So Hewlett-Packard is facing the music on its acquisition of EDS and taking an $8 billion write down on its $13.9 billion acquisition of EDS in 2008. That’s sad, but not surprising. It naturally makes one wonder about the fate of Autonomy, which HP acquired about a year ago for the absurdly premium price of $10.3 billion. How long until that write down, and how big will it be?
The market responded badly to the acquisition, but some analysts thought it a smart play (albeit at too princely a price for a company the market valued at under $7 billion). Some pointed to the Big Data capabilities that came with Autonomy, and certainly many in our e-discovery community salivate like Pavlovian pups at the mere mention of anything that smacks of meaning-based coding capabilities (like Autonomy’s IDOL tools). Maybe it won’t be a disaster on the scale of EDS. After all, apart from the never-ending parade of C-level scandals, the litany of financial missteps and the unrelenting slide in HP’s stock in an improving market, why would anyone doubt HP’s management prowess? Moreover, harm to Autonomy (if any) has been delayed by virtue of the limited integration of Autonomy’s product line into HP’s channels. Autonomy appears pretty autonomous for the moment and historically enjoyed good margins; but, will that last?
So, feel free to share your 40 month projection for HP’s Autonomy unit as a comment. Will there be a write down? If so, for how much? If you have a more optimistic outlook (as in HP will spin off the Autonomy unit and realize a $4 billion pretax gain), posit and post that, too. The world needs dreamers, too.
To get the ball rolling, I’ll project a minimum $4 billion dollar write down before the close of 2015 and, in contrast to HP’s screwy $1.2 billion purchase of Palm, Inc. in 2010, Autonomy’s intellectual property will NOT be jettisoned into the open-source ether as so much rubbish.
I’d offer a tee-shirt or something as a prize for the most accurate prediction, but I’m not sure that would be legal.
NOTE: Please don’t base your investment decisions on my musings. I’m no finance expert and have no inside track or special dope on these matters. All I know is what I read in the funny papers and, about this topic, I’d much prefer to be wrong than watch another venerable EDD concern fade away.