The analysts who were bearish on Autonomy and pronounced the shares a ‘sell’ will feel they have scored a pyrrhic victory
Hats off to Mike Lynch. We always knew Britain’s spikiest technology entrepreneur got a pretty price when he flogged his company, Autonomy, to the Americans. But it turns out that £7bn in cash was beyond pretty – last autumn’s sale to Hewlett-Packard now looks utterly beautiful.
HP has confessed to “very disappointing” revenues from its big bet, which was pitched at an astonishing 64% premium to the market price at the time. Chief executive, Meg Whitman, whose ousted predecessor initiated the purchase (although she continued with and completed it), struggled to explain what’s gone wrong:
“In my view, this is not the product. Autonomy is a terrific product. It’s not the market. There is an enormous demand for Autonomy. It’s not the competition. I was wondering, is there a competitor that we didn’t see, and the answer to that is no. This is classic entrepreneurial company scaling challenges.”
She sounded like a new homeowner who, on moving in, discovers the property needs new wiring and plumbing while that damp patch looks worse on closer inspection. Maybe it’s correct that all Autonomy needs is a new organisational structure – but £7bn was the wrong price.
The chorus of analysts who were bearish on Autonomy in its final couple of years as an independent company, and who failed to see HP coming and so were pronouncing the shares a “sell”, will feel they have scored a pyrrhic victory: they always warned that Autonomy needed to install management controls to suit its expanded revenues and greater size.
The alternative explanation, kinder to Lynch’s talents as a business-builder, is that Autonomy’s risk-taking culture has been killed by HP’s leaden bureaucracy. There’s probably truth in both versions – and the stream of departures from HP of cashed-up senior Autonomy staff suggests a fundamental clash of some form.
The interesting question is what Lynch does next now that HP has decided his talents are not required. He’s 47, worth about £500m and has never been short on ideas or confidence. He is unlikely to want to spend all his time with his herd of rare breed cattle. Maybe he has a future as a fund manager – knowing when to sell is a rare skill.