Rather than become an HP executive, Autonomy CEO Mike Lynch, who’s been described as Britain’s first software billionaire, will remain head of Autonomy, which HP will operate as a wholly owned subsidiary, though he will report to Whitman.

Of course, the deal didn’t get done without some drama — what does get done at HP without drama these days? First there was the shock at the price paid, which represented a 64 percent premium over Autonomy’s share price. It was just one of the things that led to a shareholder lawsuit against HP.

There were certainly enough questions about the deal to cause some speculation around the notion that HP might try to back out of it. Those ideas gained some currency when HP’s board of directors fired former CEO Léo Apotheker, but not before giving him a pricey exit package.

Then there was the Oracle shopping scandal. Asked about Oracle’s position in the unstructured data market two weeks ago, CEO Larry Ellison said that his company had passed on a chance to acquire Autonomy because the price was too high. Lynch, apparently falling into a PR trap laid by Oracle, took issue with Ellison, saying Autonomy had never been shopped to Oracle, prompting Oracle to publicly call Lynch a liar, then produce a set of PowerPoint slides as evidence. Lynch then went on to blame his eager banker, Frank Quattrone. Of course, it was widely known that Autonomy had been quietly shopped around for months.

So that little kerfuffle is over, now that HP is in control and its corporate communications team, led by Lynn Anderson, is in charge.

Meanwhile, there’s the larger mission to worry about: HP has to prove that Autonomy was worth all that money, and there’s an awful lot at stake. HP shares are still trading near their lowest levels in six years, and closed today at $22.20, down 25 cents. According to the disputed slides prepared by Qatalyst partners that were shared at one time or another with Oracle, Autonomy is expected to bring in $1.1 billion in revenue next year, which would amount to less than 1 percent of HP’s forward revenue projection for 2012 of $127 billion. It’s going to be tough to make it pay. But like it or not, HP is stuck with it now.

But apparently it all did lead up to something. For those just tuning in, here’s how it went down.

About two weeks ago, on Oracle’s quarterly earnings conference call, Ellison was asked by an analyst about Oracle’s position in the market for analyzing and pulling useful intelligence from unstructured data — transcripts of videos and contents of emails, and scores of other things that aren’t neatly arranged in databases. It’s kind of a big deal, as companies grapple with the so-called “big data” problem, and the question was a natural jumping-off point to discussing Hewlett-Packard’s $11.7 billion acquisition of Autonomy. Ellison, by way of an answer, portrayed unstructured data as a feature of the existing Oracle database software, called it “nothing new,” and then slammed HP for paying too much for Autonomy, the British software firm whose specialty happens to be — you guessed it — unstructured data. And, oh, by the way, Ellison said he took a pass on Autonomy when it had been shopped to Oracle because he thought the price was too high.

Much drama then ensued. Autonomy CEO Mike Lynch said his company had never been shopped to Oracle. Not so, said Oracle — and oh, by the way, you left your PowerPoint slides behind. “Those slides?” Lynch countered. “Never seen ’em before in my life. Maybe you need some help with your unstructured data, because you seem confused at the sequence of events.”

You see, the spat occurred just a few days before Oracle OpenWorld, and got Oracle in stories containing the phrase “unstructured data” numerous times.

And what did Ellison talk about in his keynote address Sunday night? Lots of things. One of them was an appliance called the Exalytics Intelligence Machine that does — guess what? — unstructured data. It’s designed, Ellison said, to do all its analysis while the data is loaded into the machine’s main memory, while four 10-core Intel Xeon chips make it scream on the processor side. “Databases run faster, everything runs faster if you keep it in DRAM, if you keep it in main memory,” he said, describing it as data analysis at the “speed of thought.” Structured data, relational data, unstructured data — it does it all, Ellison said. Now all that mishegas makes sense. It’s all about having the last word.

Ellison’s keynote — an hour and change long — is below. If you want to skip forward to the Exalytics stuff, it starts at about the 57-minute mark.

As we reported Wednesday, Oracle decided to slap Lynch silly with a public rebuke concerning his comments to The Wall Street Journal that his company had never been shopped to Oracle.

Always eager to clear up the record — just, well, you know, because — Oracle went on to publish the PowerPoint slides sent by investment banker Frank Quattrone of Qatalyst Partners to Mark Hurd in January. The slides may or may not have had anything to do with a meeting held by Lynch, Quattrone, Oracle President Mark Hurd and its head of M&A, Douglas Kehring, in April. Or not! You see, the stories vary.

(Oracle, by the way, has since taken down the slides, but you can still read them here. Update: And we’re now told the slides are back up. Interesting!)

But what about the email those slides arrived with originally? Well, a kindly source has sent it to us. Dated Jan. 26 — you can read it below — it was sent to Hurd by Quattrone (whose address I’ve deleted as a courtesy). Judge for yourself, but to me it sure reads like the windup to a sales pitch.

From: Frank Quattrone
Date: January 26, 2011 7:48:37 AM PST
To: “‘mark.hurd@oracle.com’”
Subject: Fw: Autonomy slides

Hi Mark,
It was great to catch up earlier this month. I wanted to follow up by sending the slides I promised on Autonomy. Given its strong position in managing unstructured data (such as video, voice and photos), “meaning based” contextual enterprise search, data protection, compliance, archiving and content/web management, I beleive it’s a very strategic asset that could alter the balance of power in the industry for whoever might acquire it. And despite its strong track record of growth and very high profitability (50 pct margins), it trades at less than 20x earnings and around 11x Ebitda, huge discounts to the other strategic software assets of scale. Please let me know if you would like me to follow up with you, Doug K or otherwise.
Thanks
Frank

And it was! At least the email part. Quattrone weighed in on the whole kerfuffle via an email to Lynch, which Lynch then shared with the Financial Times Alphaville blog:

“The slides Oracle posted publicly were sent by me to Mark Hurd in January, were prepared by Qatalyst and were for the purpose of our independently pitching Autonomy as an idea to Oracle. These slides were not used in our April meeting with Mark and Doug.”

So what of the meeting in April? Well, apparently it wasn’t a sales pitch at all. No, really. As Autonomy said in a statement also sent to the FT:

“In April 2011, there was a meeting for approximately thirty or forty minutes between Autonomy and Mark Hurd, which was set up by Frank Quattrone as an introduction to Mark Hurd. Oracle is an Autonomy customer. It was made clear that Autonomy was not for sale and no sale process was under way. Mr. Quattrone’s company was not engaged by Autonomy at that time. There has been no other contact with Oracle since then. …

“Qatalyst have informed us that the slides Oracle has recently posted on its website were prepared and sent independently by Qatalyst to Oracle on 26 January (the content is clearly from January). This is the first time we have seen them. Autonomy was not involved in this nor was Qatalyst engaged by Autonomy until mid-year. Autonomy did not present these slides in the meeting.

“Oracle seems a little confused about the sequence of events and origins of the data it has received, something that would suggests it needs better management of and insight into the unstructured data on its internal systems. We would be delighted to help.”

Oh, snap! At least Lynch is learning the art of the snarky retort. So the slides were the work of eager bankers trying to get a deal cooking. And the meeting was just a friendly call by Autonomy’s CEO on a customer? With an investment banker and another company’s head of M&A — two people who have collectively done more Silicon Valley deals than any other people in the world — joining in just for kicks? Okay then.

