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.

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Apple and the horrible, no good, very bad Maps app

The Amazing iOS 6 Maps Tumblr

The September launch of the iPhone 5 was marred by the disastrous reception Apple’s new Maps app received. Parody social media accounts popped up within hours, as disappointed users complained of poor or missing location data. CEO Tim Cook felt compelled to make a public apology, and it’s thought that the episode was the last straw that caused Cook to send SVP Scott Forstall packing. To rub extra salt in the wound, Google’s own Maps app for iPhone was greeted with the Twitter equivalent of a Hallelujah chorus when it arrived last week – and was downloaded 10 million times in 48 hours. – Erica Ogg

Google’s media player that never got a chance to play

Google surprised many in June when it announced the Nexus Q, a wireless digital content player dubbed as “the first social streaming media player.” But not all surprises are good ones. The small orb-shaped device launched at an introductory price of $299, triple that of the more capable Apple TV. And aside from the high price point, the Q offered no media services save Google’s own Play store for movies, television shows and music. The unique DJ function — allowing anyone’s Android device on the same network to mix the music — was hardly enough to justify the Q, which Google suspended indefinitely in July. — Kevin C. Tofel

Facebook’s troubled IPO

The initial public offering of the world’s largest social network was supposed to be the tide that lifted all technology boats, but the IPO instead turned into a stock-market train wreck and crushed the hopes of many other tech-stock hopefuls in the process. Thanks to a combination of mismanagement by the NASDAQ stock exchange (which used a new trading system for the issue) and a misreading of the initial demand by Facebook and its brokers — which resulted in an over-supply of stock — the company’s share price tumbled by more than 50 percent in the days and weeks following the offering. The company still wound up raising more than $16 billion, but the episode gave the tech darling a black eye as far as some investors were concerned, and likely set the market for tech-stock issues back by months, if not longer. — Mathew Ingram 

Two words: HP and Autonomy

The $11.1 billion purchase of Autonomy by Hewlett-Packard may have been announced in 2011, but the enormity of the screw-up didn’t fully surface till 2012. In May, HP management booted former Autonomy CEO Mike Lynch, and in November the company asked authorities in the U.S. and U.K. to look into Autonomy’s accounting practices prior to the buyout. That process is ostensibly now underway. Nevertheless, after airing all this dirty laundry in the November earnings call, HP CEO Meg Whitman asserted that HP remains “100 percent committed to Autonomy.” For the record, HP took a loss of $6.85 billion for the full fiscal year ended October 31, 2012 — most of that from an $8 billion writedown related to the Autonomy business. — Barb Darrow 

Nate Silver’s an idiot and Romney wins in a landslide

Except…Nate Silver isn’t and Mitt Romney didn’t. Silver, the founder of the New York Times‘ popular FiveThirtyEight politics blog, and several other notable statisticians mathematically predicted Barack Obama’s reelection with perfect or near-perfect accuracy. Meanwhile, Karl Rove sputtered through election night on Fox News, futilely defending his prediction like a child trying to convince a teacher a dog ate his homework. Maybe there’s something to this data analysis after all. Go figure. – Derrick Harris 

Amanda Palmer crowdfunding fubar

Alt-rock fave Amanda Palmer experienced the downside of social network savviness in September after she raised $1.2 million on Kickstarter to fund her new CD — then solicited musicians to play for free on her subsequent concert tour. Reaction was heated and Palmer quickly regrouped, saying she would pay more than beer, hugs and “merch” for the help. The alternate theory is that this was all a massive publicity stunt — in which case, it was hugely successful. (Palmer has since cancelled her 2013 tour to help a friend deal with cancer.) — Barb Darrow 

Twitter gags NBC Olympics critic

What do you when someone says mean things about your friends? You shut them up; at least, that’s what Twitter did during the London Olympics when it suspended the account of journalist Guy Adams, who tweeted snarky things about the TV coverage of Twitter’s corporate partner NBC. Twitter blamed an internal communications snafu and restored the journalist’s account two days later. Still, the incident became Twitter’s first full-blown PR crisis and a reminder of its growing shadow over our media lives. — Jeff Roberts 

The Western Mail’s caption fail

Tweeters celebrate epic #fails on an almost minute-by-minute basis. And for digital media aficionados, ye olde newspaper sub-editing and caption errors rank high on that dreary list. But there was none more epic in 2012 than Welsh newspaper the Western Mail, which committed what was labeled “the worst caption fail of all time” when it identified a photo of an airport manager, who died when the plane he was travelling in hit a mountain, with “LOL.” Although British prime minister David Cameron may think the acronym stands for “lots of love”, everyone else knows not to “laugh out loud.” The internet was not amused. Nor was Western Mail publisher Trinity Mirror, which responded, “We apologize for any offense this error may have caused.” – Robert Andrews

AT&T’s face-off over FaceTime

Trying to convince your customers, the public and your regulators that you’re just a big, cuddly carrier without an anticompetitive bone in your body? Maybe blocking a wildly popular app that happens to compete directly with your core service isn’t the best way to score points. Oh, but wait, AT&T didn’t block FaceTime over its cellular networks. You could use Apple’s video chat app to your heart’s content if you signed up for one AT&T’s (more expensive) family share plans. It’s not every day that a carrier stifles competition and jilts its customers for more money in a single brush stroke, but Ma Bell is a very efficient painter. Eventually consumer protests and the threat of the FCC involvement caused AT&T to backtrack. It offered FaceTime over cellular to more subscribers, and sheepishly claimed it was just protecting its customers from the inevitable network overload FaceTime would bring. Okay, but if AT&T’s new fangled 4G networks can’t handle video, what was the point in building them? Email and Twitter updates? — Kevin Fitchard

