SAN FRANCISCO: Hewlett-Packard (HP), which paid the highest multiple on record for a computer company six months ago, now needs to spend as much as double the historical valuation for software takeovers to catch up in cloud computing.
Red Hat, Informatica and Tibco Software, which Goldman Sachs Group says may be targets as Hewlett-Packard adds software, trade as high as 42 times earnings before interest, taxes, depreciation and amortisation (Ebitda).
That compares with the median 18 times for software and Internet acquisitions in the last five years, according to data compiled by Bloomberg. Leo Apotheker, 57, started as chief executive officer in November after an interim CEO paid a record 325 times Ebitda for 3Par following a bidding war with Dell, the data show.
The former SAP AG CEO inherited a company that trades at the lowest valuation relative to earnings among the largest US technology companies and faces slowing sales growth over the next two years.
While Apotheker said this month he will follow a "disciplined" approach to acquisitions for Hewlett-Packard, he may be forced to pay up to offset cuts in development spending by ousted CEO Mark Hurd and close the gap with Oracle and International Business Machines in cloud computing, which lets users consume software and data over the Internet.
Bill Wohl, a spokesman for Palo Alto, California-based Hewlett-Packard, the world's largest computer maker, declined to comment on potential acquisitions.
"With an eye toward the strategy laid out by our CEO, we intend to build, buy or partner," Wohl said. "Our M&A strategy is consistent with our overall company strategy." To do that, the company needs to buy, build, or strike partnerships for database software, data analysis applications, software development tools and security software, Shane Robison, Hewlett-Packard's chief technology and strategy officer who heads mergers and acquisitions, said in an interview.
"The message is growth, and if they're going to go for small, high-growth companies, they're going to have to pay up," said Jayson Noland, an analyst at Robert W. Baird in San Francisco. "Hopefully not as much as 3Par."Hewlett-Packard may have a high interest in Red Hat, the largest seller of Linux software.
Muscat Press and Publishing House SAOC 2011
Provided by Syndigate.info an Albawaba.com company
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