While this tit-for-tat seems like a mildly entertaining tempest in a teapot, it’s a $12 billion teapot! One about which HP shareholders still seem to have a lot of questions, especially in light of the management change that has gone on there since the deal was announced. Time, however, is short: HP is said to be about ready to close on the deal Monday.

Why is it so important to Lynch that the world believe that Autonomy was not shopping itself, and not engaging in any discussions about selling itself? Because laws in the U.K. about corporate acquisitions are very strict, for one thing. And companies engaging in discussions about being acquired without disclosing that fact to shareholders quickly find themselves in hot water with regulators! That means CEOs in the U.K. get ticklish on this subject very easily.

Of course, the first official public disclosure about Autonomy being in discussions to sell itself to anyone crossed the wires at 1:32 pm New York time on Aug. 18, which, by my watch, is about two minutes after markets had closed in London. The disclosure, however, came about an hour and change after Bloomberg News reported that a deal was near. About 90 minutes after Autonomy’s disclosure in London — and with 52 minutes left before the close of markets in New York — came HP’s confirming statement that it was “in discussions.” Then, just after markets closed in New York, the deal was done. That leaves plenty of room for people on both sides of the Atlantic to ask all kinds of fun questions. Anyway.

And as we all know, Oracle — whether in January or April — passed on the opportunity to bid on Autonomy, primarily because the price was, as CEO Larry Ellison put it on a conference call last week, “shockingly high” at about $6 billion. And four months later — or eight, depending on when you start counting — on Aug. 18, Hewlett-Packard announced its plans to acquire Autonomy at nearly twice that price.

So what was the purpose of the April meeting in Oracle’s board room in Redwood Shores? Was it really a “lively discussion about databases,” as Lynch has previously claimed? Or an innocent customer call during which two masters of tech M&A just happened to be in the room? We don’t know exactly.

But we do know one thing: Having first characterized Ellison’s description of the matter as “just inaccurate,” then copping to a previously undisclosed meeting of some kind, Lynch does know how to change his story.

Given the recent feuds between the management teams at the two companies, Oracle’s acquisitive history and HP’s sudden weakness, it doesn’t take much for a popular narrative of Oracle buying HP to emerge. It would be a dramatic denouement to the events of the last year that have found HP and Oracle at increasingly caustic loggerheads. Oracle CEO Larry Ellison would take some kind of victory lap and mount HP on the wall like a of trophy.

The idea gained some currency with an Aug. 21 story in the New York Post (which, like this Web site, is owned by News Corp.) arguing that HP’s $11.7 billion bid for the British software firm Autonomy, having caused shareholders to knock $12 billion and change off HP’s market cap, would therefore make HP more attractive to Oracle.

The meme gained further currency with a Bloomberg News story saying that HP’s board was “concerned” that its weakened condition had left it vulnerable to Oracle.

Let me put it like this: No. Just, no.

The first problem with the notion is this: What parts of HP would Oracle want to own? Answer: Practically none.

First, let’s look at the condition of Oracle: Its mainline software businesses are showing healthy returns, while its hardware business, built on the foundation of Sun Microsystems, the IT hardware concern it acquired last year for $7 billion, is ramping up to full speed. But here’s a fundamental truth: Software carries a higher profit margin than hardware, so when software companies buy hardware companies, they can’t avoid seeing their overall profitability erode.

Consider Oracle’s operating margin during its fiscal fourth quarter — its seasonally strongest quarter — during the last three years. In 2009, before the Sun deal was closed, it was 43.4 percent. In 2010, after the Sun deal was closed, it was 38.3 percent. In 2011 it was 41.6 percent. And during Oracle’s most recent conference call, CFO Safra Catz said Oracle hopes to get back to “pre-Sun” operating margins soon.

Now let’s look at HP and its operating margins: In its most recent quarter ended July, HP’s enterprise, storage and networking business turned in operating margins of 13 percent, which were down from 14 percent in the prior year’s period. The story was the same in practically every other HP business unit: Operating margins in services fell from 15.7 percent to 13 percent; in software they fell from 28 percent to 19.7 percent; imaging and printing margins fell to 14.6 percent from 16.9 percent. The only place they increased was the personal systems group — the PC unit that’s being considered for a spinoff — where they grew year on year from 4.7 percent to 5.9 percent.

Conclusion: Owning HP would do nothing good for Oracle’s profitability, especially at a moment when the stated goal is to nudge them up.

There’s more. As Mark L. Moerdler, an analyst at Bernstein Research, argued in a research note to clients on Sept. 26, software accounts for about 2 percent of revenue at HP. And what software it has is not the type that Oracle typically likes. When Oracle does acquisitions, it grabs companies that make applications that plug holes in its own product portfolio. The majority of HP’s software offerings — Autonomy nothwithstanding — deal with infrastructure management, not exactly a priority for Oracle. It is, however, a business where IBM and Computer Associates participate.

And there are two historically important business units at HP that would be outliers at Oracle: PCs and printers. Oracle has no interest in either one, and it’s hard to see that changing. Combined they make up more than half of HP’s annual revenue. In the hands of Oracle, they would probably end up being spun out, either together or separately, but why buy a whole company only to chop off more than half of it — a half that’s shrinking at that — at what would have to be unfavorable terms.

Let’s not forget the valuation estimate of HP’s $40 billion PC business: Analysts have expected that a hypothetical buyer might pay as little as $8 billion for it, or about one-fifth trailing revenue. Why go to all that trouble?

Further: Why would Oracle buy a company that’s roughly one-quarter exposed to the consumer market. Sure, HP has a retail distribution network that’s the envy of the PC industry. But Oracle would rather sell those retailers systems to help them manage their businesses, not the PCs they in turn resell at razor-thin margins.

If that’s not enough, then there’s one key bit about HP that Oracle would actively dislike. HP, by virtue of being the biggest distributor of Windows-based PCs and servers, is the world’s largest reseller of Microsoft Windows. If there’s anything more utterly antithetical to Oracle’s core values than helping put money in Microsoft’s pocket, I haven’t heard of it.

Finally, there’s the issue of cash. Even in its weakened state, HP is trading at a market cap of $45 billion and change. Assuming a premium for the whole thing, that pushes a hypothetical price tag to $60 billion. That’s too rich, even for Oracle, whose balance sheet as of Aug. 31 contained a combined $31.6 billion in cash and marketable securities. It would have to take on a tremendous amount of debt — amounting to 82 percent of fiscal 2011 sales — to get such a deal started, let alone closed.

HP’s directors and shareholders can rest easy. They have many worries about the Silicon Valley icon and the troubles in which it finds itself. But being acquired by Oracle isn’t one of them.

In a statement that seems not to have circulated as an official press release, but was emailed to a few U.K.-based tech journalists such as Chris Mellor at the Register, Lynch gives a more detailed account of the real reason for his “trip to SF” and his meeting in April with Oracle president Mark Hurd.

On one of my trips to SF (April 2011), Frank Quattrone, whom I have known for a long time, offered to introduce me to Mark Hurd. Oracle was a customer and I have never met him, so it was a good opportunity. Frank does this from time to time on my visits, he has introduced me to many people… NOTE: Frank was not engaged by Autonomy and there was no process running. The company was not for sale. I recall meeting with Mark and someone else I believe called Doug. At the start of the meeting they joked that Frank was there to sell them something. Frank and I made it clear that was not the case. We then met and had a lively discussion about database technologies. The meeting lasted approximately 30 mins. Frank is happy to confirm this.