Bravo’s Silicon Valley startup trainwreck

Silicon Valley has been abuzz with Randi Zuckerberg’s Bravo reality show “Start-Ups: Silicon Valley,” which attempted to portray the craaaazy lives of startup founders and their companies in the Wild West. However, the show has been widely panned by techies and journalists in the Valley, who are obviously underwhelmed by shots of people in the pool with iPads and dialogue like ”Silicon Valley is just…balls to the wall.” Of course there’s an element of hilarity to the shenanigans associated with tech startups in the Valley, but it doesn’t appear that Zuckerberg’s show will be the one to effectively dramatize it. And now that the final episodes are being downgraded to a 4 PM PST time slot, looks like the show’s on its way out. – Eliza Kern

J.K. Rowling’s unreadable book

Getty Images

J. K. Rowling fans who’d preordered the ebook edition of her hotly anticipated new novel, The Casual Vacancy, were in for a surprise on September 27: Thanks to improper formatting by publisher Hachette, the ebook was literally unreadable, with a choice of two type sizes — microscopic or massive. Hachette pushed out a new file later in the day, but this was one of the biggest books of the year, and in 2012 there’s no excuse for failing to test an ebook before you release it. – Laura Owen 

VeriFone copies Square’s user agreement

VeriFone launched its mobile payment acceptance system Sail to compete with Square. But it went a little too far in emulating Square when it copied big chunks of wording from Square’s user agreement. When called on it by GigaOM, VeriFone cut about a third of its user agreement out to eliminate the copied text. – Ryan Kim

So who didn’t suffer a data breach?

Shutterstock/deepspacedave

So much for consumer confidence. In 2012, several of the biggest names in tech were forced to ask for users’ forgiveness after hackers gained access to customer records. In January, Zappos CEO Tony Hsieh apologized after hackers accessed names, email, billing and shipping address and scrambled passwords for potentially 24 million customers. And, in June, Yahoo, LinkedIn , Last.fm and eHarmony followed up with confessions of their own after a spate of hack attacks that compromised user passwords. In April, electronic transaction processing provider Global Payments also confirmed a data breach of 1.5 million credit cards. – Ki Mae Heussner

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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.

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But the fall, when it came, was fast and relentless.

Less than a month after the deal was struck, its architect, HP boss Leo Apotheker, was on his way out, replaced by Meg Whitman. A few months later, Autonomy CEO Mike Lynch walked the plank too. And this week things exploded as Whitman announced an $8.8 billion writedown of the deal amid claims of fraud and misleading accounting that the SEC and FBI are investigating.

Whatever the realities of the deal — and Lynch vigorously denies Whitman’s claims — the damage has already been done. And it’s not just to Autonomy and HP, either.

Transatlantic tough times

Here’s one deep, abiding result of this debacle that shouldn’t be ignored: it’s likely to sour any future dealings between America’s technology giants and their European counterparts. What Silicon Valley CEO, faced with a potential acquisition of a British company, is not going to remember Meg Whitman’s claims? And what acquirer will not let the fear of being undone — just like Apotheker was — color their decisions?

For anyone skeptically minded, Autonomy underscores an unhappy trend for transatlantic technology deals. So many of the biggest European tech exits have ended in ignominy, or at the very least obscurity. MySQL was bought by Sun for $1 billion shortly before it went supernova and got snapped up by Oracle. In 2008, Microsoft spent $1.2 billion buying Norwegian search company Fast; a few months later the company was charged with fraud for violating accounting rules.

And then there’s Skype. Rightly paraded as one of the great European software success stories, it has a checkered history. Before it was bought by Microsoft for $8.5 billion, of course, it had been acquired and then jettisoned by eBay, which wrote its original bumper purchase price down by $1.4 billion.

Negative patterns are hard to shake, and in meeting rooms from San Jose up to San Francisco, you can bet anyone talking to a British entrepreneur about a possible buyout is going to think of Autonomy and this mess.

And yet, and yet. The story is so much more complex. After all, eBay’s troubled purchase of Skype happened under the leadership of… Meg Whitman. Sound familiar?

Meanwhile, the Autonomy buy wasn’t just Apotheker’s deal: it also took place on the watch of HP’s board — a hyper-connected, super-smart group of the Valley’s best and brightest. I’m not just talking about Whitman herself, but also Marc Andreessen, the man worshipped by many as the new leader of the pack. Then there’s Ray Lane of KPCB, once a bright star now having his role reduced, and Alcatel-Lucent’s Patricia Russo — who, as the head of a French-American firm, has particular experience of the European-American situation. Let’s hope pressure continues on those individuals to see why they got things so very wrong.

Truth is, attempting to draw lessons from HP-Autonomy doesn’t get you far. The British company may be tarnished by the accusations, but HP is a mess, switching from one disastrous strategy to another without understanding what is happening to it. And because it’s impossible to separate the misinformed decisions from the bad ones, coming to a broader conclusion about how fit European technology companies really are would be terrible. Each deal should be looked at on its own merits, not in some gigantic cultural context stuffed with lies, fraud and unproven accusations.

Yet we know human nature, and we know it is a fickle, arbitrary thing. What a shame for everyone.

Meg Whitman photo courtesy of Shutterstock user drserg

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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™

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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.

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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.

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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.

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