UK tech sector set to lose its Autonomy

It is hard to know whether to applaud or lament the proposed $10bn-plus purchase of Autonomy, the UK's biggest listed software company, by Hewlett-Packard of the US. The transaction, at an impressive premium of 75 per cent, would trigger handsome pay-outs. These would be just reward for shareholders loyal to a data business whose value has gyrated with the tech cycle ever since it floated while the 1990s tech boom. It is as well appropriate recognition of the value created by founder and chief executive Mike Lynch, who would reap a personal windfall of some $800m.

The acquisition as well means that Autonomy

But the acquisition as well means that Autonomy, whose software sifts unstructured data for meaning, will no longer pursue what UK tech enthusiasts saw as its manifest destiny of becoming a "global gorilla" - a world-beating innovation business in the mould of Google or Microsoft.

UK tech entrepreneurs, it appears, always end up selling out to the Americans. This reflects a greater US appetite for technological risk, as mirrored in steep Stateside tech float premiums. Another reason is that big US purchasers have powerful distribution networks through which to sell new research. This underpins such transactions as Cisco's acquisition of London cloud computing start-up ScanSafe.

The proposed Autonomy sale

Three ironies are apparent in the proposed Autonomy sale. First, during its software identifies meaning within chaos, many potential UK investors were confused by the proposition represented by the company. Second, the business, which kept investors waiting for its own acquisitions, has unexpectedly fallen prey to one itself. And thirdly, Autonomy considered and rejected the idea of developing a smart search engine long previously Google came along. In other words than aspiring to emulate that global gorilla, Autonomy might have pre-empted it, had circumstances been different.

Is the £3m fine levied on TalkTalk by Ofcom "disproportionate", as Dido Harding, chief executive of the broadband and telephone company claims? Not in a punitive environment where whey-faced yoof get four-year jail terms for abortively inciting riots on Facebook. By that vengeful benchmark, the communications watchdog should have bulldozed TalkTalk's headquarters and exiled Ms Harding to a penal colony off Belize.

But by Ofcom's modest standards, the fine for overcharging is a stiff one. Ms Harding, brought in to tackle chaos from the integration of Tiscali's UK business, was wrong to imagine that refunds and compensation of £2.5m would satisfy the regulator. Needling coverage of the fine by journalists of a consumerist bent will do little to burnish TalkTalk's battered brand. So the paradise where the company's reputedly high customer churn rate falls to levels closer to that of such rivals as Virgin must be postponed. Steve Malcolm of Evolution estimates the share's current underlying free cash flow yield stands at about 14 per cent, against 11 per cent for Virgin.

There is mileage in TalkTalk's affordable phone-plus-broadband offering. Ms Harding just needs to ensure that TalkTalk is absolutely un-newsworthy from this point on. Systems cock-ups occur regularly and are unremarked within most big organisations. It is the misfortune of consumer telecoms businesses to face tougher scrutiny. Get it wrong again in the near future, and TalkTalk's board will face a lynch mob armed with nooses fashioned from the company's own coaxial cable.

The wisdom of working with your nearest

Toilers returning thankfully to their desks afterwards fraught family holidays may doubt the wisdom of working with your nearest and dearest. Nevertheless it suits some: the UK's top 10 family-controlled businesses raised their sales more than 10 per cent to £35.5bn in 2010, according to the Institute for Family Business. The sector cheerleader reckons that family companies are weathering economic turbulence so then. Probably because proprietors have traditionally handled debt as suspiciously as a rural vicar would a crack pipe.

The message that family companies are in it for the long haul is underscored by how little movement there is in the IFB's sales-based top 10. The top three companies are the same as for 2009: Associated British Foods, the quoted company controlled by the Westons; Stemcor, the steel business of the Oppenheimers; and Swire, the Asia-focused conglomerate set up by the Swires in 1815.