Oracle’s corporate communications department, working unusually late, issued a retort that crossed the wires sometime after 1 am ET, calling Lynch’s statement “another whopper.”

It was no “lively discussion of database technologies,” Oracle says. Why bring two PowerPoint decks all devoted to Autonomy’s financial performance? Oracle, making good on last night’s implied threat to publish the decks, did so, and you can see them for yourself below.

Oracle published the slides in hope, it says, of restoring Lynch’s memory of a meeting he initially said never took place. “Yesterday, the Autonomy CEO did not remember having any meeting with Oracle,” the company said. “Today, he remembers the April meeting and inaccurately describes how it came about and what was discussed. Tomorrow, he will need to explain his slides.”

The kerfuffle is over Lynch’s defense of a comment Oracle CEO Larry Ellison made on a conference call with analysts last week. Asked about the current buzzword “unstructured data” and Oracle’s capabilities around it, Ellison engaged in his favorite hobby and took a jab at Hewlett-Packard — which last month said it would acquire Autonomy in a deal valued at $11.7 billion. “Autonomy was a shock to us. We looked at the price and thought it was absurdly high. We had no interest in making the Autonomy acquisition,” he said then.

He also went on to say that unstructured data can readily be added to Oracle’s existing database technology. “We think we’re much better off with a couple of smaller acquisitions and to continue to innovate in that area, so that the unstructured data and the structured data both find their way into an Oracle Database,” he said.

That, of course, didn’t sit well with Lynch, who has so far quietly endured criticism that HP is overpaying for Autonomy. In an interview with The Wall Street Journal, he denied that Autonomy was ever shopped to Oracle, and characterized Ellison’s understanding of the unstructured data problem as “very weak.”

Those, of course, were fighting words to Oracle, which decided to remind him of his April meeting with Hurd and Oracle’s M&A head Douglas Kehring.

It’s also helpful to remember that late last year Autonomy was being mentioned as the target of a bidding war between Oracle and Microsoft, according to a rumor-based story planted in the U.K.’s Daily Mail. Though such stories based on “takeover chatter” occur practically every day, someone with some skin in the game clearly wanted the markets to think Oracle was kicking Autonomy’s tires.

Lynch, of course, is really a proxy for HP’s new CEO Meg Whitman and Chairman Ray Lane, who have to get the Autonomy deal done and live with the price that former CEO Léo Apotheker agreed to pay for it. I asked Whitman about it last week, and she said “It is what it is.” The most interesting thing that has emerged from all this, however, is that Oracle claims to have considered Autonomy overpriced at a $6 billion valuation. HP paid almost twice that. Game on.

Autonomy Presentation 1 503341

Autonomy Presentation 2 503342

In an interview with The Wall Street Journal today, Autonomy’s CEO Mike Lynch — the man sometimes described as the British Bill Gates — says Oracle was never approached as a possible buyer of his company late last year. Mentioned by bankers mulling possible acquirers, maybe, but never approached directly.

The statement came in response to a verbal slap by Oracle CEO Larry Ellison, made on an earnings conference call last week, that Oracle had been approached by Autonomy, and took a pass because the price was “absurdly high.”

Indeed, there were reports — one I remarked on at the time — suggesting that Oracle had kicked Autonomy’s tires, and Autonomy shares spiked on the very suggestion that the acquisitive Oracle would take the firm out. They obviously proved unfounded, and Autonomy went on its merry all-but-anonymous way until HP stepped in with an $11.7 billion offer that was announced on Aug. 18.

The latest version of events just emerged in a statement from Oracle. Oh yes, Oracle says, Lynch did indeed approach Oracle about a deal, and specifically made a pitch — complete with a PowerPoint presentation — to Oracle president Mark Hurd and to its M&A head Douglas Kehring. According to Oracle’s recollection, in a meeting attended by Lynch’s banker Frank Quattrone, Hurd told Lynch that he thought Autonomy was overpriced at $6 billion, roughly half of what HP paid. Also: Oracle still has the PowerPoint deck. Zing!

The full Oracle statement is below:

“After HP agreed to acquire Autonomy for over $11.7 billion dollars, Oracle commented that Autonomy had been ‘shopped’ to Oracle as well, but Oracle wasn’t interested because the price was way too high. Mike Lynch, Autonomy CEO, then publicly denied that his company had been shopped to Oracle. Specifically, Mr. Lynch said, “If some bank happened to come with us on a list, that is nothing to do with us.” Mr. Lynch then accused of Oracle of being ‘inaccurate’. Either Mr. Lynch has a very poor memory or he’s lying. ‘Some bank’ did not just happen to come to Oracle with Autonomy ‘on a list’.” The truth is that Mr. Lynch came to Oracle, along with his investment banker, Frank Quattrone, and met with Oracle’s head of M&A, Douglas Kehring and Oracle President Mark Hurd at 11 am on April 1, 2011. After listening to Mr. Lynch’s PowerPoint slide sales pitch to sell Autonomy to Oracle, Mr. Kehring and Mr. Hurd told Mr. Lynch that with a current market value of $6 billion, Autonomy was already extremely over-priced. The Lynch shopping visit to Oracle is easy to verify. We still have his PowerPoint slides.”

Then word came, via AllThingsD, that something big was coming from the board of directors. And as AllThingsD first reported (again), HP directors made one of their own, Meg Whitman, the former eBay CEO who had become a director earlier this year, the new CEO. Léo Apotheker resigned, but don’t cry for him, because according to his contract, he made out rather well. Even before it was made official, investors applauded the move, sending HP shares skyward.

Analysts did what they always do, and, well, analyzed. And though it looked more like drama criticism, it’s not as if HP hasn’t known boardroom dramas before. Finally, the deed was done, meaning it was time to hold a conference call, but not before talking first to Kara Swisher of AllThingsD.

I got to talk to Whitman and HP Chairman Ray Lane yesterday, too, but I had to wait until after the conference call. With so many critics screaming that Whitman has no experience running an enterprise hardware company — and let’s be honest, there aren’t that many who do — I asked her to elaborate on the defense, made on the conference call with analysts, that her experience as a buyer of enterprise technology, during her years as CEO at eBay, provided important experience that will help her be an effective CEO at HP. I also asked about Autonomy, the British software firm that HP is in the process of acquiring for $10 billion, and how it will fit within HP; about the company’s plans for cloud services; and about the state of the HP brand amid all the corporate mishegas that has unfolded in the last several months.

AllThingsD: Meg, the main criticism of you, since you’ve been named CEO of HP, is that your primary experience before was at eBay, which is a consumer-facing company. The response on yesterday’s conference call has been that at eBay you were a purchaser of a lot of enterprise technology and that this gives you some important relevant experience. I get the point, but could you elaborate on it a bit? How does having been an enterprise buyer help you be HP’s CEO?

