GigaOM » autonomy

Now Autonomy is under investigation for fraud in the U.K.

David Meyer — Tue, 12 Mar 2013 11:54:45 +0000

The U.K.’s Serious Fraud Office (SFO) has opened an investigation into Autonomy, the British data management firm that HP bought in 2011, much to its eventual regret. Autonomy’s accounting methods leading up to the sale are already being scrutinized by U.K. accountancy authorities — HP claims the firm inflated its figures ahead of the sale — but the involvement of the SFO is, as its name suggests, a much more serious matter.

The SFO investigation was revealed in a filing that HP lodged with the U.S. SEC on Monday:

“As a result of the findings of an ongoing investigation, HP has provided information to the U.K. Serious Fraud Office, the U.S. Department of Justice and the SEC related to the accounting improprieties, disclosure failures and misrepresentations at Autonomy that occurred prior to and in connection with HP’s acquisition of Autonomy. On November 21, 2012, representatives of the U.S. Department of Justice advised HP that they had opened an investigation relating to Autonomy. On February 6, 2013, representatives of the U.K. Serious Fraud Office advised HP that they had also opened an investigation relating to Autonomy. HP is cooperating with the three investigating agencies.”

This whole matter is strange. HP’s anger was sparked by having to take a $5 billion write-down on the Autonomy deal roughly a year after it took place, not long after poor initial results saw Autonomy chief Mike Lynch jump ship. Lynch has protested his and his team’s innocence ever since, even setting up a blog to put forward his case.

Just this month – so, after the SFO investigation was launched — Lynch was on stage at the London Web Summit repeating his assertion that HP has never fully explained what accounting improprieties the Autonomy team was supposed to have perpetrated.

In that interview, Lynch suggested that HP’s problem was in its lack of strategy. He said erstwhile HP CEO Leo Apotheker bought Autonomy because he had understood the value of data, but HP had switched back to its previous hardware focus after defenestrating Apotheker and bringing in Meg Whitman as CEO. He also hinted that he and the former management of Autonomy had had no choice about the sale, due to the premium HP was offering.

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

Autonomy’s pre-HP accounting comes under UK scrutiny

David Meyer — Mon, 11 Feb 2013 13:05:34 +0000

Authorities in the US have already been looking into Hewlett-Packard’s allegations that Autonomy – the company it purchased in 2011 in a deal that led to $5 billion worth of write-downs for HP last year – misrepresented its financial metrics ahead of the sale. Now the UK’s Financial Reporting Council (FRC) is doing the same.

The FRC announced its investigation in a statement on Monday, in which it said it was examining Autonomy’s published accounts for the period between 1 January 2009 and 30 June 2011. Four months ago, HP CEO Meg Whitman requested that US and UK authorities look into Autonomy’s pre-deal accounting.

Mike Lynch, the former CEO who steered the data management company’s sale to HP before jumping ship after lousy results, responded via the blog he and other ex-Autonomy managers set up to combat HP’s fraud claims, saying:

“As a member of the FTSE 100 the accounts of Autonomy have previously been reviewed by the FRC, including during the period in question, and no actions or changes were recommended or required.

“We welcome this investigation. Autonomy received unqualified audit reports throughout its life as a public company. This includes the period in question, during which Autonomy was audited by Deloitte. We are fully confident in the financial reporting of the company and look forward to the opportunity to demonstrate this to the FRC.”

Whatever the outcome of the investigation, the UK authorities don’t appear to be treating what may or may not have happened as a criminal matter, as HP has called for. The FRC indicated that penalties may include “an unlimited fine, exclusion from membership of a professional body… and withdrawal of practising certificates or licences.” I have asked the FRC to clarify whether Autonomy or Deloitte — or both parties — is under investigation.

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

This week in cloud: HP saga roils on, Cisco buys Meraki, Amazon’s tax bite

Barb Darrow — Sun, 25 Nov 2012 14:00:38 +0000

HP CEO Meg Whitman

Hewlett-Packard’s acquisition of Autonomy has turned into one of the industry’s slowest motion train wrecks. Last week, HP execs sicced the feds (and UK’s Serious Fraud office) on former Autonomy management charging that it had been misled about the state of Autonomy’s fiscal health and thus overpaid for the company. Cynics might contend that HP had to say something given the $8.8 billion write-off it’s taking — mostly related to the $11.1 billion purchase. HP completed the deal in October, 2011.

There’s a ton of blame to go around. On HP’s earnings call last weeek, CEO Meg Whitman mentioned that Deloitte was Autonomy’s auditor and that HP hired KPMG to look at Deloitte’s work. Cue the lawsuits. Former Autonomy CEO Mike Lynch denied any wrong doing, As did Deloitte. As did former HP CEO Leo Apotheker (Autonomy was his idea.) Whitman said the two HP execs — Apotheker and former chief strategy officer Shane Robison — are both gone. Whitman and HP executive chairman Ray Lane were on HP’s board when the Autonomy buyout was launched.

