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Autonomy misled HP about finances Hewlett Packard claims

November 28, 2012 By: Dr Search Principal Consultant at the Search Clinic Category: Computers, Ecommerce, Search Clinic, Technology Companies, Uncategorized

A row between Autonomy and HP is brewing overthe value of the company when it was taken over.Autonomy misled HP about finances Hewlett Packard claimsHewlett-Packard has asked US and UK authorities to investigate alleged misrepresentations of Autonomy’s finances before HP took over the UK software group last year.

HP said Autonomy appeared to have “inflated” the value of the company prior to the takeover as part of a “wilful effort to mislead”.

This led to a $5 billion (£3.1 billion) charge in its latest quarterly accounts.

The former management team of Autonomy “flatly rejected” the allegations. Three former senior members of staff, including former chief executive Mike Lynch, said they were “shocked” to see the statement.

“HP’s due diligence review was intensive,” Autonomy’s former chief executive, chief financial officer and chief operating officer said, referring to the process of investigating a firm prior to purchase.

“It took 10 years to build Autonomy’s industry-leading technology and it is sad to see how it has been mismanaged since its acquisition by HP,” the statement from the former management team said.

During a conference call following the announcement, HP chief executive Meg Whitman said: “We did a whole host of due diligence but when you’re lied to, it’s hard to find.

“Autonomy was smaller and less profitable that we had thought,” she said, adding that HP’s investigations suggested that the UK firm had misstated its revenues and growth rate.

Taking into account recent falls in HP’s share value and lower-than-anticipated returns from the merger, the total one-off charge recorded in HP’s accounts for the three months to the end of October was $8.8 billion, pushing the company to a $6.85 billion net loss.

Mike Lynch said” HP’s managed the company very badly,” he said. “It lost around half the staff before I left and the whole of the management team, and the value of the company has now fallen and they’ve been forced to write it off.”

“Today is the day they’re announcing the worst results in the 70 year history of the business and I think there’s a little bit of distraction going on here.”

Ms Whitman said HP had discovered a number of irregularities, including hardware sales that had been reported as software revenues, which inflated both overall revenues and profit margins. She said margins of between 40% and 45% had been reported, whereas HP now believed them to be between 20% and 28%.

As well as referring the matter to the regulatory authorities, the company would be “aggressively pursuing individuals responsible for this wrongdoing”, she added.

HP completed the takeover of Autonomy for $12 billion in October last year.

HP’s decision to buy the company was part of the US firm’s long-term plan to move away from making computers into the more profitable software business.

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