Whitman: What HP needs now more than anything else is management skills, communication skills and a commitment to executional excellence, all of which I know well, and are sort of core competencies from my 35-year career in business. I know technology because I ran a company whose very existence would not have been possible without it, and was a very significant buyer of technology products. And so that brings me a unique buyer’s perspective. But I have not spent 35 years in the enterprise business. Add so what that means is that I will be relying heavily on Dave Donatelli; on Todd Bradley; on the senior executives at HP; and also, frankly, on Ray Lane, who was at Oracle for many years, and EDS, and who knows this space well. So I think what customers will get is that one plus one equals three.

Lane: I agree with that. What we need here, and what we didn’t have before, is operational execution, communication skills, getting the team on the same page and leading them. The CEOs of $130 billion companies are not leading the technology development of those companies. I think Meg can go into any enterprise and visit with any CIO or CEO and do really well. So whether it is the technology side or the sales side, I don’t think anyone is giving her enough credit on those fronts. She can do just fine. And then on top of that she has strong operating executives under her who do know the enterprise business. But right now it is the need for leadership of the people, a focus on executing and operating. I could point back to Lou Gerstner at IBM, or even my own days at Oracle. When I joined Oracle, people thought the board had lost its mind, because I was a consultant at Booz Allen. People scoffed and said ‘How is a consultant going to lead the worldwide sales force at Oracle, a trained wolf pack?’ And somehow I figured it out. And I knew nothing about software, but I learned, and I learned from Larry Ellison, who is one of the best.

I want to talk a bit about Autonomy, and about unstructured data. You made a comment about that when you talked with Kara Swisher of AllThingsD yesterday. Talk to me about where you see Autonomy fitting within HP. Do you still intend to let it be independent? How do you see the alignment shaping up?

Whitman: It’s a big and fast-growing market. Of all the data out there, about 15 percent of it is structured and 85 percent of it is unstructured. And the unstructured data is growing by leaps and bounds. There are not a lot of good software companies that can help companies manage unstructured data and help companies make business decisions based on what they see in that unstructured data. So what we hope to do with Autonomy, and I’m enthusiastic about this acquisition, is take what is fabulous about Autonomy — they have a leading position in the marketplace — and put it through the very powerful HP distribution system. And I think what Mike Lynch is excited about — he is the founder and CEO of Autonomy — is taking this great product and getting it into more people’s hands. And we just need to grow this company as fast as we can; extend our lead and our accumulated experience in this area. So that’s the plan for Autonomy.

Lane: Yeah, I think the synergies are great, and I think it makes a lot of sense. It will make a lot of sense to customers if HP engages them in a dialogue of managing unstructured data.

You don’t think HP paid too much for Autonomy?

Whitman: You know what? It is what it is.

Lane: We wish we could have bought it for cheaper, but it was the market price. People thought we overpaid for 3Par, and you know what? We’re hitting it out of the park.

Is HP still going to be player in cloud services? That was a big commitment that Léo made in March. How far along is that plan?

Lane: Absolutely. The cloud is way ahead of plan. So our cloud services have gone live. So that is absolutely part of the plan, yes.

Meg, a lot of the same people who applauded your selection to HP’s board of directors are criticizing your selection as CEO. Why do you think there’s a disconnect?

Whitman: I don’t know. There’s always people who have different points of view on things. What I have to do — and I said this on the conference call — is lead this company, make it a great company again and fulfill its destiny as the icon of Silicon Valley and of California, and deliver the results. I will have to prove myself by delivering the results. If we’re going to restore the confidence that investors have in us, and that employees have in us, we have to deliver. We have to mean what we say and say what we mean and deliver the results. And that is what I intend to deliver.

Meg, you have a lot of history managing brands. I’m thinking of the job you had managing brands for Procter & Gamble. What’s wrong and what’s right about HP’s brand right now?

Whitman: I think HP is known as the world’s largest provider of information technology, and we are a trusted brand. We are a worldwide brand that touches both consumers and businesses. If you’re an enterprise, we have full suite of solutions. I know that when I bought enterprise hardware and software at eBay, I wanted one person to choke when something went wrong. I wanted one supplier to go to and say ‘Hey, this is not working.’ And so I think we have a fabulous brand in a world where technology is increasingly fundamental. I will say — and Ray would say this as well — I think we need crisper communications with all the constituencies. I think on Aug. 18 we confused people. We didn’t mean to do that, but we did. And so I think we’ve got some work to do around communicating crisply and cleanly about what we’re about — the moves that we’re making — to employees, customers, shareholders and, frankly, to the press.

Yesterday — right after she took over the reins at Hewlett-Packard — high-profile Silicon Valley tech exec Meg Whitman and Executive Chairman Ray Lane got on the phone with me to talk about her new gig.

In the interview, which took place just before her debut — well, re-debut with investors, since she ran eBay for a decade — Lane said he approached Whitman for the job sometime after she joined the board eight months ago, because he felt she had the kind of leadership that HP needed and was lacking under now-ousted CEO Leo Apotheker.

Message No. 1 from Whitman, who is very good at delivering messages: “I took this job, because HP really matters to Silicon Valley, to California, to this country and to the world.”

And: “This is an icon and the place where the initial spark to create Silicon Valley came from and I am resolved to restore it to its rightful place.”

And: “I have the skills to do that.” Lane concurred, noting that while Apotheker had focus on defining some of HP’s goals, he lacked the operational, people and communications skills Whitman has.

“Leo was very wise about figuring out what HP needed to do to add value,” said Lane. “But he did not have more important tools we needed, including operational excellence, people skills and communications skills.”

He added: “Meg has all those things … and when we looked around the board room, we realized we had what we needed right there.”

Now that is some fancy CEO talk, for sure, which is why Whitman will surely be the most interesting leader HP has had in a long time.

And the troubled tech giant has had a lot of leaders — seven CEOs since 1999.

Whitman says she is undaunted by those odds and will focus on several major issues at first.

Those include, in the order she put them in (of course, using definitive numbers):

1) Focusing on meeting Wall Street expectations for HP for the next quarter over the next 45 days. “We have made a commitment,” she said. “And we are going to do everything possible to keep it.”

2) Integrating HP’s $10 billion acquisition of Autonomy, which was made by Apotheker. “As you know from my time at eBay, I know a lot about unstructured data and it is a market where no one is a leader except Autonomy,” Whitman said.

3) Come to a decision about whether to spin off or keep its Personal Systems Group, which includes HP’s consumer PC business. “We will not sell,” said Lane firmly.

4) Getting a better feel for HP and its employees. “I have been on the board for eight months, but I really need to get in there and meet its people,” said Whitman. “That is perhaps the most important thing to get right.”

Whitman added that after leaving eBay and her loss in a run for governor of California, she said she found she wanted to get back in the tech game.

“She won that race,” joked Lane, who perhaps is hoping HP will, since it freed up Whitman for the job.

And while she said she enjoyed her short — and brutal — political life, Whitman said she was happy to be back.

“Business is my first love,” she said. “And this is a huge opportunity that I sensed I could do well at.”

It’s a mixed bag. While they all seem to agree that HP’s board is right to push out CEO Léo Apotheker, especially in light of the stock performance, a confused strategy and a jarring change in emphasis, none seem ready to endorse the ascendance of Meg Whitman, the former eBay CEO and current HP director, to that company’s top job. Yet like it or not, the HP board meeting that will make it all official is underway, and as AllThingsD has reported, Meg Whitman will be named HP’s CEO at the close of markets today.

