The creation of two British students from Cambridge, UK software company Autonomy has made a software that can scan millions of emails and hours of talk time and could “understand” the meaning of conversations. The software is used by Vodafone to alert supervisors when a customer gets angry and has been used to find evidence to convict broker Jérôme Kerviel who caused the loss of 5 billion euros for Societe Generale.
HP CEO, Leo Apotheker is ready to pay an amount ten times the annual revenue of the British software maker, while HP shares dropped more than 20% last week, the largest drop in company shares over the past 24 years.
Why would HP pay an amount almost equal to that which will be paid by Google for Motorola – a company whose name and whose products are known worldwide – for a British firm that almost nobody has heard of, was the favorite theme discussion among HP shareholders, who were shocked to find out that the IT giant wants to retire its PC business.
This giant acquisition project is, as even Mike Lynch says – a founder of Autonomy, the victory of “the two geeks from Cambridge” who created software that could scan millions of e-mail or hours of phone calls or radio/TV and then “could understand” the subject of conversation.
The result of Lynch’s work, an eccentric entrepreneur who has one of his mottos: “always take with you a gun in a knife fight” the range of products provided by Autonomy is now being used by giants like Vodafone, Shell, and the British police, the security department of U.S. universities and scholarships, according to an article published in the British magazine Director.
What is so special about this software?
“Our technology allows computers to understand human conversations. This is the unfair advantage that has allowed some nerd students from Cambridge to create a company listed on the London Stock Exchange”, said Lynch.
What does the Autonomy software? For example used in call centers such as Vodafone’s to detect when a client is nervous and to alert a supervisor. In the financial industry where regulations are very tough, the software can be used to follow the thread of discussion in million of e-mails and phone calls.
The software can listen to millions of hours of conversations and extract only those 10 hours relevant to the topic. Moreover, the evidence that led to the sentencing of Jérôme Kerviel, the broker who caused losses of 5 billion for French bank Societe Generale, was obtained using Autonomy technology.
According to the manual, what the company makes is called “software that automates the analysis of unstructured data. Unstructured data found in electronic documents, e-mail or other content as text, which could include audio and video”.
The software can be used in a wide range of applications, from locating people suspected of terrorism or fraud to news and data connection.
Providers of “weapons” to political parties in Britain.
With such technology, customers come from unexpected areas. “We are suppliers of weapons to political parties in Britain”, Lynch joked. The company provides technology that is used to monitor the online media, social networks and TV stations.
“Every time someone says something, the system reveals if and when that person said something different”, explains Lynch.
Why is so successfull Autonomy, given that a man can be more accurate than a computer in such searches? “People get bored,” he explains. “The task requires scanning of large quantities of information, the computer becomes more precisely in relation to man”.
Although the company has reached annual revenues of one billion dollars and working with giants like Vodafone and Shell, Autonomy is still run on an entrepreneurial level, according to an article published in the British magazine Director. “Should run this company the same as the giant software companies? Technology evolves too quickly, and, to adapt, you have to think as an entrepreneur”.
The company style is eccentric and certainly not boring: meetings of the company are divided into two categories, positive and negative. “We have meetings where we must mention the only good ideas and then others that talk about problems. So let ideas grow”.
Mike Lynch: $1 billion from the sale to HP
Mike Lynch is one that will most benefit from business with HP, he will get over a billion dollars, according to Irish newspaper Irish Times.
Lynch was born in Ireland but moved to England as a child, continued to study computer engineering and mathematics at Cambridge University. He founded the company Neurodynamics in 1991, which resulted in Autonomy in 1996.
The company was listed on the London Stock Exchange in 2000 and now, at the age of 45, Lynch has an eight percent stake in the company.
Autonomy is now the second largest software manufacturer in the UK. Autonomy sponsors the British football team Tottenham Hotspur and the Mercedes F1 team.
HP heads defend changes in company strategy
In an attempt to calm investors, HP leaders jumped to defend the radical change in strategy announced late last week, writes the Financial Times newspaper.
Leo Apotheker, CEO of HP, will meet the company’s shareholders in New York, Boston and London to argue that the bet on business software that the company makes, exiting from the PC market are two things necessary to keep pace with changes in technology.
“We are at a turning point in our history”, said Apotheker.
He predicted that HP would regain the 40 billion dollars that the company could lose if it sells its PC division, while the long-term profit margin and potential growth will be much better.
HP shares fell more than 20% at the announcement that the company plans to buy British firm Autonomy for $11 billion. HP also announced it will sell its PC division and that it will stop the production of tablets and smartphones.
Apotheker and Cathie Lesjak, CFO of the company, have already spoken with dozens of investors, and Ray Lane, a non-executive chairman, will make more conference calls.
“What I will say to investors is that I fully understand that changes of this magnitude are difficult to understand and swallow in view of current stock value”, said Lane.
“Even some long-term investors attracted by the price collapse of HP were alarmed by the move of the company”, has admitted Lane.
Ray Lane, former president at Oracle, said that the PC division was a brake in an attempt to maintain profits and believes that it can thrive independently. Now it must compete with one arm tied behind its back. It is not free to put Android on its devices”, said Lane. One single company has been successful in integrating hardware and software, and this is a special case because of one man”, he added, making reference to Steve Jobs , founder and chief executive of Apple.
Instead of running a conglomerate managing many independent products and services, Apotheker said “we have to begin acting as an integrated company” with the software as the core.
However, the path to an integrated offer to large business customers, needs a strategic transformation “to put an emphasis on the software.
Even if HP will have lower sales than other software companies like Oracle, IBM or SAP, Apotheker believes that HP has the potential to change the market.