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Hewlett-Packard is to buy UK software firm Autonomy for £7.1bn ($11.7bn).

The offer, which has been accepted by Autonomy's board, is 64% above the firm's market value.

It came as the US company announced a massive strategic shake-up, involving stopping making hardware in order to refocus on software.

Shares in HP spiked as rumours of the various news - - broke, but the firm eventually ended the day down 7.6%.

That came on top of a 3.9% fall on Tuesday that was prompted by a warning from rival Dell that it expected demand in the US market to weaken in the coming months.

Autonomy was set up by researchers at Cambridge University and specialises in pattern-recognition technologies.

Founder Mike Lynch, whose 8.2% stake could be worth several hundred million dollars, has pledged to vote for the deal, told the ´óÏó´«Ã½: "HP understands the special culture we have. This is about building Autonomy. It will be a positive thing for Cambridge and the UK."

HP will pay 2,550 pence per share, compared with a closing price in London on Wednesday of 1,558p.

The implied valuation of the company is equivalent to 47 times the pre-tax profits earned by Autonomy in the 12 months to June this year.

Meanwhile, HP announced quarterly results that were largely in line with expectations, with revenues of $31.2bn (£18.9bn), up 1.6% from a year earlier.

HP trimmed its maximum full-year forecast from $130bn to $127.6bn, echoing a similar reduction by Dell on Tuesday.

On Thursday, HP briefly went from being the worst performer in the Dow Jones Industrial Average, to the only gainer at lunchtime, as its share price jumped 15% after the news broke.

But by the close of trading, the company was confirmed as the worst performer on a day of big falls on the markets.