Toni Sacconaghi of SanfordBernstein, the author of a widely circulated note last week describing how “exasperated” HP investors are, weighed in again. “We are not surprised by HP’s stock’s reaction yesterday, given that our conversations with shareholders and investors over the past month revealed a level of exasperation that we have not seen directed at HP or any other company in our universe in our 13 years following the sector,” he wrote in a note today.

He also slammed HP’s board. “Our conversations with major shareholders also indicate that they have been disgruntled with the board, given it has made and approved a series of decisions” — including the ouster of the prior CEO Mark Hurd, the Autonomy deal, the premature announcement of the PC-spinout — “that many shareholders believe were poor decisions and misaligned with their interests,” he wrote.

Nor is he a fan of the Whitman hiring. HP needs to search far and wide and also internally for another CEO, Sacconaghi says. “We would view any decision not to conduct a comprehensive search of internal and external candidates for a permanent CEO role as unsatisfactory and unnecessarily hasty,” he wrote. “We also believe that shareholder reaction to Whitman as a permanent CEO would be mixed.” He also thinks CFO Cathie Lesjak, notable for filling in as interim CEO during the Hurd-to-Apotheker transition, may be leaving.

Shaw Wu of Sterne Agee is pretty much in agreement with Sacconaghi. “Given the disappointing financial performance over the last few quarters and some questionable decision making including the high purchase price of Autonomy, handling of the spinoff of its PC operation, and abrupt shutdown of its webOS hardware business, we are frankly not surprised that a change is being considered,” he wrote in a note to clients today. “So far, investors and even some customers we have talked to don’t seem confident in where HPQ is heading so a change is likely needed.”

But he’s not sold on Whitman. “While we believe she has proven to be a very capable manager helping grow eBay from a start-up into one of the largest internet companies, we think an ideal candidate for HPQ should have extensive experience in the enterprise market. In addition, we believe expertise in supply chain management would be helpful as well.” He goes on to name a handful of insiders and outsiders he’d consider possible successors: Dave Donatelli, who runs HP’s enterprise business; Todd Bradley, who runs the personal systems group and would be a likely CEO of that unit if it’s spun out; Steve Mills, who runs software and hardware at IBM; and Gary Moore, the COO of Cisco Systems.

Wu also says it might be a good idea for HP to keep its PC unit after all is said and done. “We estimate the business generates $2 billion in operating income per year and is the second most profitable behind Apple,” he wrote. Also the PC business isn’t so bad when you think of it as being one and the same with the tablet market. He maintained a neutral rating on HP for now.

Lou Miscioscia of Collins Stewart isn’t encouraged by the shake-up, either. Many of HP’s problems aren’t necessarily Apotheker’s fault, he says in a note to clients issued today. And he’s not sold on Whitman, arguing that she’s never run so large a company as HP and has never run one focused on the enterprise before. He maintained a neutral rating.

And while a post-Apotheker HP may undo some of his decisions, like spinning off the PC business, one thing it probably can’t do is walk away from its $10 billion purchase of Autonomy Software, says Jeffries and Co. analyst Peter Misek. Corporate takeovers are governed by strict laws in the U.K., making it nearly impossible for HP to pull out of the deal now. He rates HP shares a buy.

In the wake of a proposed class action lawsuit, filed Sept. 13 in the U.S. District Court for Central California (complaint below), four more law firms have said they are launching their own investigations of HP.

The latest came this morning, as Klayman & Toskes, a securities law firm, said it was investigating claims on behalf of shareholders who might be eligible to join the proposed class action. The other three firms that have made similar announcements are Holzer Holzer & Fistel; the Briscoe Law Firm, PLLC; and Powers Taylor, LLP.

In the suit filed Tuesday, an HP shareholder named Richard Gammel alleged that comments by CEO Léo Apotheker — concerning the company’s earnings expectations, the importance of its personal computer business and plans to move ahead with devices running the webOS operating system — gave a vastly different indication of actions HP took on Aug. 18, when it killed the webOS hardware business and announced plans to spin off the PC business and spend $10 billion to acquire Autonomy. Gammel is being represented by Robbins Geller Rudman & Dowd.

During a period starting in November 2010 and ending on August 18, the Gammel suit argues that HP highlighted its ownership of the webOS hardware and software as a key differentiating factor against competitors — “a defining aspect of the company’s value proposition” — and that HP represented to shareholders that webOS, as the “crown jewel” obtained in last year’s $1.2 billion acquisition of Palm, was going to play an integral role in HP’s strategy going forward.

Of course we all know what happened after August 18. HP shares cratered in the days that followed, and traded below $23 a share, down from about $32 days before.

Lawsuits by shareholders are a fairly common response to sudden price drops, especially when they result from the kind of jarring shift in strategic direction that HP decided to make. The trick — and it’s a tough one — is proving that Apotheker and other HP executives made public statements about the state of the business, knowing they were false. And many lawsuits like this get dismissed. HP will have the advantage of being able to argue that Palm was acquired under the previous CEO, Mark Hurd, now a president at Oracle, and that the webOS business wasn’t taking off as originally hoped. We know this much is true, as TouchPad sales proved to be lousy before a drastic price cut spurred demand.

gammelHPcomplaint

In a scathing assessment from an analyst who’s rarely so negative on HP, Sacconaghi argues that investors are universally opposed to the Autonomy deal based primarily on the high price that HP is paying, which works out to 11 times sales, versus the option of using HP’s precious cash reserves elsewhere.

Unhappy HP investors have little recourse, Sacconaghi writes, and Autonomy shareholders seem especially eager to get the deal done. As the Financial Times reported yesterday, the fact that 42 percent of shareholders signed on to the deal so early in the tender process gives an indication of their opinion that the price HP is paying is a favorable one that’s not likely to be met by another bidder. It’s also an unusually high response rate this early in the process.

And there’s little if any chance that HP shareholders could stop the deal now even if a majority of them wanted to, he says. By paying cash for Autonomy, HP doesn’t need shareholder approval, and according to the terms of the deal, HP has to follow through absent a “material adverse change,” such as new negative information about Autonomy (like a major legal problem or something on that scale).

There’s certainly plenty to dislike about the deal. As Bloomberg News reported, HP sold $4.6 billion worth of bonds in order to help pay for the deal, though with yields on corporate bonds near record lows the timing to take on debt could be worse.

But even with corporate bond rates at relatively low levels, HP is paying more to finance its debt than its peers. Compare, for example the five-year fixed-rate bonds that HP issued yesterday with a coupon rate of 3 percent. In July, IBM issued five-year fixed-rate bonds at a coupon rate of 1.95 percent. I’m not exactly an expert on corporate bonds, but the way I understand it is like this: If you think of bonds like a credit card, HP is paying more than 1.5 times the interest on its debt than IBM is. That block of five-year bonds represents $1.3 billion worth of the $4.6 billion offering, making it the biggest portion of the debt offering disclosed in an HP regulatory filing yesterday.

Separately, two securities law firms said today they have launched investigations of HP and its board of directors. The Briscoe Law Firm, headed by former Securities and Exchange Commission attorney William Briscoe, and Powers Taylor LLP announced they’re investigating what they call “potentially misleading statements” by HP between Nov. 22 and and August 18. During that period, the firms allege that HP executives and directors made false statements or failed to disclose material information about the TouchPad tablet and the webOS operating system running on it. HP, they say, “lacked a reasonable basis for their positive statements,” and thus caused HP shares to trade at artificially high prices, peaking at $48.99 on Feb. 16. HP shares were nowhere near that high today, closing at $22.93, up 23 cents.

