY11 non-GAAP diluted EPS estimates exclude after-tax costs of approximately $1.16 to 1.23 per share, it said, related primarily to restructuring and shutdown costs associated with webOS devices, the amortization and impairment of purchased intangibles, restructuring charges and acquisition-related charges.
H-P scheduled its conference call for 5 p.m. ET to discuss these announcements. The call is accessible via an audio webcast at .
Autonomy Corp. is an enterprise software company that, according to a description on its website, is the "market leader in the provision of software that automates the analysis of unstructured data, whether in the form of text, audio, images or video."
Earlier in the day, Bloomberg reported that H-P was talking with Autonomy Corp. about a deal in the $10 billion range, as part of overall plans to spin off the enormous PC business. It attributed the report to people with direct knowledge of the matter. Initially, an H-P spokesperson declined to comment.
Chief Executive Leo Apotheker had said earlier this year that he wants to expand in software and services that help customers deliver computing over the Internet, through the cloud. H-P has been aiming to lessen its dependence on lower-margin PCs, where growth has stalled as consumers flock to tablet-style computers like those made by Apple Inc.
"This is the direction we want him to take," Abhey Lamba, an analyst at ISI Group in New York, told Bloomberg. after the first reports broke. "Get out of a low- margin business and focus more on his core competency, which is software."
Hewlett-Packard shares had fallen $1.23, to $30.16, as of 1:41 p.m. on the New York Stock Exchange. They earlier had jumped as much as 8.3%. Up until this week, the shares had declined 25% during the year.
Autonomy's U.S.-traded shares rallied 51%, to $38.50, for their biggest intraday gain in six years, Bloomberg said. The shares had declined 8.3%, to 1,429 pence in London, where markets closed before news of the takeover talks.
Hewlett-Packard would be paying a high multiple of sales for Autonomy if the $10 billion price was accurate, Lamba said. Autonomy may report $1.05 billion in sales this year, according to the average estimate of analysts surveyed by Bloomberg, which would value it at about 10 times sales in a deal.
"That's a very high multiple for a software stock," he said. Software companies commonly sell in mergers and acquisitions for five to seven times sales, Lamba said.
In the past five years, there have been more than 970 takeovers of European software companies, amounting to over $31 billion in deals, according to data compiled by Bloomberg. The largest was SAP AG's 2008 takeover of Business Objects SA. Buyers have paid a median multiple of 10.8 times the targets' earnings before interest, taxes, depreciation and amortization, based on 70 deals.Bloomberg reported that Hewlett-Packard shares had fallen 53 cents, to $30.86, at 12:34 p.m. on the New York Stock Exchange, after earlier jumping as much as 8.3%. Before today, the shares had declined 25% for the year.
Autonomy, the UK's second-largest software maker, offers programs used in database search. The company's customers include Coca-Cola Co., Nestle SA, and the U.S. Securities and Exchange Commission.