The story so far: How's that Autonomy High Court battle with HPE looking at half-time? Just how far has HPE come in proving its $5bn fraud allegations against former Autonomy CEO Mike Lynch and co-defendant CFO Sushovan Hussain? While the world basks in the summer sun, we had a close look at the last three months of court hearings to decide. Regular readers know all too well about the Autonomy trial, which has …
"doubtless sold thousands of bags of popcorn across the English-speaking tech world"
Yeah popcorn? Maybe a very small punnet.
Really, I think only the 'stakeholders' (or more probably steakholders - something more tasty to nom on, and perhaps a bloody one something to throw to the baying of the lawyer hounds).
Most I cold manage is a small box of chocolate raisins with the highlights.
I'm lovin it. Nothing like reading about overpaid execs spanking billions. It probably easy to justify the cost of autonomy if you measure it in CEO wages.
Autonomy cost about 1000 crap CEOs,
~100 good CEOs.
When you buy a company the important thing is what it is worth to you, not what it is worth to the current owners.
To judge by the reports so far HPE has not proven anything (except that HPE had idiotic management). Unless Lynch & co do something stupid in court, HPE will lose this legal battle.
The only reason that HPE is in this legal battle is to try to save face for their management - even if they won, the actual amount of money they could get from Lynch would not come close to meeting their legal bills. By the time that HPE loses and has to pay its and Lynch's legal bills, millions of HPE's money will have been squandered - and a lot of lawyers will be laughing all the way to the bank.
One could make a reasonable case against HPE management for wasting shareholders assets on an unwinnable case.
Icon for what should happen to HPE senior management ====================>
Back in the day when oi were nobbut junior engineer and had to touch my forelock to the cleaning lady, our engineering director remarked that it was always worth going with roulette odds if you could afford it.
But what he meant by roulette odds was if you had a 50:50 chance of a project succeeding, but the returns were many times greater than the cost. If you could bet on a number at roulette at the usual 36:1 return, but with a 50% chance of its coming up, you would be stupid not to.
Same here:
Potential return $5 billion.
Legal costs won't exceed $100 million
Chance of succeeding in a civil court? As I once heard my father say down the phone to a client "Of course you can go for Counsel's opinion and pay £30 000 to be told you've got an evens chance of winning. Or you can take me out to lunch and I'll tell you for a lot less."
If it was easy, HPE wouldn't need to write a book of claims in the hope that a few stick.
The HPE strategy makes perfect sense, as did the Apple strategy against Samsung.
Potential return $5 billion.
The only problem is that Lynch and Co don't have $5bn.
I'm sure they can squeeze hundreds of millions out of them, if they win. But I'd be surprised if they can manage much more than that. Still a profit on the trial I suppose. Though even in the (unlikely looking to me) event they win, the PR damage of some of their own testimony has been pretty high.
HPE's original strategy seems to be to get an easy win on balance of probabilities in the UK courts to use as ammunition for criminal charges in the USA. They knew they couldn't win a criminal case in the UK where you have to have to prove your case beyond reasonable doubt.
... repeated most if not all of those false and misleading statements directly to Bidco, Hewlett-Packard's acquisition vehicle, as a result of which Bidco, we say, paid very much more for Autonomy
Bidco: " 'Ello, I wish to register a complaint."
Bidco: "'Ello, Miss?"
Autonomy: "What do you mean "miss"?"
Bidco: "'I'm sorry, I have a cold. I wish to make a complaint!"
Autonomy: "We're closin' for lunch."
Bidco: "Never mind that, my lad. I wish to complain about this company what I purchased not half an hour ago from this very boutique."
This article is the first reference I've noticed to the mysterious Bidco. Maybe HPE should be suing Bidco, not the rump of Autonomy, except that HPE's contract with Bidco probably excludes that, and Bidco probably doesn't have assets. Or "enough" assets.
Inspired by the semi-existence of Bidco, I suggest adapting the "Eric The Half-A-Bee" skit.
OK, I might be being thick here, but....
1. Surely HPE did some due dil that's why they employed Deloitte to do it.
2. If HPE should be suing anyone it should be Deloitte, who if found to be guilty should...
3. Deloitte should be suing Autonomy for hiding stuff when it did the due dil.
I really don't understand how HPE can think they can win, they *paid* a 3rd party and then went with their recommendation, surely deloitte should be the ones on trial here. Either Deloitte didn't get the information in which case they should have recommended that HPE walk away or buy for less. Deloitte did get the information and didn't pass it on to HPE, therefore, they are the guilty party or, lastly, Autonomy lied to Deloitte and therefore Deloitte didn't have the information and would have made an inaccurate recommendation to HPE.
TLDR; how come HPE are suing Autonomy (i.e. Lynch) rather than Deloitte...
Actually HP bought Autonomy before Deloitte had finished the due diligence. That means Deloitte are totally off the hook.
The rest of it is just barelling scrapping nonsense. Naturally in a company thsi size they can find some dodgy deals/crooked salesman but even if everything HP says is taken a true then they have nothing that adds up to anything like billions of overvaluation.
HP opened their case with the fact that Autonomy was selling some hardware. This should have been obvious to anyone that knew the market as they would have to do so to facilitate their software sales and once selling hardware the sales force would inevitably use it to sweeten or enhance deals. The hardware sales were always small compared to the software. It would have been identified as part of due dilligence - but - oops this was never completed. That they even bothered raising this let alone opened with it tells a lot.
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