Gone is the webOS hardware business acquired with Palm last year, though the WebOS software business remains alive and well for now. The business of selling phones and tablets was unceremoniously killed in a move reminiscent of Cisco Systems’s decision to kill its Flip video camera business. At least we know why: As AllThingsD reported exclusively Tuesday night, sales of HP’s TouchPad have been embarrassingly bad, particularly at Best Buy.

Soon to be going — either spun off or sold — is HP’s consumer PC business. Exactly what will happen there is anyone’s guess. Will HP create an independent company or sell it? If it’s to be a sale, the smart money says that Samsung would be a possible buyer, and sources have told AllThingsD that HP was shopping the PC business around Asia earlier this year. But there are several reasons that HP would choose to follow the model of Motorola and spin the unit off into an independent company. As CEO Léo Apotheker said on the conference call, all options are on the table, including a spinoff sale to another company, sale to private equity, or even no transaction at all. The reason for making today’s “strategic options” announcement is that it frees up management and the board of directors to take a deep dive and look at what’s best. My guess: Bet on a spinoff.

My notes from the conference call are below.

2:01 pm: And so we’re waiting for the conference call to start. Lots of soothing music to keep our minds off all the questions reeling in our heads.

Among those questions: What kind of transaction can we expect for Hewlett-Packard’s PC unit? A spinoff or a sale? Will it include the enterprise PC business as well as the consumer PC business?

Was there ever any attempt to sell the webOS assets? What about the webOS and Palm-related portfolio of patents? I bet those are pretty valuable right now. Will HP sell them or keep them?

The call is underway.

Léo will be speaking shortly.

2:05 pm: And here’s Léo.

Today is all about driving shareholder value and addressing the challenges in our business. I’ve been CEO for nine months and made some tough decisions. There are four elements to the path forward.

Consumers are changing the use of the PC, and sales of the TouchPad are not meeting expectations. (Where have I heard that before?)

The plan to separate PSG is to sharpen HP’s focus on cloud and other services. There are tactical issues to consider. We are still facing headwinds, stemming from the Japan earthquake, in the printing business.

There is a clear secular movement in the consumer PC space. The tablet effect is real, and the TouchPad is not gaining momentum in the marketplace.

For our PC business to function properly, it needs to be able to make decisions that are best for itself. We anticipate we will take 12 to 18 months to complete this process.

Additionally, we have been tracking the progress of webOS. We were successful at launching software that was praised. We are exploring options of how best to optimize the webOS assets in the future. The devices aren’t getting traction. Continuing to execute in this market space is no longer in HP’s interest. The webOS hardware business will be shut down by Q4.

Now on to services. The transformation will be a multiquarter journey. We are focused on addressing sales delivery and other challenges.

He’s now announcing John Visentin as the head of Enterprise Services. He’s an IBM veteran and has previously run Enterprise Services. He’s Ann Livermore’s replacement, and thus has big shoes to fill.

Now on to tactical challenges. In business critical services, we think the Itanium platform is the best in the industry. We are fully committed. We are doing everythying we can, including pursuing legal action against Oracle’s “anticompetitive behavior.” (Long story, but you can read several posts I’ve written about this.)

Fourth: Adding more value-added intellectual property. More software. More big data. More cloud.

2:14 pm: A good example is the acquisition of Vertica.

And now he’s talking about the acquisition of Autonomy. Here are the financials: This is a milestone, because there is a very real need to address the explosion of structured and unstructured data.

HP will pay $42.11 per share, though Léo is giving the amounts in British pounds.

2:17 pm: In 2010, Autonomy had gross margins in the high 80 percent range, and operating margins in the 40-plus percent range. Autonomy will continue to operate separately.

As an executive who has spent most of my career in software, it is a world I know well. We believe this transaction will unlock synergies across multiple industry verticals. We are building a strong HP software business.

We are focusing on what needs to be fixed, shut down and considered for separation.

A comment on guidance. I am lowering the Q4 guidance in order to be realistic about where we are. I don’t take this action lightly. I know our investors don’t like being in that position, and neither do I.

I am taking ownership for these actions and investments as we shape the new HP.

Cathie Lesjak, CFO, is now speaking and doing the numbers. “This is the toughest guidance in my career as CFO.”

Company gross margin of 23.3 percent was down 70 basis points year on year. Printing and webOS posted lower gross margins, which were offset by favorable commodity environments.

Generated $3 billion in earnings from operations, down 14 percent sequentially and down from $3.4 billion a year ago.

HP repurchased $4.6 billion of shares.

Segment info: Personal systems, revenue of $9.6 billion, down three percent from prior year.

Commercial client revenue grew nine percent, led by workstations. Consumer down 17 percent. Ouch. Desktops and notebooks equally affected by drop in consumer demand.

Lesjak says webOS ran a loss. Clearly, the sell-through wasn’t what was expected. It quickly became clear that pricing parity wouldn’t generate demand. The price cuts had added incremental cost to our model. We took a five-cent charge to EPS. We would expect a bigger loss in Q4.

To make this a financial success would create more risk without certain returns. We will explore options for strategic value of the software. (Hint hint, webOS software is for sale. Again.)

Now on to the printing business. Three million Web-connected printers sold. Sell-through is slowing in supplies. Supplies business tends to follow the economy. Expect a revenue and margin impact for the next few quarters.

Still more troubles from Japanese currency and the rise in the yen. Expect that to continue, too.

Our services transformation is a four- to six-quarter journey.

Industry standard servers: We expect to show share gains, though we expect growth to slow. HP remains number one in blade services.

Revenue decline in business critical servers is down nine percent because of the legal mess with Oracle.

3PAR sales continue to accelerate. Seems it was worth taking on that bidding war with Dell last year.

Balance sheet: Total gross cash of $13 billion. Looks like the Autonomy deal is going to consume $11 billion of that, if I read the presentation of that deal correctly.

Long-term EPS commitment is now gone. I think Lesjak said it was $7.14 in EPS by 2014. I may have mangled that. Whatever, they’re not going to make it now, anyway.

Q4 EPS expected at 44 to 55 cents a share.

Léo is back. This is about a transformation of HP for a new future. HP is at a critical point in its existence. These changes are fundamental. The changes will transform HP. The transformation starts today.

And here’s the Q&A. Should be interesting.

2:39 pm: Morgan Stanley. Can you talk about which customer segments and geos weakened in July, and which ones will weaken in October?

Léo: A summary of this — we saw our business in Asia grow, and if you look at the other two regions, they declined in constant currency. On a rough basis, consumer PCs declined while commercial increased. We had good performance in ESSN. But public sector, which is 10 percent of business, is being impacted by budget constraints on both sides of the Atlantic.

Lesjak: We had a back end loaded quarter, but it was softer that we expected in July.

Barclays asks about services: Did you cut enough when you bought EDS? Is 12.5 percent margins low enough?

