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Summary:

Autonomy’s former management, including Mike Lynch, deny HP charges that they misled, practiced bad accounting and failed to disclose key information to HP prior to its acquisition of Autonomy. HP has asked the US and UK authorities to pursue a criminal investigation.

Former Autonomy CEO Mike Lynch

Updated: Mike Lynch, the former Autonomy CEO and the leader of the management team who sold the company to Hewlett-Packard last year, has denied charges that Autonomy misled its buyer.

Update: In an interview with The Wall Street Journal, Lynch said he’d been “ambushed” by the charges, which he called “utterly wrong.”

“We were audited on a quarterly basis. It was Deloitte, who knew the company well. We had 10 years as a listed company; during that time Deloitte would have had their work reviewed by the various boards. Of course H-P did what its senior management called “a meticulous due diligence” involving hundreds of people that was highly intense, involving KPMG Barclays well. They threw everything at it.”

And in another statement obtained by Reuters:

“The former management team of Autonomy was shocked to see this statement today, and flatly rejects these allegations, which are false … HP’s due diligence review was intensive, overseen on behalf of HP by KPMG, Barclays and Perella Weinberg. HP’s senior management has also been closely involved with running Autonomy for the past year.”

 

On Tuesday morning’s HP fourth-quarter earnings call, CEO Meg Whitman leveled the allegations that Autonomy management had misrepresented the company’s performance and failed to disclose information that HP should have had prior to closing its acquisition. “These efforts appear to have been a willful effort to mislead investors and potential buyers, and severely impacted HP management’s ability to fairly value Autonomy at the time of the deal,” according to an HP statement.

Whitman’s predecessor Leo Apotheker had launched a $10.3 billion bid for Autonomy in the summer of 2010. The purchase price ended up being $11.1 billion when it closed a few months later. Lynch (pictured above) left HP suddenly in May 2011, as the company reported disappointing Autonomy sales.

The Autonomy acquisition has been controversial from the get-go. News of it leaked in advance and even at the time of the announcement most onlookers felt that the offer price was very high for the U.K.-based company.

For her part, Whitman has laid the blame on HP’s side of the equation on Apotheker and former Chief Strategy Officer Shane Robison, who left within weeks of Apotheker’s ouster in September 2011.

  1. I think you mean predecessor?

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    1. Glad I wasn’t the only one to notice – looks like they fixed it pretty quickly. :)

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      1. you guys are so fast! i was in there fixing– i have a recurring issue w/ successor/predecessor. thanks for pinging!

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  2. 25 billion (Compaq) + 11.1 billion (Autonomy) + (Palm), if only HP could do it over, somewhere in all that money could have been a OS designed from the ground up?

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    1. Stewart Schaffer Tuesday, November 20, 2012

      +VeriFone +EDS and they never keep the producers of any company acquired. Or, I should say does seem no producer wants to work for HP after being acquired. Just get paid, and stockholders hold the gift of purchase.

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  3. Reminds me of Lance Armstrong pointing to the fact that he didn’t fail any third party administered tests as proof he didn’t dope.

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  4. Roberto Valerio Tuesday, November 20, 2012

    I guess a good technical due diligence would have been enough to cancel the Autonomy deal. I worked for a company offering similar products in 2000. AndI did not see some “magical” software @ Autonomy. They got some corporates in believing magic. Then they got one to buy them. Great sales job.

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  5. Without knowing any of the details, my emotional reaction based on observing HP over the past years is that the only fraud going on are the claims by the HP BoD and Management team that they are competent.

    On the other hand, whenever I hear that Deloitte was the auditor, my Spidey-sense starts tingling.

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    1. this may be my favorite comment on this whole mess. Spidey sense indeed.

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  6. It’s sad to see this state of affairs at HPQ – just kills the history of this valley icon. To think that even Jobs envied this company at one time. The very least that the board should do at this time is to pledge on a 3 yr freeze on any acquisition – their track record on acquisitions from the compaq days is pathetic. Today was the first time that nasdaq recorded a 6 times normal volume on hpq and guess the low single digits are not too far off. This story is as bad or worse than Apple in its near- death yrs. but then apple found jobs- who will hp find to right this ship

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