Close
  • Latest News
  • Artificial Intelligence
  • Video
  • Big Data and Analytics
  • Cloud
  • Networking
  • Cybersecurity
  • Applications
  • IT Management
  • Storage
  • Sponsored
  • Mobile
  • Small Business
  • Development
  • Database
  • Servers
  • Android
  • Apple
  • Innovation
  • Blogs
  • PC Hardware
  • Reviews
  • Search Engines
  • Virtualization
Read Down
Sign in
Close
Welcome!Log into your account
Forgot your password?
Read Down
Password recovery
Recover your password
Close
Search
Logo
Logo
  • Latest News
  • Artificial Intelligence
  • Video
  • Big Data and Analytics
  • Cloud
  • Networking
  • Cybersecurity
  • Applications
  • IT Management
  • Storage
  • Sponsored
  • Mobile
  • Small Business
  • Development
  • Database
  • Servers
  • Android
  • Apple
  • Innovation
  • Blogs
  • PC Hardware
  • Reviews
  • Search Engines
  • Virtualization
More
    Home Latest News
    • Storage

    HP Still Fighting Battle With Autonomy Founder

    Written by

    Chris Preimesberger
    Published January 2, 2013
    Share
    Facebook
    Twitter
    Linkedin

      eWEEK content and product recommendations are editorially independent. We may make money when you click on links to our partners. Learn More.

      Hewlett-Packard, which revealed Jan. 2 that it is again considering trimming businesses that aren’t bringing in positive cash flow, is still fighting a nightmarish battle with the founder and former CEO of its most expensive recent acquisition, Autonomy.

      Until the iconic IT company resolves this problem—either by wrestling with Autonomy to make the division profitable, selling it off or closing it down completely—this conflict will not go away.

      HP filed its requisite 10-K with the Securities and Exchange Commission on Dec. 27, and in it, CEO Meg Whitman said the company is continuing “to evaluate the potential disposition of assets and businesses that may no longer help us meet our objectives.”

      However, it said little about the $8.8 billion write-off of the $11.3 billion Autonomy acquisition that closed back in October 2010—one of the biggest problems the company currently faces.

      Autonomy was supposed to be the long-term answer for HP’s software business, but instead it has been one headache after another.

      HP Claims ‘Serious Accounting Improprieties’

      HP claimed during its quarterly earnings conference call last November that Autonomy had committed “serious accounting improprieties, disclosure failures and outright misrepresentations … that occurred prior to HP’s acquisition of Autonomy and the associated impact of those improprieties, failures and misrepresentations on the expected future financial performance of the Autonomy business over the long term.”

      Among other things, Autonomy makes search engines that help companies find vital information stored across computer networks. Acquiring it was part of an attempt by HP to strengthen its portfolio of high-value products and services for corporations and government agencies.

      Among the tricks used at Autonomy, Whitman said on the conference call, was that it had been booking the sale of servers as software revenue and claiming the cost of making the machines as a marketing expense. Revenue from long-term contracts also was booked up front, instead of over time, Whitman said.

      Founder Criticizes HP in Letter to Media

      After the 10-K was filed last week, Autonomy creator Mike Lynch criticized HP in a letter to media, stating that HP in the report “again failed to provide any detailed information on the alleged accounting impropriety, or how this could possibly have resulted in such a substantial write-down.”

      Although HP won’t dare say it at this time, Autonomy is probably on the table as one of the divisions that might eventually be sold off or even axed completely. After all, the huge all-purpose IT company basically admitted it made an $11 billion mistake when it claimed the $8.8 billion charge on its quarterly earnings reports in November, citing “serious accounting and credibility problems.”

      Although HP did not specifically name any of its numerous divisions as candidates for the recycling bin, drastic measures might be expected of a company whose stock has slipped more than 70 percent in less than three years.

      (See page 2 for Lynch’s letter and additional comments from HP.)

      HP Still Fighting Battle With Autonomy Founder

      Here is Lynch’s letter in its entirety:

      “HP is backtracking. … We urged Meg Whitman to use HP’s annual 10-K filing to provide a full explanation of the allegations of accounting impropriety at Autonomy, which she made on Nov. 20. Unfortunately, she did not do so. HP finally filed its 10-K yesterday, more than a week later than usual, but again failed to provide any detailed information on the alleged accounting impropriety, or how this could possibly have resulted in such a substantial write-down.

      “HP’s failure to provide us and its own shareholders with clarity on these crucial issues does not come as much of a surprise. Ever since putting out those very serious but nonspecific allegations last month, HP has refused to disclose either the substance of its allegations or any supporting evidence.

      “In fact, HP’s 10-K filing appears to raise many more questions than it answers. Having had further time to study HP’s filing since it was released (on Dec. 27), it is apparent that a number of the statements contained within the filing are materially different from HP’s previous commentary on these issues. It also appears that the company is backtracking on a number of key points that underpinned its original allegations:

      1. How much of the Autonomy write-down is actually being blamed on accounting improprieties?

      “In its Nov. 20 statement, HP stated, “The majority of [the Autonomy] impairment charge, more than $5 billion, is linked to serious accounting improprieties, misrepresentation and disclosure failures” committed by “former members of Autonomy’s management team.” However, HP’s 10-K filing refers much more equivocally to a $5.7 billion goodwill impairment charge that “incorporates” the alleged accounting improprieties at Autonomy. So how much of the $5.7 billion is being directly attributed by HP to accounting improprieties, and how much should in fact be attributed to other changes in business performance, earnings projections and discount rate?