Léo: We are making progress on services. One thing we are focused on is growing the top line. We didn’t do it. We now have a leader for this business. What we are trying to achieve is a much better mix, from the execution standpoint. We can increase our coverage and bench in application and services. We are engaged in a systematic account review, so we are optimizing value.

Lesjak: I said 12.5 percent. We are affected by the weakness in public sector, and also by business critical systems. (There’s the Itanium fight with Oracle rearing its head again. -Ed.)

Citigroup ask about the synergies between printers and enterprise business. How do you feel about keeping printers and enterprise together?

Léo: IPG, the printing unit, is important to HP. It has been leading the disruption of the analog printing market.

IPG has the opportunity to reinforce its strengths. We are driving our document- and content-management solutions. With the acquisition we announced today, we will be able to provide IPG with additional intellectual property.

Sanford Bernstein asks about Autonomy. You are paying a fantastic price. He’s worrying that HP is overpaying for Autonomy at a time when HP’s stock is at a historic low. It’s going to cost you 15 percent of your market cap. Also it’s going to eat into the cash position.

Léo: Let me start by making sure everyone understands what Autonomy represents. It will allow us to lead a large and growing space, enterprise information management. It will help customers manager the explosion of information. It will position HP in a large and growing space. It will provide differentiated IP for services. It will give IPG a base for content management.

Léo: Autonomy has grown its revenue at compound annual growth rate of 55 percent over three years. We think we can extract a lot more out of it by combining it with HP.

Lesjak is speaking about cash. We have repurchased $15.6 billion worth of shares. We would spend to rebuild our balance sheet, and will moderate share buybacks.

2:49 pm: Cross Research on Personal Systems Group: Why not spin it off now? And also on webOS. What about the plan (announced at D) for putting webOS in PCs?

Léo: What the board and management team have been working on is to look at our options, and what the board has decided to do is look at all the options. This will allow us to look at it much more closely. Over time, a decision will crystallize. All I can say now. We will refrain from commenting further. On webOS software business, we are looking at all our strategic options regarding the software. The software has been received very well. We will be looking at all of the options to third parties, to others who need this kind of option. Licensing or other possibilities, to extract value from webOS.

Wow.

Goldman Sachs question: How should we think about strategic actions versus the need for further cost reductions, in light of the view that there’s been an underinvestment in prior years?

Léo: He’s not taking the bait to repeat the “Blame Hurd” message from last quarter.

BMO’s Keith Bachman, whose downgrade caused so much share-value loss yesterday, asks about the growth prospects at Autonomy.

Léo: When you analyze the numbers of Autonomy, they have been executing a shift to software as a service, or cloud services. They are one of the few traditional license-based companies who have executed such a successful transaction. Roughly one-third of revenues are cloud-based. Not going to talk about forward growth rates.

Raymond James: On PC, you’ve talked about strong return on capital in that business. Can you talk about what changed?

Léo: One of the reasons we announced today was so that we can study. We are going to look at all of our options, and also want to make sure everyone understands that all options are possible, including a nontransaction. Which means they may not ultimately sell the PC unit.

2:56 pm: Stifel Nicolaus asks: Operating profitability for two segments: Enterprise seems to be at 13 percent, which is below previous guidance. And the same question to imaging and printer, now 14.7 percent, though having supply-chain problems.

Lesjak: The macro picture has deteriorated since last quarter. We saw softness in Europe and Americas. Also there’s the lower mix of systems in Business Critical Systems. (Another reference to the Oracle fight.)

Another question, though I didn’t catch the firm that asked: Is there scope to cut more costs at HP at the group level?

Léo: How are we performing compared to peers? In fact, we are actually competing rather well. Our market share across the vast majority are stable, or in a few cases we have eked out gains. Are there any specific issues affecting our business in particular? We are facing macro trends. What HP is facing are essentially the following things: We are being challenged on business critical systems. We have an issue in printing, which was impacted by Japan. Overall, we have one issue that we want to tackle, and that’s our productivity in the salesforce. We are going to create a unified platform for the salesforce to go to market. We are now going to have a regular cadence and discipline around managing major accounts in this company.

3:01 pm: UBS question. How much of the $332 million in operating losses is related to webOS? How long is the leash to lower the losses or get to break-even?

Lesjak: We remain at the operating expenses of one to two cents a quarter.

A question from Jeffries about free cash flow. Can you give us an understanding of the cash balance? Also, do we have any bullet payments? Also around Autonomy: If it’s going to be independent, but if you see synergies, how will you integrate it?

Léo: Yes, we will run Autonomy as a separate entity. Of course we will be looking for synergies as quickly as possible. First off, we will give Autonomy access to our channels. We will be working across our softare teams and theirs. IPG is one case. There are other things we can do with ESSN, as you can imagine.

Lesjak: We ended with $13 billion in gross cash. With our lower top-line expectation, and the cash charges related to webOS shutdown, that is putting downward pressure on cash flow. We expect free cash flow for the year of $8 billion.

3:04 pm: Question from Gleacher about storage. What will drive that business to higher growth rates?

Léo: Our storage business is going through a mix shift. 3PAR is growing triple digits year over year. We are in the early days of the P6000(?) launch.

Lesjak: 3PAR revenue is up triple digits on a normalized basis.

ISI question: If PSG transition could take a year, do you expect disruptions in PSG revenue?

Léo: I just want to be sure that people understand that PSG will be managed in a normal manner. The team and employees and everyone will continue as if we are a normal day-to-day business. That is the expectation that we have. I’m sure we can manage whatever transition happens.

One more question, from RBC Capital: Can’t hear it well. Sorry, RBC.

And that’s a wrap.

Related posts

• Hewlett-Packard Says Goodbye to PCs, webOS
• HP Pulls Plug on webOS Hardware, Leaves OS Future in Doubt
• HP And webOS: But They Seemed So Happy Together!
• Liveblogging HP’s “Everything Including the Kitchen Sink” Conference Call
• HP’s Apotheker: We Struck Out with WebOS, but Maybe Someone Else Wants a Swing?
• Viral Video: Like Palm’s Creepy Naked Lady, TouchPad’s Floating Celeb Heads Get the HP Boot
• Licensing webOS May Not Be Much of an Option for HP
• Hewlett-Packard’s PC Business: What Happens Next?
• Worth More Dead Than Alive: Could HP Turn a Profit on Palm’s Patents?
• With HP’s Raising of the World’s Biggest White Flag, Will Jon Rubinstein and Todd Bradley Surrender Too?

It also said that it is engaged in talks with the British software concern Autonomy. Bloomberg News reported earlier today that HP was in talks to acquire Autonomy for about $10 billion, which would make it HP’s third-largest acquisition ever, after Compaq in 2001 ($32 billion) and EDS in 2008 (about $16 billion).

In addition, HP said it would discontinue operations of the webOS unit that came with last year’s acquisition of Palm, the handheld computing company for which it paid nearly $2 billion. Ina Fried has more about that here, but obviously the revelation that the TouchPad tablet device isn’t selling at Best Buy was an important indication that the webOS business was not long for this world.

