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HP story updated with spokesperson comment in the 11th paragraph.



) -

Hewlett Packard's


recent string of mergers may not end despite the C-suite drama. Unless it runs out of spending money.

Even after the $10.3 billion purchase of Autonomy and the board's decision to replace Leo Apotheker with former



CEO Meg Whitman, the largest personal computer maker in the U.S. still must decide whether to continue a new strategy of tipping the balance of sales from P.C.'s to higher profit margin services and software businesses --a plan that may require more software acquisitions.

"To be the company Leo envisioned, you would need to do


acquisitions," said Richard Kugele, an analyst at Needham & Co in an email to


on Tuesday. As such, Kugele expects that Autonomy won't need to be integrated into HP "for a long time, if at all." About its P.C. business and operating system he added, "I suspect that


clearer heads prevail, the business may be kept (albeit now weakened). webOS should find a home because I feel it was a good OS, just needed some investment and MANY more apps. "

Whitman made it clear on her introductory call as the Palo Alto, California -based company's new chief executive that while a new leader was in place, HP would likely follow Apotheker's plan announced in mid-August. "I think the strategy is right. The initiatives that we undertook on August 18 are right," said Whitman. Responding to analysts questions about how long it will take for HP to solidify a strategy Whitman said, "The best thing we can do is get to a decision on PSG as fast as possible. This decision, it's not like fine wine. It's not going to get better with age."

With or without the P.C. unit, for HP to affect the change it's looking for in its Autonomy acquisition, the company will likely need to add to its software division through acquisitions and not merely synergies.

In a Monday statement, HP reaffirmed that Autonomy will be run independently and its founder and CEO Mike Lynch will continue to head the Cambridge, England -based software-maker, reporting directly to Whitman. Part of the reason Autonomy is running independently for now is only roughly 2% of current HP revenue comes from the software related businesses it's looking to build. With Autonomy revenue added, software will only be bolstered by roughly $1 billion or roughly 3% of overall revenue, a small piece of larger $100 billion-plus annual revenue that come from its overall P.C., printing and server & network businesses.

"On software, HP clearly has to be acquisitive," said Jeff Fidacaro an analyst at Susquehanna Financial Group in a phone interview Tuesday. "If they divest of the PC business, I think they will accelerate revenue from the software business to 10%," added Fidacaro, meaning acquisitions would be likely to "move the needle" in HP's overall software revenue distribution.

As HP built out its businesses like security software, handsets, storage and networking in recent years, it has a track record of acquisitions. Regardless of whether Whitman will spinoff, keep it or sell HP's P.C. division, -its single biggest division responsible for just under 31% of overall company revenue and the most ambitious piece of Apothekers vision, HP may continue down the merger path.

In spring of 2010, HP purchased 3Com for $2.7 billion to bolster its networking business, and later it bought Palm for $1.2 billion to sell handsets and leverage its webOS platform. In the summer, the company bought Fortify a software security company that helps users connect to mobile devices using a firewall. That fall, the company paid $2.35 billion for 3Par's storage capabilities and $1.5 billion for ArcSight in a push to security services.

Fidacaro expects that building on previous acquisitions, HP will build its services business organically through hiring and other expense. For software, he sees companies like open-source software maker

Red Hat


, data integration-software maker



, process-management specialist

Tibco Software


and data warehouse



as companies HP may shop for as it builds the software component of its remake.

In an email Wednesday afternoon, HP spokesperson Randi Polanich said, "HP does not comment or speculate on future acquisition plans and we are focused on Autonomy right now."

In HP's Sept. 23 call with analysts, HP chairman Raymond Lane indicated that after the Autonomy acquisition, the company would still have a significant amount of work to. He said that though Autonomy was a $1 billion revenue company it could build the "position and the synergies with HP's business, which probably in the future could become a $4 billion or $5 billion or hopefully a $10 billion business." Lane, however, downplayed the notion that through Autonomy and a P.C. spinoff the company would transform itself. "Hopefully, we'll see a bigger software portfolio and we'll see more value-added services at HP, but we have $120 billion of hardware business that we care dearly about," Lane said.

One hitch to a shopping spree; however is cash. If the HP board and Whitman, who on Tuesday said that HP will make a decision on its PSG business by the end of the month, decide to keep P.C.'s there won't be loads of cash to spend on acquisitions. Analysts Kugele and Fidacaro say no. "If they keep the PSG business it will be hard to grow a software unit," said Fidacaro. "Their balance sheet doesn't support large

acquisitions anymore," Kugele added.

-- Written by Antoine Gara in New York