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back to article HP 'KNEW' about Autonomy's hardware sales BEFORE the whistle blew: report

HP knew about Autonomy's hardware and reseller sales long before a whistleblower pointed them out and the company wrote down its acquisition by $8.8bn, the Financial Times has claimed (paywall), citing emails and Deloitte audit reports. HP has accused Autonomy of "accounting improprieties, misrepresentations and disclosure …

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Silver badge

HP knew...

"HP knew about Autonomy's hardware and reseller sales long before a whistleblower pointed them out and the company wrote down its acquisition by $8.8bn, the Financial Times has claimed"

Colour me unsurprised...

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Headmaster

Re: HP knew...

Hmmm... Not sure you can actually undo a surprise. Once you have been surprised, that surprise remains forever (for varying lengths of forever). I think you need to use "not surprised" - i.e. the surprise never happened in the first place. ;-)

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Headmaster

Re: HP knew...

No banana for you...

Unsurprised

1.not feeling or showing surprise at something unexpected.

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Re: HP knew...

Colour me unsurprised...

Out of the following colors: CYAN, MAGENTA.

Please call support for another cartridge.

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Anonymous Coward

Prepare for a huge class action

Aimed at Meg and her cronies.

Sad to see a once great company in such a state.

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Stop

Re: Prepare for a huge class action

Would that inlude Leo Apotheker, the disastrous CEO before Meg Whitman whose decision to purchase Autonomy at a significant premium to market value, but without real due diligence, was in part, following other disastrous decisions by him, the cause of the 40% loss of market value under his tenure, following the prior decision of SAP not to extend his contract as CEO having reviewed his performance in that role.

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Re: Prepare for a huge class action

>Would that include Leo Apotheker, the disastrous CEO

Or HP could ask for its $10m back.

Ha ha ha.

Such a shame that what used to be a great engineering company is now a great example of how not to run any company.

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Re: Prepare for a huge class action

"Such a shame that what used to be a great engineering company is now a great example of how not to run any company."

Quite right, and I'm afraid it's been like that for a long time now. The only thing they've got left that is interesting is memristor, and the sooner they bring it to market the better.

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Anonymous Coward

Caveat emptor

I think there are 3 core possible acts that led to the issue:

1) HP did not carry out sufficient due diligence

2) HP relied entirely on Deloitte's report and that report was inaccurate

3) Autonomy lied to Deloitte and their accountants

.

if 1) then HP should shed some more Board members

if 2) then HP should sue Deloitte and their own consultants used in the deal

if 3) then some Autonomy directors will go to jail and face financial consequences

.

Is this oversimplified ?

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Anonymous Coward

Re: Caveat emptor

The autonomy directors have already flown the coop.

It's the classic tale of big company buys small company, makes directors rich (the people who built the company up) and then pisses off directors who leave. Resulting in big company having lost all the expertise they acquired.

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Re: Caveat emptor

The only people who thought Autonomy was a good buy were on the HP board. Lest we forget, Autonomy was shopped to Oracle before it was sold to HP. Oracle laughed at them and at HP, and did so publicly. In fact, Larry Ellison is probably still laughing two and a half years on:

http://www.oracle.com/us/corporate/features/please-buy-autonomy-503330.html

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Happy

Re: Caveat emptor

I had a look at those Oracle press releases (and the slides). It's very refreshing to see such blunt language in a corporate press release. Mike Lynch really hasn't been telling the whole truth here.

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"We still have his PowerPoint slides.”

Not only is Oracle's language delightfully blunt, but the man who made the decision, Mark Hurd, used to be CEO of HP...

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Anonymous Coward

Re: Caveat emptor

"It's the classic tale of big company buys small company, makes directors rich (the people who built the company up) and then pisses off directors who leave. Resulting in big company having lost all the expertise they acquired."

I know nothing of what happened at Autonomy but Having Been There, Done That wrt takeovers, it's not just the directors who leave.

The remaining employees get snowed under by new paperwork systems which appear to be designed to thwart the levels of customer service they were once proud to provide.

Exeunt key technical non-director staff as well.

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Re: Caveat emptor

http://www.oracle.com/us/corporate/features/please-buy-autonomy-503330.html

Link has disappeared.

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Thumb Up

Re: Caveat emptor

Seems to work just fine. 4 links, two with epic burn, plus two with PP slides for evidence.

Never thought I'd see something that raises Oracle in my esteem!

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This post has been deleted by its author

Anonymous Coward

Re: Caveat emptor

"Mike Lynch really hasn't been telling the whole truth here."

Well, plainly there was enough truth for companies like Oracle to decide they didn't want to buy Autonomy. If HP want their legal case to stick they'll have to explain why Oracle was bright enough to make the right decision and why HP was not.

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Joke

Re: Oracle press releases

I took a look at the first one listed on the linked page (the one dated September 28, 2011), and could not help but note the date of Mr. Lynch's visit to Oracle:

April 1, 2011, quoting from that press release:

... ‘Some bank’ did not just happen to come to Oracle with Autonomy ‘on a list.’ The truth is that Mr. Lynch came to Oracle, along with his investment banker, Frank Quattrone, and met with Oracle’s head of M&A, Douglas Kehring and Oracle President Mark Hurd at 11 am on April 1, 2011. After listening to Mr. Lynch’s PowerPoint slide sales pitch to sell Autonomy to Oracle, Mr. Kehring and Mr. Hurd told Mr. Lynch that with a current market value of $6 billion, Autonomy was already extremely over-priced. The Lynch shopping visit to Oracle is easy to verify. We still have his PowerPoint slides.”