Cisco ponies up $1.2B for Meraki

A week after buying Cloupia to bolster its cloud management reach, Cisco dug deep to pay $1.2 billion for Meraki, a company born out of MIT to make setting up and managing Wi-Fi networks easy and inexpensive for resource-stretched organizations. Meraki’s mesh networking software, that lets admins prioritize the types of devices or apps that can access the network, is a big strategic value add for Cisco, the world’s largest provider of networking hardware, but which has seen its share price languish over the past few years.

In a statement, Rob Soderbery, SVP of Cisco’s Enterprise Networking Group said:

“The acquisition of Meraki enables Cisco to make simple, secure, cloud managed networks available to our global customer base of mid-sized businesses and enterprises. These companies have the same IT needs as larger organizations, but without the resources to integrate complex IT solutions. Meraki’s solution was built from the ground up optimized for cloud, with tremendous scale, and is already in use by thousands of customers to manage hundreds of thousands of devices.”

As Om wrote last week, Meraki’s web-centric approach to software, is something a company like Cisco sorely needs.

For Amazon, sales taxes loom

Massachusetts and other states are getting closer to winning sales tax concessions from Amazon.com, you’ve got to wonder what the impact will be not only on Amazon’s booming online retail operations but Amazon Web Services as well. As Philly.com reported on Black Friday:

“For the first time since the dawn of e-commerce, residents in California, Texas and Pennsylvania will be automatically charged state sales tax at the checkout on Amazon and some other online retail websites. Next year, Virginia and New Jersey residents will join them, followed by residents of Nevada, Indiana and Tennessee in January 2014

(Actually, California started charging sales tax in September.) Brick-and-mortar retailers say this move will let them compete more with Amazon and other on-line resellers.

Asked on the most recent earnings call what impact Amazon has seen from the new tax in California, CFO Tom Szkutak said it was too early to tell. “The only thing I could point to is, we collect in over — either sales tax or equivalent value-added tax,” he said. “We collect in over 50 percent of our revenue today. We have very good businesses in those states and geographies that we do that in long ago. That’s all I can point to today.”

One huge question around Amazon Web Services is just how fat (or not) the margins are. One camp holds that profit those cloud services is razor thin. The flip side — and an opinion held by at least one of Amazon’s huge would-be public cloud competitors — is that Amazon turns a tidy profit on what appears to be a $2.2 billion-a-year-business.

If you believe that Amazon’s retail business pays the freight on cloud, the sales tax is an obvious issue. But even if you don’t, it’s hard to see how increased sales taxes won’t impact the company as a whole, and thus its ability to keep rolling out tons of low-cost cloud services.

And this is probably just the beginning. Going forward, there is more pressure from cash-strapped governments to levy sales tax on cloud services as well. Stay tuned. The AWS: Reinvent show kicks off in Las Vegas Tuesday.

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

Report: Feds look into HP claims of Autonomy fraud

Barb Darrow — Wed, 21 Nov 2012 14:33:39 +0000

The FBI is looking into Hewlett Packard’s allegations that Autonomy execs lied about their company’s books prior to HP’s $11.1 purchase of the company last year, according to Bloomberg.

The Bloomberg article cites a “person familiar with the matter” saying that the Securities and Exchange Commission brought in the FBI because criminal acts have been alleged. The news comes a day after HP CEO Meg Whitman charged that Autonomy executives mislead HP about the company’s finances, failed to disclose key information and otherwise behaved badly. HP said it had referred the matter to the SEC in the US and the UK’s Serious Fraud office.

Former Autonomy CEO Mike Lynch has categorically denied the charges and maintains that HP is using them as a smokescreen to disguise its poor fiscal results. Deloitte had audited Autonomy for years and HP brought in KPMG to look at the books as well. Whitman said neither set of auditors found anything until someone “pointed them in the right direction.” Lynch left HP in a hurry last May when the company reported dismal results related to Autonomy sales.

This is just the latest in a series of embarassments for HP. When the company, under former CEO Leo Apotheker, launched what was to have been a $10.3 billion buyout of Autonomy, the universal reaction was that the price was too high. Apotheker was ousted soon after the deal was completed and replaced by Whitman.

Whitman said the two HP execs — Apotheker and former Chief Strategy Officer Shane Robison — are both gone. However, she was on HP’s board at the time as was executive director Ray Lane.

Feature photo courtesy of Flickr user cliff1066™

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

Former Autonomy execs reject HP’s fraud charges

Barb Darrow — Tue, 20 Nov 2012 18:49:59 +0000

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.

