When I first heard the news last night I couldn’t immediately work out whether Leo (a) had completely lost the plot, (b) was a genius, or (c) is quite simply desperate. Having thought much about it, I think we can now rule out (b).
The announcement that HP is to (a) buy Autonomy, (b) scrap its webOS tablets and smartphones (and in so doing write off the $1b+ it paid for Palm in April last year plus who knows how much more R&D to try to turn that sow’s ear into a silk purse), and (c) potentially sell off its PC business, completely overshadowed its Q3 results And just as well, as they were a lacklustre set of numbers, carrying with them yet another downgrade to FY guidance.
But why are we even talking about the Q3 numbers? They are now irrelevant!
What's relevant - and all that's relevant - is that what Leo is doing to HP is wrong.
I don’t care whether buying Autonomy will be accretive to HP’s earnings next year, next month or next week. By my (admittedly now very rusty) financial analysis, Autonomy generated $310m net operating cash flow in 2010, just 3% of HP’s. At the end of Q3 HP carried some $12.7b of net debt. Now add another $11b. I’ll leave it to ‘real’ financial analysts to determine whether this deal even makes good financial sense.
But even that is not the point. The point is this.
Buying Autonomy – as fabulous a business that it is - does not bring HP any closer to becoming a software company than buying Palm made it a mobile internet company. Or than buying EDS turned it into a services company.
HP shareholders should revoke the bid for Autonomy (sorry, Mike) with all that implies for Leo's future at HP.
Mark the date in your diaries, my friends, as from today HP will never be the same again.