How fast things turn round. When Hewlett Packard’s (s HPQ) $11 billion deal to purchase Autonomy hit the headlines little more than a year ago, it was hailed as a victory for the British tech sector. Sure, the price was high, and HP’s strategy unclear, but this was a solid company with some interesting technology — a big win for the local scene.
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 (s ORCL). 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 (s MSFT). 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 (s 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