HP in Talks to Settle Shareholder Suit Over Autonomy: Reports

Hewlett-Packard executives reportedly are looking to settle an investor lawsuit over its troubled $11 billion acquisition of software maker Autonomy.

Citing unnamed sources close to the situation, both Bloomberg and Re/code reported that lawyers for both HP and the shareholders’ group met in San Francisco on Feb. 18 and that other meetings were scheduled for this week.

The movement toward a settlement comes soon after reports surfaced that, contrary to previous statements, HP senior executives knew about some of Autonomy’s sales methods and other issues with the software company even before a whistleblower came forward in May 2012 with details about questionable accounting practices.

HP bought the company in 2011, but a year later, the tech giant was forced to pay an $8.8 billion charge on the deal after financial and accounting problems were unearthed through an internal investigation prompted by the whistleblower’s statements. HP executives, including CEO Meg Whitman, put the blame squarely on Autonomy officials, saying in November 2012 that an internal investigation found that former Autonomy executives used questionable accounting and sales methods to inflate the company’s sales figures to mislead HP as well as investors.

Mike Lynch, founder and CEO of Autonomy who came over to HP after the deal, has pushed back at HP’s allegations, saying any problems stemmed from HP’s handling of the company after the deal.

HP has been sued by shareholders who said executives failed to do their due diligence before the deal closed and should have known about the accounting problems. Leo Apotheker was HP’s CEO at the time of the deal and would be replaced by Whitman a few months later. However, Whitman was on HP’s board of directors when the deal went through.

The Financial Times reported that documentations and emails between the two companies and viewed by their reporters indicated that HP executives knew about some of Autonomy’s practices earlier than they’ve said, which could contradict HP officials’ claims of ignorance of the sales issues at the company until after the whistleblower’s disclosures.

In a statement to Reuters, HP officials said that while they had learned of problems Autonomy had selling HP hardware after the deal was closed, they didn’t learn of accounting issues within the software company until a whistleblower raised the issue.

“Our investigation has shown that Autonomy often resold generic hardware at a loss in the last few days of the quarter with the sole purpose of masking its real financial performance,” the statement read. “In addition, Autonomy engaged in improper transactions with certain value-added resellers to create the appearance of software licensing revenue at the end of each quarter. In some instances, these transactions were used to accelerate revenue, and on numerous occasions, these were fabricated transactions with no real end-user.”