The news came along with quarterly results that missed the consensus expectations of analysts. Revenue was $31.2 billion versus a consensus of $31.19 billion. Per-share earnings were $1.10, a penny short better than the consensus of $1.09. While HP managed to squeak by expectations on the earnings front, its outlook isn’t getting any better. It reduced its revenue forecast for the year to a range of $127.2 billion to $127.6 billion, down from its previously guided range of $129 billion to $130 billion. It also cut its estimated per-share earnings for the full year to a range of $4.82 to $4.86, down from $5. HP shares set new 52-week lows today, finally settling at $29.51, down 6 percent. The shares have lost nearly 30 percent since the start of the year, and are down more than 40 percent from their 52-week high set in February.

Update: In the sudden onslaught of HP news I misread the press release and said that HP missed the consensus by a penny per share when in fact it beat the consensus by a penny per share. Sorry about that.

A second update: Now HP has confirmed the terms of the Autonomy acquisition. HP has reached a deal to pay $42.11 a share for Autonomy in cash. The deal represents a premium of about 64 percent from Autonomy’s closing price yesterday. The deal will close by the end of the year.

And if that weren’t enough HP news for you, the company named John Visentin as executive vice president of HP Enterprise Services, effective immediately. Visentin previously led HP Enterprise Services for the Americas. Prior to joining HP, Visentin held several senior executive positions at IBM and, all told, has 27 years in the information technology industry. He replaces Tom Iannotti, who announced his retirement earlier this year.

Here’s the announcement. I’ll have more as I go through everything.

HP Confirms Discussions with Autonomy Corporation plc Regarding Possible Business Combination; Makes Other Announcements

Press Release Source: HP On Thursday August 18, 2011, 3:02 pm

PALO ALTO, Calif.–(BUSINESS WIRE)– HP (NYSE:HPQ – News) today commented on the recent announcement by Autonomy Corporation plc (LSE:AU.L.l – News). HP confirms that it is in discussions with Autonomy regarding a possible offer for the company.

HP also reported that it plans to announce that its board of directors has authorized the exploration of strategic alternatives for its Personal Systems Group (PSG). HP will consider a broad range of options that may include, among others, a full or partial separation of PSG from HP through a spin-off or other transaction.

In addition, HP reported that it plans to announce that it will discontinue operations for webOS devices, specifically the TouchPad and webOS phones. HP will continue to explore options to optimize the value of webOS software going forward.

HP today announced preliminary results for the third fiscal quarter 2011, with revenue of $31.2 billion compared with $30.7 billion one year ago.

In the third quarter, preliminary GAAP diluted earnings per share (EPS) was $0.93 and non-GAAP diluted EPS was $1.10, compared with third quarter fiscal 2010 GAAP diluted EPS of $0.75 and non-GAAP diluted EPS of $1.08. Non-GAAP diluted EPS estimates exclude after-tax costs related primarily to the amortization of purchased intangible assets of approximately $0.17 per share and $0.33 per share in the third quarter of fiscal 2011 and fiscal 2010, respectively.

For the fourth fiscal quarter of 2011, HP estimates revenue of approximately $32.1 billion to $32.5 billion, GAAP diluted EPS in the range of $0.44 to $0.55, and non-GAAP diluted EPS in the range of $1.12 to $1.16. Non-GAAP diluted EPS guidance excludes after-tax costs of approximately $0.61 to $0.68 per share, related primarily to restructuring and shutdown costs associated with webOS devices, the amortization and impairment of purchased intangibles, restructuring charges and acquisition-related charges.

HP estimates full-year FY11 revenue will be approximately $127.2 billion to $127.6 billion, down from its previous estimate of $129 billion to $130 billion. FY11 GAAP diluted EPS is expected to be in the range of $3.59 to $3.70, down from its previous estimate of at least $4.27, and FY11 non-GAAP diluted EPS is expected to be in the range of $4.82 to $4.86, down from its previous estimate of at least $5.00. FY11 non-GAAP diluted EPS estimates exclude after-tax costs of approximately $1.16 to 1.23 per share, related primarily to restructuring and shutdown costs associated with webOS devices, the amortization and impairment of purchased intangibles, restructuring charges and acquisition-related charges.

HP will host a conference call with the financial community today at 2 p.m. PT / 5 p.m. ET to discuss these announcements well as HP’s third quarter 2011 financial results. The call is accessible via an audio webcast at www.hp.com/investor/2011q3webcast.

About HP

HP creates new possibilities for technology to have a meaningful impact on people, businesses, governments and society. The world’s largest technology company, HP brings together a portfolio that spans printing, personal computing, software, services and IT infrastructure at the convergence of the cloud and connectivity, creating seamless, secure, context-aware experiences for a connected world. More information about HP is available at http://www.hp.com.

Related posts

• Hewlett-Packard Says Goodbye to PCs, webOS
• HP Pulls Plug on webOS Hardware, Leaves OS Future in Doubt
• HP And webOS: But They Seemed So Happy Together!
• Liveblogging HP’s “Everything Including the Kitchen Sink” Conference Call
• HP’s Apotheker: We Struck Out with WebOS, but Maybe Someone Else Wants a Swing?
• Viral Video: Like Palm’s Creepy Naked Lady, TouchPad’s Floating Celeb Heads Get the HP Boot
• Licensing webOS May Not Be Much of an Option for HP
• Hewlett-Packard’s PC Business: What Happens Next?
• Worth More Dead Than Alive: Could HP Turn a Profit on Palm’s Patents?
• With HP’s Raising of the World’s Biggest White Flag, Will Jon Rubinstein and Todd Bradley Surrender Too?

The potential spinoff of the PC business would amount to a huge shift. HP is, after all, the world’s largest maker of personal computers, ahead of Dell. HP’s Personal Systems Group did nearly $41 billion in business last year that earned $2 billion. This is the sort of radical surgery that analysts have been calling for in recent months as the PC market has suffered, and HP’s lack of success so far with the TouchPad tablet device hasn’t made that unit look any better.

Autonomy is a U.K.-based software company that specializes in “meaning based computing.” Its software is designed to recognize relationships between structured data — what you find in an organized database — and unstructured data, which can be anything from words in a written document, a speech or conversation to anything else that has information that isn’t organized into rows and columns. It’s been the subject of occasional buyout rumors. In December there were sketchily sourced reports that Oracle and Microsoft were kicking the tires.

Rumors that Oracle is considering another acquisition appear with unsurprising regularity given the pace of its deal-making over the last several years. One such rumor I noticed late last year was around Autonomy. Others companies mentioned in Oracle-takeover rumors that haven’t materialized are Ultimate Software, Lawson and Blackboard. The reason?

Over the years, Oracle has often grown by acquisitions, but that works only when the valuations of target companies are attractive. Right now they’re too high, Ellison says. President and CFO Safra Catz put it much more simply at the end of the audio clip below: Valuations are, right now, “quite ridiculous.” Meanwhile, as today’s earnings results show, Oracle is growing just fine organically without making any big deals for now, he says.

Still, that didn’t stop Oracle from acquiring privately held Web software player Fatwire just yesterday.

You can hear Ellison and Catz discuss it in the audio highlight below. The clip opens with the final question from today’s earnings conference call, from Wells Fargo analyst Jason Maynard.

Oracle CEO Larry Ellison Says He’s Done Shopping For Deals, For Now by ahess247

Autonomy–which makes software that helps companies keep track of their mass of e-mails, phone calls and documents–said the acquisition consists of the digital archiving, e-discovery and online backup and recovery solutions of Iron Mountain Digital.

Read the rest of this post on the original site »