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back to article Ex-Autonomy boss Mike Lynch goes nuclear: Claims HP 'misleads' its own shareholders

Mike Lynch, former chief of HP-owned Autonomy, tossed an explosive shareholder letter onto the internet today – just hours before HP's annual investors' meeting in Santa Clara, California. The scathing missive alleges Hewlett-Packard has been "misleading" its shareholders about the reasons behind the computer giant's $8.8bn …

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Anonymous Coward

Autonomy? Who?

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Anonymous Coward

By definition

If you have a company called Autonomy and it's taken over, it isn't autonomous any more. Hence the writedown.

Yes, I probably am quite stupid.

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Re: By definition

But not as stupid as HP.

Unless you have a few billion to spend on this software company that I have....

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Anonymous Coward

I'm not by an means a fan of HP.

Every time I see stuff from this guy in the media I read, I lean more and more towards the "hes a crook" viewpoint.

He should probably either shut up or say that he is "confident of being cleared" in the end.

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FAIL

I am not a crook

whilst I lean towrads agreeing with that assessment of Lynch, if it is true it means by extension that all HP's board are crooks too. Since they are legally required as part of both their internal role, and external roles as Officers of a Corporate to do due diligence on aquisitions.

In fact you have a matrix of 3 possible outcomes .

1. Crooked accounting + Crooked due diligence.

2. Legal but dubious accounting + crooked due diligence in the over-valuation of autonomy.

3. Perfectly legal accouting + crooked mismanagement of a multi-bn dollar asset.

In only one scenario is Mike Lynch a crook. In all 3 HP's board are "crooks".

Question for the commentards - can anyone come up with a scenario where HP's board arent either crooked or grossly negligent? The only one I can think of is if 2 sets of auditors (Autonomies and HP's) were both grossly negligent.

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Re: I am not a crook

Isn't "crooked accounting and piss poor due diligence" also a possibility? Knowing HP as I do, that latter half seems likely no matter what type of accounting Autonomy had.

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Joke

Re: I am not a crook

Own up Meg you down voted me didnt you?

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M7S
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@ ac "he should shut up"

That's a bit unfair. Given the tortuous length of time legal processes, especially transnational ones, can take and the apparent lack of progress, what's he supposed to do for work in the meantime?

Given the level at which he operates, it might be hard for any company or investor to be satisfied as to due dilligence of emploing him so until he is vindicated (if that is what happens, I appreciate the issue remains open) he's left in a potentially ruinous situation.

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Anonymous Coward

Re: I am not a crook

"Never ascribe to malice that which is adequately explained by incompetence." -

Said old Boney

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This post has been deleted by its author

coming out fighting

> either shut up or say that he is "confident of being cleared"

Why? That's how people react who are slavishly obeying a defence lawyer's advice. Lynch is coming out fighting. That proves nothing about the facts of the case; it does suggest that he's not too afraid of the truth.

s/Autonomy/Whatsapp/ and see how the real value of the acquisitions compare. This is a business full of BS valuations - apparently HP wasn't aware of this until recently.

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Anonymous Coward

Re: @ ac "he should shut up"

Although it's unlikely, this is possibly exactly what HP wants - to use their claims to keep him on ice so he can't work for, or start, a competitor.

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Re: I am not a crook

I'll go with the poor due dilligence. I accept that trying to get an acurate view of what a company is is very difficult but it still needs to be done. But often self stoked hubris kicks in

I am on the end of shit due diligence right now, trying to dig out what horrors of accountancy and fraudlent practices with company my employer has taken over. So I sympathise with HP, but the board of my company used more fel than numbers. Thank heavens for escrow agreements.

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Anonymous Coward

Re: I am not a crook

I accept that trying to get an acurate view of what a company is is very difficult

Corporations petitioned & lobbied, then lobbied some more to make it so. Now that they have succeeded, they can go on to eat their own swill and hopefully some of them will choke on it too!

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Re: I am not a crook

The whole 'due diligence' thing isn't nearly as in depth as you'd think. The regulatory requirements are easily satisfied and the Board has tremendous latitude in interpreting the findings of the parties doing the reviews/audits.

