Autonomy's financial reports? I didn't even read KPMG's due-diligence, says ex-HP CEO Léo Apotheker Ex-HP CEO Léo Apotheker had not read any of KPMG's due-diligence reports on Autonomy ahead of his company's $11bn acquisition of the British software maker, he told London’s High Court on Tuesday. Under cross-examination from barrister Robert Miles QC, acting for former Autonomy CEO Mike Lynch, Apotheker painted a grim picture …
Almost totally agree. Apotheker has already given enough evidence to have the case shut down and thrown out. If Autonomy didn't actually hide anything from KPMG and Apotheker didn't even bother to read their report after being forwarned of problems by his own CFO, any statements made by Lynch should have been treated as "advertising fluff" (surprisingly a legal term in UK law). I.e. hyperbole to be treated not just a pinch of salt but a tonne.
If HP want to sue someone it is Apotheker himself for not just being gullible but criminally negligent in his duties.
I think HP(E) could try to assert that yes, they've been deceived, but all the faults for taking the bait were up to a CEO they fired and his consultants, so the board is actually clean and shareholders shoudn't sue them... because I believe that if HP(E) wins someone else could want some of those money...
The fact that KPMG didn't find anything worrysome may be because they didn't their work properly, or Autonomy hid the troubles well - that's up to the court to find. From one of the old ElReg articlees:
"HP's CEO said that a top executive within Autonomy had shown HP where to look in uncovering the true situation: which was not picked up by KPMG, hired by HP as part of its due diligence during the Autonomy deal to audit the company's books (put together by Deloitte)"
Didn't a previous report state that KPMG were given limited time for their assessment? I can understand that someone wants to limit the amount of fees that KPMG is trying to drag out of this deal, but you do that by setting boundaries so you contain the risk in doing so. All that has happened now is that KPMG has ended up with a golden get-out-of-jail card for failed due diligence*.
* Not that I fully believe that, differences of that magnitude tend to show in multiple ways
and this is the kind of genius CEO who, in large public companies, is remunerated 200-300 times the median wage in the company?
Only this time he effed it up enough to showcase the Peter Principle?
I am far from a lefty and I believe in free markets and fairness. This class of free-riding parasites, who handpick their pet remuneration committees disgusts me. All bonus upsides, never downsides. Remember Citigroup and their bailout-funded bonuses? Or Gini’s reward for her slow scuttle?
Say what you want about Larry and his boats, at least he founded the company.
What needs to happen is real teeth to shareholder-led pay scrutiny. And serious societal pressure and/or taxation to stop unjustified pay.
Most of the time, shareholders are part of the problem. They are only interested their shares price is kept high, and dividends paid. How - they too often don't care. Just look at the recent huge buy-backs. Any CEO that aims at that is OK for them - and if he CEO can sell the company at a premium price the better.
What is sinking Western capitalism is exactly the "maximize shareholder value" mantra that became a religious belief in the past forty years.
>the "maximize shareholder value" mantra
Another turd stain left by Jack Welch. Got all the dumb proles to believe that executives only have a duty to short term share price and not to long term growth of the business.
Nothing wrong with delegating his due diligence to people employed (or contracted, in the case of KPMG) for their expertise in such things. If indeed that's what happened.
If that decision went wrong, he's responsible (and he did get the boot), but surely then he himself is of very marginal relevance as a witness. I take it we're due to hear from those to whom due diligence was delegated?
Unfortunately he delegated to the wrong people, as companies almost always do when doing a takeover. They let the accountants decide what makes sense, not the people who understand the product of the taken over company. It sounds very much like zero technology input into a takeover that was based on technological potential.
When looking at a take-over, you shouldn't just be looking at what the accountants say. You'll be looking closing at how it fits into your product mix. You'll be looking at their back office systems. Maybe looking at their organisation's culture. I'm sure lawyers will have something to say too.
Your job as the CEO is to take the advise from all of these people in your company, plus listen advice from your non-exec board members to make the final call. And if the call is wrong, to learn from the mistake and fall on your sword.
You certainly shouldn't just listen to the accountants.
But the thing that shocks me, and I guess we await further testimony to give the details, is that his CFO opposed the takeover. And that they went ahead and did it anyway! What the hell is the point of a board, if they won't oppose the CEO? And if the CFO says no to an $11bn takeoever, then why aren't the non-execs either sacking them and getting one who does believe in it, or sacking the CEO for being an incompetent?
That's supposed to be the role of a chairman (and the non-execs). To protect the shareholders from the executive members of the board - and if the two senior exexutives can't agree on something as major as this then it should be delayed and the executive members' heads banged together or replaced with ones who can agree.
