Search specialist Autonomy to sell for £7.1bn in HP software move

SHARES in Autonomy soared by more than 71 per cent yesterday after the Cambridge-based software company recommended a £7.1 billion offer from Hewlett-Packard that will net its founder more than £500 million.

The US tech giant has agreed to buy the FTSE 100 company in a strategy change that will also see it spin off its personal computer business to reinvent itself as a higher-margin, software- focused company.

Shares in Autonomy rose by 1,023p to finish at 2,452p and close to the 2,550p-a-share offer price - but some analysts believe a counter-bid could still emerge.

Hewlett-Packard saw its shares slump by more than a fifth to a six-year low in early trading in the US as traders reacted to the news which came on top of a weak forecast for future earnings.

Autonomy, which employs about 2,700 people in the UK and US, supplies software for searching unstructured information such as e-mails and text messages. Clients include Procter & Gamble, Nestle and Shell. Governments and police forces also use it to track people they suspect of terrorism and to probe complex white-collar fraud.

If the takeover is approved by shareholders, founder Mike Lynch will realise more than 500m from his 8 per cent stake, although he has agreed to remain at the helm of the business.

The acquisition is part of a radical restructuring by HP to focus on software and IT services work instead of hardware where gadgets such as Apple's iPad have eaten into its market.

Gerardus Vos, an analyst at Investec Securities, said: "Although the valuation appears rich, we see this deal as Hewlett-Packard playing catch-up in the 'big-data' arena, where we have seen a rapid consolidation by IBM, Oracle, and Adobe."

Lynch described it as a "momentous day" for his company. "From our foundation in 1996 we have been driven by one shared vision - to fundamentally change the IT industry by revolutionising the way people interact with information," he said. He added that HP would enable Autonomy to bring its technology to a "truly global stage".

Tim Daniels of brokerage Olivetree Securities said Autonomy's specialist products were highly attractive in a changing IT market. "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," he said.

It is the second major deal in the technology sector this week after Google's 7.7bn acquisition of handset maker Motorola Mobility. Technology shares rose on the back of the latest news.

A union leader yesterday expressed concerns that the proposed takeover of Automony could see the UK lose another market leader to an overseas buyer.Tony Burke, Unite's assistant general secretary for manufacturing, said: "It would be a dreadful shame if this acquisition followed form - job losses, investment drain and, worst of all, new technologies and skills ebbing out of our economy."