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

How search can unlock the power of big data

Paul Miller — Tue, 20 Nov 2012 15:50:53 +0000

Big data tools such as Cassandra and Hadoop are transforming how data is stored and are creating a wide range of possibilities for new ways in which it can be exploited at scale. But without similarly capable search technologies, enterprise adopters face significant challenges in formulating questions capable of returning timely and meaningful answers. This report explores how established search technologies are being integrated with big data tools to meet real business requirements, both on-premise and in the cloud.

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

HP requests fraud investigation into Autonomy deal

Barb Darrow — Tue, 20 Nov 2012 13:33:50 +0000

Updated: Hewlett Packard CEO Meg Whitman said “outright misrepresentations” about the state of Autonomy’s financial health led to HP overpaying for that company last year and Whitman is recommending civil and criminal investigations into that issue. HP took a loss of $6.85 billion ($3.49 per share) for the year ending Oct. 31, mostly related to a previously announced $8 billion charge related to the company’s Autonomy business.

HP bought Autonomy for $11.1 billion last year. Autonomy CEO Mike Lynch (pictured above) left HP under a cloud last quarter.

According to an HP statement posted today:

“Autonomy’s management team used accounting improprieties, misrepresentations and disclosure failures to inflate the underlying financial metrics of the company, prior to Autonomy’s acquisition by HP. 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. We remain 100 percent committed to Autonomy and its industry-leading technology.”

Most of this charge — $5 billion — relates to those improprieties and HP has referred the matter to the U.S. Securities and Exchange Commission’s Enforcement Division as well as the U.K.’s Serious Fraud Office for civil and criminal investigation. “In addition, HP is preparing to seek redress against various parties in the appropriate civil courts to recoup what it can for its shareholders. The company intends to aggressively pursue this matter in the months to come,” according to the statement.

Where was the board?

Update: The biggest question — both on the conference call and beyond — is why HP’s board did not spot these issues before okaying the purchase –which was the brainchild of former HP CEO Leo Apotheker. Whitman said the “two people who should be held accountable” for this situation — former CEO Leo Apotheker and former chief strategy officer Shane Robison – are now gone. Apotheker was ousted in September, 2011 and Robison left a few weeks later.

She also pointed out that HP used Deloitte to look at the deal and KPMG to look at Deloitte and nothing turned up until “a third party” came to HP to point it in the right direction.

“At the time I joined [as HP CEO], I was surprised that due diligence and M&A reported to strategy and not the CFO. I changed that right away,” Whitman said.

After all this, Whitman said the company remains squarely behind the Autonomy business, which she characterized as a “work in progress.”

The rest of HP’s earnings release is here, although the numbers which show PC and server revenue off, software revenue up, seem anticlimactic after all this drama.

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

Telefónica bets on augmented reality with Aurasma tie-in

David Meyer — Mon, 17 Sep 2012 16:29:56 +0000

One of the platforms for that great unrealized piece of mobile tech, augmented reality, has just got a big boost. Aurasma, which was created by Autonomy in its pre-HP-acquisition days, has inked a deal with the Spanish telecoms giant Telefónica.

The deal will see Aurasma, which allows print and outdoor advertising to trigger interactive content through mobile apps, integrated into Telefónica Digital’s advertising services. Telefónica suggested that the functionality would plug into its location-based marketing and mobile couponing services.

The telco will also promote the Aurasma Android and iOS apps to its 300 million customers around the world.

“Augmented reality has the potential to fundamentally change advertising, transforming current static formats and introducing new levels of interactivity,” Telefónica Digital ad chief Shaun Gregory said in a statement.

Augmented reality is one of those technologies that seemed to be waiting for the advent of the smartphone, combining the camera with connectivity and a capable processor to overlay all sorts of imagery and interactive content on top of live, real-world imagery.

Yet, despite the early days producing innovative mash-ups of useful location-relevant information, it is now seen primarily as a marketing tool. Even the pioneering Layar is now pushing that as its primary angle.

And there’s no question that the technology fits with marketing particularly well. Last week Qualcomm gave me a demo of recent ads capitalizing on its Vuforia platform, a big rival to Aurasma. It’s quite something watching a model of a running shoe pop off the page, for example, then split into segments to show the customer how it’s built.

Advertisers are certainly keen. The Vuforia tech is used in 1,500 apps, and Aurasma’s in around 400. And the various layers of the mobile value chain are staking their bets too, as the keenness of Qualcomm and Telefónica demonstrates.

But it’s not something I see people doing in day-to-day life just yet, and that’s where the problem lies.

In a way, I would lump augmented reality in with QR codes, another mobile technology seized upon enthusiastically by advertisers and few others. Both technologies require the active participation of the consumer – you do not by default wander around with your phone held out in front of you.

On top of that, very few people I know would actively seek out enhanced advertising, unless there’s something in it for them. If augmented reality had taken off three or four years ago, through the fun and informative stuff it originally promised, perhaps people would be used to it by now. But they’re not, and advertising is a pretty lousy way to get people using a technology as a matter of course.