      2. Does HP have facts or beliefs?

      “In its Nov. 20 statement, HP was definitive in accusing “former members of Autonomy’s management team” of “serious accounting improprieties, misrepresentation and disclosure failures,” stating these matters as fact. However, HP’s 10-K filing is materially weaker, referring to its interpretation of accounting improprieties, which it “believes” to have taken place at Autonomy. Why did it make such definitive assertions before any independent assessment of the matter, and why is it less confident now than it was a month ago?

      3. Why does the 10-K contain less detail than its last statement?

      “HP’s Nov. 20 statement clearly leveled the accusations at “former members of Autonomy’s management team.” However, HP’s 10-K filing does not repeat—let alone expand upon—this specific detail, or indicate who it is accusing of wrongdoing. Every time we ask for more information, we get less.

      “Today we renew the call for HP to release the PwC report on which its allegations are based, along with any other relevant supporting evidence that was behind the statements of Nov. 20, and explain the material differences between those statements and the 10-K.

      “It is time for Meg Whitman to stop making allegations and to start offering explanations.”

      HP had the following response to a query from eWEEK:

      “HP has been very transparent about the issues relating to Autonomy and the reasons why we announced an $8.8 billion noncash impairment charge on Nov. 20. As we have said previously, the majority of this impairment charge, more than $5 billion, is linked to serious accounting improprieties, disclosure failures and outright misrepresentations discovered by HP’s internal investigation into Autonomy’s practices prior to and in connection with the acquisition.

      “Our Form 10-K for fiscal 2012 is meant to provide the necessary overview of HP’s financial condition, including our audited financial statements, which is what our filing does. As disclosed in the filing, the U.S. Department of Justice advised HP that they have opened an investigation relating to Autonomy. HP is cooperating with the Department of Justice, the Securities and Exchange Commission and the UK’s Serious Fraud Office in this matter. We continue to believe that the authorities and the courts are the appropriate venues in which to address the wrongdoing discovered at Autonomy.”

      Chris Preimesberger
      Chris Preimesberger
      https://www.eweek.com/author/cpreimesberger/
      Chris J. Preimesberger is Editor Emeritus of eWEEK. In his 16 years and more than 5,000 articles at eWEEK, he distinguished himself in reporting and analysis of the business use of new-gen IT in a variety of sectors, including cloud computing, data center systems, storage, edge systems, security and others. In February 2017 and September 2018, Chris was named among the 250 most influential business journalists in the world (https://richtopia.com/inspirational-people/top-250-business-journalists/) by Richtopia, a UK research firm that used analytics to compile the ranking. He has won several national and regional awards for his work, including a 2011 Folio Award for a profile (https://www.eweek.com/cloud/marc-benioff-trend-seer-and-business-socialist/) of Salesforce founder/CEO Marc Benioff--the only time he has entered the competition. Previously, Chris was a founding editor of both IT Manager's Journal and DevX.com and was managing editor of Software Development magazine. He has been a stringer for the Associated Press since 1983 and resides in Silicon Valley.
      Linkedin Twitter

      Get the Free Newsletter!

      Subscribe to Daily Tech Insider for top news, trends & analysis

      Get the Free Newsletter!

      Subscribe to Daily Tech Insider for top news, trends & analysis

      MOST POPULAR ARTICLES

      Artificial Intelligence

      9 Best AI 3D Generators You Need...

      Sam Rinko - June 25, 2024 0
      AI 3D Generators are powerful tools for many different industries. Discover the best AI 3D Generators, and learn which is best for your specific use case.
      Read more
      Cloud

      RingCentral Expands Its Collaboration Platform

      Zeus Kerravala - November 22, 2023 0
      RingCentral adds AI-enabled contact center and hybrid event products to its suite of collaboration services.
      Read more
      Artificial Intelligence

      8 Best AI Data Analytics Software &...

      Aminu Abdullahi - January 18, 2024 0
      Learn the top AI data analytics software to use. Compare AI data analytics solutions & features to make the best choice for your business.
      Read more
      Latest News

      Zeus Kerravala on Networking: Multicloud, 5G, and...

      James Maguire - December 16, 2022 0
      I spoke with Zeus Kerravala, industry analyst at ZK Research, about the rapid changes in enterprise networking, as tech advances and digital transformation prompt...
      Read more
      Video

      Datadog President Amit Agarwal on Trends in...

      James Maguire - November 11, 2022 0
      I spoke with Amit Agarwal, President of Datadog, about infrastructure observability, from current trends to key challenges to the future of this rapidly growing...
      Read more
      Logo

      eWeek has the latest technology news and analysis, buying guides, and product reviews for IT professionals and technology buyers. The site’s focus is on innovative solutions and covering in-depth technical content. eWeek stays on the cutting edge of technology news and IT trends through interviews and expert analysis. Gain insight from top innovators and thought leaders in the fields of IT, business, enterprise software, startups, and more.

      Facebook
      Linkedin
      RSS
      Twitter
      Youtube

      Advertisers

      Advertise with TechnologyAdvice on eWeek and our other IT-focused platforms.

      Advertise with Us

      Menu

      • About eWeek
      • Subscribe to our Newsletter
      • Latest News

      Our Brands

      • Privacy Policy
      • Terms
      • About
      • Contact
      • Advertise
      • Sitemap
      • California – Do Not Sell My Information

      Property of TechnologyAdvice.
      © 2024 TechnologyAdvice. All Rights Reserved

      Advertiser Disclosure: Some of the products that appear on this site are from companies from which TechnologyAdvice receives compensation. This compensation may impact how and where products appear on this site including, for example, the order in which they appear. TechnologyAdvice does not include all companies or all types of products available in the marketplace.

      ×