Wouldn't it be fair to say that Hurd & Co recognized Autonomy as an "April Fool's Day Joke"??????

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Re: Caveat emptor

It's still there,,, I just read it. Pretty damning of Autonomy CEO and shill.

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Re: Caveat emptor

Not over simplified at all.

I don't actually care one way or the other. either they knew or didn't. They paid over the odds for somethign that turned out to be less than was expected. I suspect thier customers know the feeling.

welcome to capitalism, lads. How do you like them apples?

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Re: Caveat emptor

I, too, have just reviewed the press releases and slides. In my view any claim that these indicate Autonomy was shopping itself to Oracle are unfounded. The slides show lots of financial information, client lists, publicly available trading statistics, etc but if you've never been on the receiving end of a product sales pitch you will recognize this type of content. Almost every pitch to sell high end anything includes this stuff. Moreover, why would a company pitch itself at $6bn on the basis of these financials?

My take (which is worth the cost of these bytes) is that Lynch did not try to sell itself to Oracle regardless of Hurd's interpretation of the meeting. He and Quattrone may have talked about their valuation of the company but, hey, everyone has inflated ideas of the value of their possessions, right? And if they think they have gem, why not flaunt it? If they approach Oracle with the intention of being first tier partner would the slides look any different? I suspect not.

However, maybe, just maybe, this meeting with Hurd could be interpreted by HP staff as interest by Oracle in Autonomy. If so, and if I were in that position, I'm not sure I'd be in a hurry to pour cold water on it.

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Re: Resulting in big company having lost all the expertise they acquired.

If Autonomy were improperly recording revenues before they were purchased by HP, seems to me that's not the sort of expertise you want in your company in the first place.

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Re: Caveat emptor

Not oversimplified, but you did leave out one possibility in the universe of all possibilities:

4) HP knew about the improprieties BEFORE the purchase.

So far nobody is suggesting that. It would be quite a game changer if it enters the equation.

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Re: either they knew or didn't.

Almost, but not quite that simple. WHEN they knew is also important.

If they found out after the sale was completed that's one set of circumstances. I'll make a small allowance for them not announcing it as soon as someone reported it to them. At that point it is still an allegation, and there's a fiduciary responsibility to the stockholders to avoid spooking the market without good justification. Not sure that is a full year's allowance, but I expect they need some time to determine what the actual facts are.

If they had any knowledge, even a hint, BEFORE the sale was completed, they are in a world of hurt from investor lawsuits.

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Boffin

Re AC 101 Re: Caveat emptor

"....Larry Ellison is probably still laughing...." Given Larry's habit of dissing any company bought by the competition I'd suggest he is not exactly likely to have applauded any hp purchase (especially seeing as, at the time, he was rapidly losing his lawsuit against hp for support of Oracle on hp Integrity servers). But Lynch was hawking Autonomy around at the time, and Oracle do seem to have a the sales slideset.

Knowledge of Autonomy's problems with hardware "discounting" does not show that hp had clear knowledge of Autonomy's accounting practices before the practice, indeed the article mentions the hp execs' problems of trying to unravel the deals without full access to the information concerned. At worst, you could suggest Leo was unwise to go ahead with the purchase without a clearer view, or that he ignored Deloitte's findings, but then I suspect he would claim the "value" of the Autonomy software outweighed the risks.

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To the Americans getting all upset over this...

.. I have one word 'Ferranti'.

One has to be old enough to remember the early nineties to appreciate how this could be seen as ironic payback.

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Anonymous Coward

Re: You beat me to it

Compared to Ferranti though, this is really a very mild fucking over.

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Anonymous Coward

HP has to be the more inept and badly run company around.

They would be better closing the company down and giving all the money to the shareholders.

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Facepalm

So HP's defense is they didn't know Autonomy were selling HP kit?

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Facepalm

So HP's defense is they didn't know Autonomy were selling HP kit?

I wouldn't be surprised if some of HP's executives didn't know that HP sold HP kit!

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they didn't know Autonomy were selling HP kit?

Not quite. They were selling Dell kit below cost to jack up sales numbers. HP say that was one of the surprises they didn't know.

But they failed to sell HP kit at full price after HP bought them.

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Errr...Autonomy is a software company and doesn't sell hardware much?

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Anonymous Coward

"Autonomy is a software company and doesn't sell hardware much?"

"Autonomy is a software company"

Allegedly.

" and doesn't sell hardware much?"

Ah well, it all depends what you mean by "sell". Book revenue for selling hardware, yes they seem to have done that.

Beyond that, it gets a little greyer.

Allegedly.

Pleny of places to read. Some of them more for entertainment than facts.

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Anonymous Coward

At least they've found a good way

Of stopping Karl Icann buying stock to leverage a share buyback

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The things you can do with the Internet instead of going to bed

Phantom You

Mahout Pony

Amount Hypo

HP Autonomy

Sad or what?

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You're damn right they knew...

...but nobody could prove it until now.

NOBODY cuts billion dollar deals without a rectal probe on high magnification.

Bad deals aren't about lack of due diligence at that level, it's about the skim.

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Re: You're damn right they knew...

Nobody has yet alleged that HP knew BEFORE the deal. The current allegation is that HP knew after the deal was complete, but a year before they announced it. Unfortunately in the legal roulette world of publicly traded companies, if you announce an allegation of fraud at your company without a fair amount of proof, if it turns out the allegation was unfounded you are subject to essentially the same lawsuits as if you don't announce it when you have the proof. If you're a decision maker in that sort of damned if you do, damned if don't environment, I can see the logic of holding off the announcement. I can also see the corruption problems that come with those types of decisions.

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