Perhaps the only way to truly make augmented reality a no-brainer is through something like Google Glass, which is in front of your eyes by default. Even then, would people want to frequently see enhanced ads jumping around in their field of vision? Some may; many will not.

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

Autonomy founder Lynch to leave HP

Barb Darrow — Wed, 23 May 2012 21:39:23 +0000

Autonomy founder Mike Lynch

So far the big news out of Hewlett-Packard’s second quarter earnings call is that the company will lose 9,000 employees in fiscal year 2012, with former Autonomy CEO Mike Lynch among the soon-to-be-departed. His exit was announced less than a year after HP completed its acquisition of Autonomy. Overall the company plans to cut 27,000 jobs over the next few years.

Autonomy saw “a significant decline” in license revenue, HP CEO Meg Whitman told analysts on Wednesday’s earnings call. Bill Veghte, HP’s chief strategy officer who also had headed up HP’s overall enterprise software business, will step in to lead Autonomy, she added.

Lynch, the Autonomy founder and most recently executive vice president for HP’s new information management unit, “will leave HP after a transition period,” according to the HP earnings release.

In response to an analyst’s question, Whitman was quick to claim that there is nothing wrong with Autonomy per se and that the unit will remain a linchpin of HP’s big data efforts going forward. She said:

When Autonomy turned in disappointing results we did a fairly deep drive. It’ s not [because of the product], it’s a terrific product; it’ s not the market, there’s enormous demand; and it’s not the competition. This is a classic entrepreneurial company scaling challenge. I’ve seen this movie before. We need to put in some sales processes, a better interface to HP and our services, server, storage and networking [businesses] and we need a better structure to support a billion-dollar-plus company. The opportunity around big data and analytics is fantastic and can flow across all our businesses.

Overall software revenue — a key HP focus — rose 22 percent year over year including Autonomy.

When news of the Autonomy deal leaked last August, it was immediately controversial. Then-CEO Leo Apotheker talked up his proposed $10 billion acquisition at a time when HP had only $12 billion in cash. The purchase closed in October.

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

Enterprise search doesn’t begin and end with Google

Barb Darrow — Wed, 09 May 2012 19:36:43 +0000

Paul Doscher, CEO of Lucid Imagination, wants you to know that when it comes to enterprise search — and search that can handle the big data wave — open-source Lucene is a contender.

Of course, as head of the company that offers both open source and commercial versions of Lucene, Doscher is no neutral observer. At the company’s Lucene Revolution conference Tuesday in Cambridge, Mass., Doscher announced an application development stack that knits together Hadoop, Mahout, R and Lucene/Solr for handling search, machine learning, recommendation engines and analytics as a platform for enterprise search. That stack, called LucidWorks Big Data, is in beta and aims to make it faster and easier for developers to deploy enterprise-scale search.

“Most Hadoop instances now are one-off — they’re not scalable and not repeatable,” Doscher told me in an interview. “With our stack — all of which is available via APIs, you can use your own user interface and algorithms, and get productive much faster.”

Lucene, the product of an Apache Software Foundation project, is already used by a ton of e-commerce sites — Zappos, the big online shoe store, for example, uses Lucene for 63 million customer searches, according to Computerworld. That’s interesting since Amazon, which bought Zappos three years ago, is now transitioning from Lucene to its own A9 search. A9 is the technology underlying Amazon’s Cloudsearch service announced a few weeks back.

But other big users include EMC, which is replacing Microsoft’s FAST Search technology in EMC’s Documentum document management system with Lucene.

Searching for the right search

As structured and unstructured data proliferate, the need to index and search that data efficiently will only grow.

To be sure, Lucene (which is the core engine) and SOLr (which is the more developer-friendly wrapper around that engine) are not the only dogs in this fight. Other players include the Google Search Appliance, and HP Autonomy — which Doscher called the “800-lb gorilla.” And there’s Microsoft with FAST and now Amazon, which is continually building up its cloud-based services. Lucid Imagination, Redwood City, Calif., offers both on-premises and cloud-based versions of its Lucene/Solr-based search.

Lucid, which employs 9 of the 36 contributors to Lucene, seems the fan favorite of the open-source contingent although there is a rival in Elasticsearch, said Lou Romm, senior program manager for Search Technologies, a consulting firm that helps businesses evaluate the best search for their needs.

Granted, it was a biased group at the conference, but several attendees — including one from the M.D. Anderson Cancer Research Center — said there really is no alternative to Lucene for his purposes. Lucene is able to handle all the data — images, text, structure, unstructured — that choke other solutions. “That’s a big deal when you’re trying to save lives,” he said.

Photo courtesy of Flickr user suvodeb

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.