"I've seen in many companies, more scrutiny and debate, even from the very top echelons, about a marginal spend on a few tens of thousands, whereas a significant capital project is waved through based on a 'vision'."
I believe the technical term is "penny wise, pound foolish". It's far from limited to management, however, and while the phrase itself dates back well before the origin of capitalism, the sentiment is likely much older again.
Indeed. C Northcote Parkinson commented on that phenomenon in "Parkinson's Law". IIRC the example was approving construction of a nuclear power plant in a couple of minutes then spending hours discussing construction materials for a shed to keep employee bicycles out of the rain. This he dubbed the Law of Triviality. https://en.wikipedia.org/wiki/Law_of_triviality
"Nothing wrong with delegating his due diligence to people employed (or contracted, in the case of KPMG) for their expertise in such things. If indeed that's what happened.
If that decision went wrong, he's responsible (and he did get the boot), but surely then he himself is of very marginal relevance as a witness. I take it we're due to hear from those to whom due diligence was delegated?"
Actually what you realize is that ANYONE could have done his job. Why again to CEOs get payed so damn much?
There was virtually no due diligence done by anyone. Leo like a moron incorrectly thought Oracle was about to buy them so like a total dumbass he vastly overpaid for the company in an accelerated manner throwing the usual M&A stuff out the window. Board let him do it so pox on them too.
Do report need now a "CEO summary", a one-line one in 24 points font, all caps, to get a glimpse of their overpaid "scarce" time, between a golf match and a lavish dinner?
Anyway "delegating" doesn'r mean you no longer bear responsibilities - you do delegate experts in a given field to check, extract and "translate" the relevant data so you can take an informed decision - advises are just advises.
It's no secret that many well-paid C-class executives are some of them most clueless people. How do they survive? By performing in their political, Machiavellian power game with rhetoric, networking, lies, intrigue, deception etc.
The Rolls Building where this trial is taking place, allegedly Britain's most modern courthouse, has no press benches or even tables. The 19th century Royal Courts of Justice has press benches in every courtroom.
Mind you, the Rolls Building is abundantly sprinkled with plug sockets for chargers whereas it wouldn't surprise me if the oak-panelled RCJ was still lit with natural gas, so there's advantages and disadvantages.
Tell me if this reading of the runes is completely wrong ...... Mike Lynch's Autonomy develops a revolutionary, game changing technology/methodology/"pure-play software company" which HP/Uncle Sam want at any cost .... because of its extremely disruptive leading potential.
And then Uncle Sam/HP appear to deny its worth and close it down, because of its extremely disruptive leading potential which is next to impossible to comfortably predict and control, and then they think to sue for another pay day, dressing it up as a malicious damages and corrupt maladministration claim against their earlier love child.
With such as friends, the likes of an Uncle Sam/HP are guaranteed to be increasingly quickly overwhelmed with considerably smarter and invisible stealthy opposition in a relatively anonymous competitive field, as they are realised to be a parasitic enemy?
"Micro Focus" - two words. But, yeah, we own it. I've seen an internal demo and the tech looks like it has potential, but (speaking as someone who's done a little research into the use of ML for extracting information from unstructured data) not astonishingly revolutionary. Some surprises and what looks like a lot of hard work, but in line with what I've seen in the published research. Like most commercial software, in other words.
I know there have been comments by Autonomy users in previous Reg stories about the firm, citing various difficulties with using the software. Again, that's not surprising. The products I work on aren't all that easy to use either, to be honest. Also like most software.
In short, it wasn't buried, by HPE or by the US government. Still available, still under development.
But, yeah, we own it. ..... In short, it wasn't buried, by HPE or by the US government. Still available, still under development. ... Michael Wojcik
The only question worth asking of that which you think is owned, MW, is .... is it still worth scores of billions of dollars to the Virtual Enterprise Sector with ITs Myriad Remote Autonomous Trojan Vectors under development in Micro Focus fabless lab rat hands/hearts and minds?
If you think things are kosher and on the straight and narrow, would this anomalous glitch not be a red flag?
In open court, being asked some seriously pointed and deeply probing questions, has many a great white shark reduced to a defenceless minnow and latter-day saintly king with GOD complex to well dressed common criminal. Best avoided at all costs, methinks, with this particular puppet show set to cost the US technology sector considerably more than just £8.4bn if prepared to walk away off into the sunset to avoid being tested with proprietary information usually best secured and further protected as secret testimony.
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