At the end of the day, due diligence is about building blame shifting mechanisms into the deal. The Board, nor the executive managment of the purchasing company will ever review anything other than somewhat more detailed versions of company financials and opinion letters from legal and accounting firms. As a final blow to transparency and accountability the Board will get opinion letters on the opinion letters then a 3rd party will come and perform a closed 'opinion vote' operation where they count the yea/nay votes and return the anonomized results and editorialized versions of each Members specific concerns (anonymous as well). If it looks like an official vote will suceed they'll schedule one and that's that.

Like I said, making sure that everybody has a legally valid way to shift any blame is what gives due diligence its value. There isn't a CEO alive who could even broach the topic of an $8+ billion acquisition without Board approval and that's generally always given and especially when they've brought in a new CEO to refocus the company.

Besides, I've never, not a single time in my career, met a CEO who actually understood the details of the stuff that makes a $1B or larger company actually work. Since most Boards are composed of past and current CEO's there actually isn't a lot of diligence capacity in any given Boardroom.

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Re: @ ac "he should shut up"

But he emerged from the takeover with about 800 million in the bank. Most of us could manage on that for a while.

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Re: coming out fighting

@Yes Me - Lynch is coming out fighting. That proves nothing about the facts of the case; it does suggest that he's not too afraid of the truth.

The suggestion that bullish behaviour is a sign of confidence in one's position, could just as easily be a simple confidence trick - i.e. bluffing.

It always reminds me of those people at work who try to get their way in meetings by being loud and confident about their position, rather than actually correct.

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Anonymous Coward

Read about him, he's not stupid. I have more confidence in him than HP.

http://en.wikipedia.org/wiki/Michael_Richard_Lynch

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Re: I am not a crook

Even if the auditors were grossly negligent, it's still HP's responsibility to shoulder and own it, not point fingers.

Meg and the board are consistently failing the company and its shareholders. They're failing to innovate. They're failing to hold one another accountable. There is no checks and balances, only poor results.

Her 5 year turnaround rhetoric got old a year ago. They are still performing below Hurd's numbers across the board.

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Anonymous Coward

" it uncovered numerous accounting irregularities at Autonomy prior to its acquisition by HP"

If it uncovered these serious issues before purchase why did it spend $11bn on them?

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Anonymous Coward

> " it uncovered numerous accounting irregularities at Autonomy prior to its acquisition by HP"

The claim is that the alleged accounting irregularities occurred prior to the acquisition, the discovery of them was post-acquisition.

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"If it uncovered these serious issues before purchase why did it spend $11bn on them?"

You inserted the word "serious" into that - the canned HP quote merely talked about irregularities. I'm sure they've previously claimed that the accusations were serious, but the more that HP squeeze out of their corporate sphincter, the more it looks to me that the irregularities weren't serious at the corporate scale.

In the world of software sales, there's all manner of technical accounting problems about how you recognise the value software licences that have a duration, how you handle service contracts revenues, how you value bundled hardware and software etc. I won't bore people with example problems, but there are no right answers, merely a range of judgement calls, where the business hopes its auditors and the taxman will accept its view of the way that is books sales. In my experience, all computing businesses sale close to the wind on accounting, looking to maximise sales revenue, because if you're a software business your investors don't value profits or safe accounting, all they want is growth - and then more growth. That's why actual accounting fraud and mistatement of results are so common amongst IT companies.

When the dust has settled, I guess that there will be a few token accounting errors proven in Autonomy's numbers, that these were not particularly material in the grand scheme of things, that Autonomy's audited accounts weren't too far off the mark, and that the big problem was HP's corporate incompetence that compelled them to pay a ludicrous sum of money without even understanding the business they were buying. However, if that's the case, and there is nothing revealed that world + dog have not already surmised, then you have to ask why HP's histrionic outburst? A cynic might suggest this is simply a smokescreen to divert attention from the fact that Mystic Meg and her gormless board cronies all rubber stamped this deal. By throwing this at the SFO and the lawyers, she's booted the whole issue into the long grass. It took the SFO seven years to bring criminal cases against the directors of Torex Retail after it collapsed due to blatantly fraudulent accounting in 2006: Who thinks that Meg will still be in the hot seat in 2021? But in the meanwhile she's asbestos against investors wanting to sack her and the other career goons on HP's board.

