HP + Autonomy is Unlikely
Posted by Jeff as Uncategorized
There was an active Enterprise Irregulars discussion on HP the last couple of days, which then caused me consider how HP could pull it off.
I don’t see how HP can do the deal for $10b in cash when that is all the cash they have and it’s looking like their debt is going to get downgraded, which will drive up their borrowing costs. Their stock took a 20% hit today so doing a deal in stock just got more expensive, a lot more expensive.
The more I look at it the more I come away less concerned about whether or not they should but rather if they can even get a deal done. Given the confidence issue there are a lot of big holders (27% of the stock is held by 10 funds) who are going to be very critical of any plan that Apotheker puts forward.
So it seems where they are is that a buyer for the PC business, which itself is estimated to reflect 13% of the stock valuation or about $6.4b at current valuation, will need to emerge in order for the Autonomy deal to go forward. In this economy who thinks that is a high probability scenario?
If the deal does proceed given the turmoil that HP finds itself in right now, it’s probably a bigger statement of uncertainty about Autonomy than any statement on HP.