"HP knew about Autonomy's hardware and reseller sales long before a whistleblower pointed them out and the company wrote down its acquisition by $8.8bn, the Financial Times has claimed"
Colour me unsurprised...
HP knew about Autonomy's hardware and reseller sales long before a whistleblower pointed them out and the company wrote down its acquisition by $8.8bn, the Financial Times has claimed (paywall), citing emails and Deloitte audit reports. HP has accused Autonomy of "accounting improprieties, misrepresentations and disclosure …
Would that inlude Leo Apotheker, the disastrous CEO before Meg Whitman whose decision to purchase Autonomy at a significant premium to market value, but without real due diligence, was in part, following other disastrous decisions by him, the cause of the 40% loss of market value under his tenure, following the prior decision of SAP not to extend his contract as CEO having reviewed his performance in that role.
"Such a shame that what used to be a great engineering company is now a great example of how not to run any company."
Quite right, and I'm afraid it's been like that for a long time now. The only thing they've got left that is interesting is memristor, and the sooner they bring it to market the better.
I think there are 3 core possible acts that led to the issue:
1) HP did not carry out sufficient due diligence
2) HP relied entirely on Deloitte's report and that report was inaccurate
3) Autonomy lied to Deloitte and their accountants
if 1) then HP should shed some more Board members
if 2) then HP should sue Deloitte and their own consultants used in the deal
if 3) then some Autonomy directors will go to jail and face financial consequences
Is this oversimplified ?
The autonomy directors have already flown the coop.
It's the classic tale of big company buys small company, makes directors rich (the people who built the company up) and then pisses off directors who leave. Resulting in big company having lost all the expertise they acquired.
"It's the classic tale of big company buys small company, makes directors rich (the people who built the company up) and then pisses off directors who leave. Resulting in big company having lost all the expertise they acquired."
I know nothing of what happened at Autonomy but Having Been There, Done That wrt takeovers, it's not just the directors who leave.
The remaining employees get snowed under by new paperwork systems which appear to be designed to thwart the levels of customer service they were once proud to provide.
Exeunt key technical non-director staff as well.
The only people who thought Autonomy was a good buy were on the HP board. Lest we forget, Autonomy was shopped to Oracle before it was sold to HP. Oracle laughed at them and at HP, and did so publicly. In fact, Larry Ellison is probably still laughing two and a half years on:
"Mike Lynch really hasn't been telling the whole truth here."
Well, plainly there was enough truth for companies like Oracle to decide they didn't want to buy Autonomy. If HP want their legal case to stick they'll have to explain why Oracle was bright enough to make the right decision and why HP was not.
I took a look at the first one listed on the linked page (the one dated September 28, 2011), and could not help but note the date of Mr. Lynch's visit to Oracle:
April 1, 2011, quoting from that press release:
... ‘Some bank’ did not just happen to come to Oracle with Autonomy ‘on a list.’ The truth is that Mr. Lynch came to Oracle, along with his investment banker, Frank Quattrone, and met with Oracle’s head of M&A, Douglas Kehring and Oracle President Mark Hurd at 11 am on April 1, 2011. After listening to Mr. Lynch’s PowerPoint slide sales pitch to sell Autonomy to Oracle, Mr. Kehring and Mr. Hurd told Mr. Lynch that with a current market value of $6 billion, Autonomy was already extremely over-priced. The Lynch shopping visit to Oracle is easy to verify. We still have his PowerPoint slides.”
Wouldn't it be fair to say that Hurd & Co recognized Autonomy as an "April Fool's Day Joke"??????
I, too, have just reviewed the press releases and slides. In my view any claim that these indicate Autonomy was shopping itself to Oracle are unfounded. The slides show lots of financial information, client lists, publicly available trading statistics, etc but if you've never been on the receiving end of a product sales pitch you will recognize this type of content. Almost every pitch to sell high end anything includes this stuff. Moreover, why would a company pitch itself at $6bn on the basis of these financials?
My take (which is worth the cost of these bytes) is that Lynch did not try to sell itself to Oracle regardless of Hurd's interpretation of the meeting. He and Quattrone may have talked about their valuation of the company but, hey, everyone has inflated ideas of the value of their possessions, right? And if they think they have gem, why not flaunt it? If they approach Oracle with the intention of being first tier partner would the slides look any different? I suspect not.
However, maybe, just maybe, this meeting with Hurd could be interpreted by HP staff as interest by Oracle in Autonomy. If so, and if I were in that position, I'm not sure I'd be in a hurry to pour cold water on it.
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"....Larry Ellison is probably still laughing...." Given Larry's habit of dissing any company bought by the competition I'd suggest he is not exactly likely to have applauded any hp purchase (especially seeing as, at the time, he was rapidly losing his lawsuit against hp for support of Oracle on hp Integrity servers). But Lynch was hawking Autonomy around at the time, and Oracle do seem to have a the sales slideset.
Knowledge of Autonomy's problems with hardware "discounting" does not show that hp had clear knowledge of Autonomy's accounting practices before the practice, indeed the article mentions the hp execs' problems of trying to unravel the deals without full access to the information concerned. At worst, you could suggest Leo was unwise to go ahead with the purchase without a clearer view, or that he ignored Deloitte's findings, but then I suspect he would claim the "value" of the Autonomy software outweighed the risks.
Not over simplified at all.
I don't actually care one way or the other. either they knew or didn't. They paid over the odds for somethign that turned out to be less than was expected. I suspect thier customers know the feeling.
welcome to capitalism, lads. How do you like them apples?
Almost, but not quite that simple. WHEN they knew is also important.
If they found out after the sale was completed that's one set of circumstances. I'll make a small allowance for them not announcing it as soon as someone reported it to them. At that point it is still an allegation, and there's a fiduciary responsibility to the stockholders to avoid spooking the market without good justification. Not sure that is a full year's allowance, but I expect they need some time to determine what the actual facts are.
If they had any knowledge, even a hint, BEFORE the sale was completed, they are in a world of hurt from investor lawsuits.
"Autonomy is a software company"
" and doesn't sell hardware much?"
Ah well, it all depends what you mean by "sell". Book revenue for selling hardware, yes they seem to have done that.
Beyond that, it gets a little greyer.
Pleny of places to read. Some of them more for entertainment than facts.
Nobody has yet alleged that HP knew BEFORE the deal. The current allegation is that HP knew after the deal was complete, but a year before they announced it. Unfortunately in the legal roulette world of publicly traded companies, if you announce an allegation of fraud at your company without a fair amount of proof, if it turns out the allegation was unfounded you are subject to essentially the same lawsuits as if you don't announce it when you have the proof. If you're a decision maker in that sort of damned if you do, damned if don't environment, I can see the logic of holding off the announcement. I can also see the corruption problems that come with those types of decisions.