Report: HP to spin off PC business, buy software firm

Aug 18, 2011, 18:56 GMT

San Francisco - Hewlett Packard, the world's largest maker of personal computers, is planning to spin off its PC operation and transform its business model with a 10-billion-dollar purchase of British software maker Autonomy, The New York Times reported Thursday.

The sweeping changes to the Silicon Valley pioneer were expected to be confirmed by HP chief executive Leo Apotheker later Thursday at the company's earnings announcement. In a statement to the London Stock Exchange, Autonomy confirmed that it was in talks with HP.

The move would be a stunning change of direction for the massive US technology company, which Apotheker has been trying to steer towards higher-margin businesses like software and de-emphasize the personal computer business.

The attempt to reshape HP comes amid a drastic slump of PC sales, which have been hit by a stuttering world economy and the emergence of Apple's iPad as a popular PC alternative. It also marks a reversal of the 20-billion-dollar merger in 2001 that saw HP combine forces with Compaq to leapfrog Dell and become the world's largest PC maker.

Apotheker addressed the changing market in May, telling analysts on a conference call that the company needed to put greater investment into its 'value-added services' or it will 'be left with a business that is running out of steam.'

Apotheker was hired to re-orient HP last year after previously heading the German software giant SAP.

Autonomy was founded in 1996 and is regarded as one of the vendors of business analytic software. It had net revenues of 870 million dollars in 2010. Founded in 1935 in a garage, HP is regarded as one of the pioneers of the Silicon Valley tech region and had net revenues of 126.3 billion dollars last year, making it the world's largest technology company by sales.