Oracle, Autonomy Trade Barbs Over Impending Sale to HP

 
 
By Chris Preimesberger  |  Posted 2011-09-29
 
 
 

It isn't necessarily news when Oracle and another company become embroiled in a war of words and egos, because it happens quite often. Oracle, never a shrinking violet, has been known to be proactive in corporate skirmishes with competitors from time to time.

It is more newsy, perhaps, when the argument involves a company that most of the world has never heard of. Oracle usually picks on companies its own size or larger, such as IBM, SAP and Hewlett-Packard.

This time the opponent is Autonomy, a U.K.-based content management, search and storage software provider with 1,800 employees, a stockpile of new-generation software and a large measure of what some people call "balls."

HP, a former Oracle partner now turned competitor, is tangentially involved here, being in the closing stages of acquiring Autonomy for $10.3 billion. In fact, Autonomy's shareholders are scheduled to vote on the acquisition on Monday, Oct. 3.

Was Autonomy Shopping Itself Around?

At issue here is whether Autonomy "shopped" itself around to other companies before HP decided to go for it. If this is true, it makes Autonomy look awfully cheap for trying to market itself, although companies do this out of the public eye all the time. Oracle's implication also is that HP was foolish for paying so much for such a company.

If it is false, it makes Oracle look like a bully in bad-mouthing Autonomy. Of course, Oracle acting like a bully isn't particularly unusual. Ask any of the Tier 1 companies noted above about that.

The current disagreement first flared up on Sept. 20, a month after the HP deal was announced, when Oracle CEO and founder Larry Ellison (left) told listeners on the company's quarterly earnings call that "Autonomy was shopped to us. We looked at the price and thought it was absurdly high. We had no interest in making the Autonomy acquisition. We think we are much better off with a couple of smaller acquisitions, and continue to innovate in that area."

Autonomy CEO and founder Mike Lynch took exception to Ellison's remark, stating Sept. 23 in an interview that in fact Autonomy did not "shop" itself in a meeting on the Oracle campus last spring and that he preferred HP because it "doesn't have a legacy position it has to protect."

Lynch (right) stopped short of calling Ellison a liar. In a Wall Street Journal article a few days ago, Lynch described Ellison's remarks as "inaccurate." Later, to eWEEK, Lynch said: "Oracle seems a little confused about the sequence of events and origins of the data it has received."

Oracle retaliated with a couple of email blasts Sept. 28, saying in corporate statements that "either Mr. Lynch has a very poor memory or he's lying." Oracle then produced copies of two PowerPoint presentations detailing Autonomy financial information plus several market-related charts showing everything "up and to the right" for Autonomy. They certainly appear to be documents that could be used to promote the sale of Autonomy.

You can access those docs here; they are entitled "Please Buy Autonomy" by someone at Oracle.

Those PowerPoints, plus the fact that when Lynch visited Oracle last spring to talk to President Mark Hurd, he brought along well-known investment banker Frank Quattrone, whose business is buying, selling and brokering deals for companies.

In fact, eWEEK has obtained an email from Quattrone to Hurd, dated Jan. 26, 2011, that discussed Autonomy. Here is the email in its entirety:

Hi Mark,
It was great to catch up earlier this month. I wanted to follow up by sending the slides I promised on Autonomy. Given its strong position in managing unstructured data (such as video, voice and photos), "meaning based" contextual enterprise search, data protection, compliance, archiving and content/web management, I beleive it's a very strategic asset that could alter the balance of power in the industry for whoever might acquire it. And despite its strong track record of growth and very high profitability (50 pct margins), it trades at less than 20x earnings and around 11x Ebitda, huge discounts to the other strategic software assets of scale. Please let me know if you would like me to follow up with you, Doug K or otherwise.

Thanks
Frank

So this is why Oracle contends that Autonomy was marketing itself for a sale. At least that's Oracle's side of it.

Autonomy's Side of the Story

Lynch countered that on Sept. 29 with an email to eWEEK that states: "In April 2011, there was a meeting for approximately 30 or 40 minutes between Autonomy and Mark Hurd, which was set up by Frank Quattrone as an introduction to Mark Hurd. Oracle is an Autonomy customer. It was made clear that Autonomy was not for sale and no sale process was under way. Mr. Quattrone's company was not engaged by Autonomy at that time.  There has been no other contact with Oracle since then.

"It may well be that investment banks were independently recommending Autonomy as an acquisition target to industry players -- that is standard practice -- but this would not have been at our behest. Qatalyst (Quattrone's San Francisco-based company) have informed us that the slides Oracle has recently posted on its website were prepared and sent independently by Qatalyst to Oracle on 26 January (the content is clearly from January).  This is the first time we have seen them. 

"Autonomy was not involved in this nor was Qatalyst engaged by Autonomy until mid-year. Autonomy did not present these slides in the meeting.

"Oracle seems a little confused about the sequence of events and origins of the data it has received, something that would suggest it needs better management of and insight into the unstructured data on its internal systems. We would be delighted to help."

That raises a separate question: If Oracle is an Autonomy customer, why isn't it managing its unstructured data with the Autonomy software? Of course, it may be possible after this spat that Oracle won't be a customer of Autonomy's anymore -- especially after the company joins the HP kingdom.

Quattrone did not return an eWEEK request for comment on Sept. 29. Oracle and Autonomy didn't have anything more to say, either.

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