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Market banks on Autonomy following $70m deal

Written by Lautaro Vargas
Thursday, 03 January 2008
A new multi-million deal for Cambridge-based IT infrastructure specialist, Autonomy, with an unnamed major international bank could be the first of many as the industry prepares itself for a potential spate of litigation connected to the American sub-prime crisis. Autonomy CEO, Mike Lynch Analysts say the deal, worth an estimated $70 million (£35.4m) over the next few years, backs up CEO Mike Lynch’s claim that Autonomy stands to benefit from the sub-prime crisis as bans and other financial institutions look to provide robust compliance and regulatory processes. The order, in the area of compliance and regulatory solutions, comes through the Californian data archival suite provider, ZANTAZ, which Autonomy acquired for £186m in July 2007, and will enable the bank to deploy Autonomy’s industry-leading solution throughout its operations around the world. ZANTAZ creates archives of electronic material for big banks and law firms so that it is available for investigation if the organisation is hit with a lawsuit. In November of 2007, Lynch said it was likely that the US would see a lot of litigation around sub-prime, adding: “We have already seen a large number of large financial institutions who have turned to us to help them.” Seymour Pierce said the ZANTAZ acquisition increasingly looked a steal and that the deal showed that at a time when the market is worried about reduced IT spending in Financial Services, some areas of investment are immune to the slowdown and that Autonomy clearly has a market leading solution in order to achieve such pricing. It added it believed it likely that more deals of this nature will be signed as pressures mount for banks to prepare for potential litigation in the wake of the sub-prime crisis This view was echoed by analysts UBS and NUMIS Securities who added the deal suggests there could be a number of similar deals of this scale in Autonomy’s pipeline over the next 12-24months. All three analysts recommended Autonomy as a BUY ahead of its Q4 and 2007 full year results, expected at the end of January. Autonomy’s share price finished the day at 906 pence a share, up 31.5p (3.6 per cent).