Autonomy Founder Files Counter-Suit Against HP

By Chris Preimesberger  |  Posted 2015-10-02 Print this article Print

Autonomy founder Mike Lynch files a counter-claim against HP for $150 million in damages over allegations of financial mismanagement.

In many ways, mostly legal, it's certain that more than a few people at Hewlett-Packard now wish the company had never crossed paths with Autonomy.

There must have been a less problematic big data analytics company to acquire, but they didn't know it at the time. This is the one then-CEO Leo Apotheker, his staff and the board selected in 2011, and lawyers—not to mention residual headaches—have been prevalent ever since.

Litigation between the struggling U.S. IT giant and the former U.K. company's founders simply doesn't want to go away. On Oct. 1, Autonomy founder Mike Lynch filed a counter-claim against HP for $150 million in damages over allegations of financial mismanagement the U.S. company made about his software company in 2011.

This follows an April 2015 lawsuit filed by the Palo Alto, Calif.-based corporation against Lynch, which accuses him of misrepresenting the capabilities and the business books of Autonomy. Last June, HP came to a $100 million settlement with a group of shareholders who sued the company for the disastrous deal that they contended cost them billions of dollars of value.

HP, led by Apotheker at the time, spent $11.1 billion for the small, U.K.-based Autonomy company, which positioned itself as having the fastest big data search and analytics software on the market.  HP was in the process of transitioning itself to become more of a software and services-oriented vendor from its former market-leading role as one of the world's top server, storage and printer providers.

Even though some components of Autonomy are being used in some HP products, several sources within HP have told eWEEK that the company has never obtained anywhere near the value it expected to get when it bought the company four years ago.

Shortly after the transaction closed, HP was forced to take an $8 billion charge in its quarterly earnings to cover for what it called "inconsistencies" in the Autonomy books. HP also contended that the sales pipeline wasn't anywhere near what Lynch and his staff had projected.

In March, HP lodged a claim in London against Lynch and his former colleague Sushovan Hussain for damages of about $5.1 billion over their alleged mismanagement of Autonomy. HP charged that Lynch and Hussain had conducted a systematic and sustained scheme to make Autonomy look like a rapidly growing, pure software company, when in reality it was the opposite.

Lynch apparently has prepared a response to that lawsuit, and on Oct. 2, Reuters reported that he has documents that show HP was made aware of practices at Autonomy in a due diligence report prepared by KPMG.

Lynch, commenting to Reuters on the Oct. 1 lawsuit, said HP had made statements that were highly damaging to him and misleading to the stock market, and the company knew, or should have known, these statements were false.

"HP's own documents, which the court will see, make clear that HP was simply incompetent in its operation of Autonomy, and the acquisition was doomed from the very beginning," Lynch said.

Lynch said he hoped the claim would result in HP CEO Meg Whitman appearing in court.

"This is about dragging them to be accountable, to actually explain the chaos, the mismanagement and the internal warfare, and then the attempt to cover it up," he told Reuters.

HP said Lynch's lawsuit was a "laughable and desperate attempt to divert attention from the $5 billion lawsuit HP has filed and the ongoing criminal investigation."

"HP anxiously looks forward to the day Lynch and Hussain will be forced to answer for their actions in court," a spokeswoman told the wire service.


Chris Preimesberger

Chris Preimesberger is Editor of Features & Analysis at eWEEK. Twitter: @editingwhiz
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