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Anonymous Coward

Ah yes, autonomy, the most over-valued British export since the ADE 651...

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Anonymous Coward

ADE 651

The difference is that the ADE 651 was obviously, to anybody with any knowledge of chemistry or sensing, a fraud. The mere fact that it was ever sold is a condemnation of the abilities of more than one procurement organisation; there was obviously no scientific or technical review involved whatsoever.

Autonomy had products that obviously work to some degree. Given the fantasy valuations of companies like Facebook and Whatsapp, there are obviously some very incompetent people out there valuing software companies. But there is a big gap from "not as good as stated" to "does nothing whatsoever and even a kid with GCSE chemistry and physics could see that."

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Anonymous Coward

Re: ADE 651

Its still going - in Egypt it can detect and cure AIDS.

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Paris Hilton

Get pragmatic dood?

Like politicians tell the truth, boards never put self interest first and always tell the truth?

Funny phrase alarm: wake up and smell the coffee dude?

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HP sucks

HP upper management needs to take a clue from JP Morgan who pretty much buried (after a lot of short term pain) a far worse acquisition (money lost, amount of fraud, worse due diligence, etc) Countrywide. They are both shysters but JP Morgan is far more slick and doesn't put its board disfunction out as much for the world to see. Probably because they are all Dimon's golfing/frat buddies. Did I mention both companies suck?

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Bullshitters bullshitting bullshitters....and making lots of money.....maybe? Total bullshit?

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Anonymous Coward

Genuinely feel sorry for the employees

And I was nearly one, once (before HP), but during the interview I decided that there's no way I'd enjoy working there.

This petty squabbling has probably done more damage to the output of the employees there than anything else. Great way to drive a company into the dirt.

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Anonymous Coward

Re: Genuinely feel sorry for the employees

Nah, only people who are all out of "blyat"s to give still work for HP

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Anonymous Coward

Re: Genuinely feel sorry for the employees

I worked there. Worst company I have ever worked for. I should have realized this when I saw the fish tank full of piranhas in the reception. You had a lucky escape.

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Re: Genuinely feel sorry for the employees

The entire HP saga is a sad story. I can think of no better cautionary example of how not to combine engineering with the business of engineering and the business of Wall Street. HP and a lot of the companies they assimilated were some of the best, well rounded and productive entities in high volume engineering. Truly well put together and run in a way that really encouraged Engineers with fulfilling work.

Those last two words, 'fulfilling work', embody a concept that is completely alien to financially focused people and because they don't understand it they come in and fuck everything up by diddling things they don't know how to diddle.

You can have fantastic engineering capacity and rake it scads of money as well. The key is balance, a mix between your highest value capabilities and the financial side of things. Not only does a proper mix of things make the machine run more efficiently, it's cheaper in even the medium term. Want a new CAD workstation, fine just get it. Same with conferences and trade shows that appeal to an individual Engineers specialty. Just go. Fly first class, get a fun car and a good room. Eat, drink and try not to kill anyone or get arrested. A $10,000 trip for your important people is about 11 metric fucktons cheaper than waging a never ending war with headhunters.

Unfortunately, HP lost that 'fulfilling work' characteristic a long time ago and it's a real shame. Being on the HP Board of Directors has become kind of like one of those old people communities that you go into with a private residence and move slowly into geriatric ICU before becoming a job creator for coffin makers, undertakers and land mine removal specialists (I had my yard mined for privacy purposes. That may not be a universal thing).

As everyone has stated, HP lost the plot a while back and are now no different than any of the zillions of tech companies out there. They suck.

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Anonymous Coward

Suck It Up !

Who cares, it's HP and the board and shareholders deserve everything that it gets. They treated their staff like cattle while looking for any excuse to a make a penny profit !

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