HP: Autonomy had us believing in a false IDOL HP has laid out the "accounting improprieties and misrepresentations" allegedly used by Autonomy to inflate its value just before HP bought the British biz. Hapless Hewlett-Packard yesterday took an $8.8bn bath on the acquisition following the findings of an internal probe. It said a senior member of Autonomy's leadership team …
AC #1:
I'd take anything Mike says which a massive pinch of salt, he couldn't even remember trying to dump his company on Oracle with similarly inflated value.
http://www.oracle.com/us/corporate/features/please-buy-autonomy-503330.html
AC#2:
I'd much rather listen to some anonymous hp astroturfer....
Dear AC #2,
1. At least AC #1 provided relevant reference material.
2. Criticizing an AC while posting anonymously yourself? Really? Have you ever head of the term hypocrisy? Pick a pseudonym and use it. As a bonus, you also get to use the wonderful comment icons (sample to the left).
Dear Register,
Love the expandable comment edit box! When did that come in? Now if you'd just let me do that with the article body so I don't have 1/4 of my screen wasted with a gray background ; P
I always reply anonymously to anonymous posts. or comments about anonymous posts I've made, obv. The majority of my posts aren't anonymous though.
I do it because anonymous posters irritate me and I think they should get a name. Instead of moaning about it I take non-violent direct action. I sometimes try and interject when an ac is arguing with a named poster just to show how confusing it makes things.
Yes, I should probably get out more.
I always reply anonymously to anonymous posts...because anonymous posters irritate me and I think they should get a name.
Think about the logicl of that for 5 seconds, please. And if you don't see the problem, think again. If you still don't see the problem, kindly FO.
(Here's a hint: it only reinforces my allegation of hypocrisy.)
Is HP honestly expecting people to believe that if the channel stuffing and hardware resell did not occur that $10 billion would have been a fair price, but now that a few million of hardware was sold on software contracts and some revenue was potentially booked early by selling it to the channel, they think a fair price is $1 billion. These two, relatively minor, discrepancies account for $9 billion or so worth of value? HP massively overpaid for this company as everyone said from day one. Now they are trying to make people look at a few trees so they don't see the forest.
HP obviously believe they've been shafted here, given that they've just mightily crapped upon Autonomy's products and brand. Who's going to buy em now? 75% markdown? They may as well have written off the entire cost of acquisition, given their actions. But then, given that they spanked $12bn on Autonomy in the first place, I guess it would be unwise to assume that HP knows what it is doing.
Still, there may yet be silver linings... I'm hoping that the auditors get royally shafted here. Seldom do Deloitte and KPMG get the public kicking they so richly deserve.
Autonomy were a mess of a company. HP screwed up royally in buying them, and feel that the value of shouting about fraud is greater than the value of not doing so. Many financial blogs at the time said this was a very bad move. Please see the fine Bronte Capital blog posting today: http://brontecapital.blogspot.co.uk/2012/11/hewlett-packard-and-autonomy-notes-from.html.
It's still around. Rather than following the posted link as a URL, stick it into your favourite search engine and you should still find it.
E.g. I found it at http://brontecapital.blogspot.co.uk/2012/11/hewlett-packard-and-autonomy-notes-from.html
It begins:
"A few weeks ago I presented at the Santangels conference in New York. The conference was held under Chatham House rules.
My topic: how to fake your accounts from the perspective of the fraudster (and hence how as an investor to tell if a company is faking its accounts).
At the end I suggested that even if you were right and the company was a fraud you could still short the stock and lose money - someone with deep pockets might buy the fraud. The example I gave was Autonomy which was purchased by Hewlett Packard.
Yesterday Hewlett Packard admitted that Autonomy was a grotesque fraud. They wrote off most of the purchase price."
"E.g. I found it at http://brontecapital.blogspot.co.uk/2012/11/hewlett-packard-and-autonomy-notes-from.html"
Interesting read.
Looks like the Accounting function at HP (who presumably oversaw the due diligence from the HP end) can't add up.
Not good when you' re splashing that kind of cash.
I read the article yesterday; from memory, it mentions that due diligence was overseen at HP at one time (at the time of the bid?) not by Finance but by Technology (Shane Robison?).
Then again you'd have thought any technologist with a clue would have seen right through the Autonomy hype anyway. After all, if the FT Alphavile folks had known for years that there was little more to it than smoke and mirrors, why wouldn't HP's finest?
Brewery. Organise. Etc.
...HP went shopping with $9 billion in it's pocket and absolutely had to spend it. Why? Were they joping for a massive tax write-off? Whether they got suckered by valuations or ignored warning bells, they now claim it's someone else's fault that they chose to spend all that money. They didn't have to sign the deal, but this sounds like they wanted to buy something that would be instant profit to offset some of the shocking choices they've made recently. When it turned out that it would need a bit of effort to integrate, HP upper management went into default blame mode. HP is like a supertanker powered by tiny oars where all the divisions are rowing in different directions, none of it coordinated, and the captains argue about what colour the dining table should be.
Wasn't CF on the verge of buying three executive jets for herself? Then there's the webOS fiasco, EDS, the near sell off of the PC division, and now this. I imagine Autonomy's defence is going to be "this is HP we're talking about, mLud, self-extraction from wet paper bag with sharp knife not guaranteed".
And he's ignored my attempts to get in touch for the last 5.5years, for no good reason that I know of. So whilst I have no experience of them (the last I heard he was involved with DLR auditing as I was doing a uni project where passenger number logging would be of interest) it wouldn't matter to me if they did get a kicking in public.
"The other major bone of contention is the reporting of licensing deals with resellers rather than with end-customers. HP said this was to 'inappropriately accelerate revenue recognition, or worse create revenues where no-end user customer existed at the time of sale'."
Isn't this the first thing any due diligence ought to pick up? It has been historically commonplace with software companies.
HP knew it was paying over the over the odds in terms of value, that's why it allocated 6.8bn as goodwill on the balance sheet. A write down of 5bn is far in excess of any reputed dodgy figures.
In buying EDS, Palm and Autonomy, it spent some 26bn and has written down around 19bn. That's a pretty woeful record of paying over the odds for companies, not knowing what to do with them and losing their value, because of too many changes at the top table with differing and conflicting views and direction. The rot in fairness started when Mark Hurd was forced to leave but HP as a business has lost its way badly.
"In buying EDS, Palm and Autonomy, it spent some 26bn and has written down around 19bn. "
So they've taken $19Bn dollars of *shareholder* money (either the money could have paid to shareholders as dividends or the charges on the loans they raised will be met out of money that *could* have gone to shareholders) and basically flushed it down the pan.
Sounds like some of those shareholders should lawyer up as well and administer some "Conrad Black" style discipline to the board.
Gimp mask because on *that* basis that's pretty much what's happened to the stockholders.
"One further point, the goodwill still on the balance sheets far exceeds HP market capitalization currently..!"
And you know what happens to companies whose assets are worth *substantially* more than their market capitalization?
I hear the folk at OpCapita are at a bit of a loose end since Comet "unfortunately" went down the pan.
There's still a few nice chunks left that they could "release the value" of.
Coat as I think sensible HP staffers should be considering putting on theirs and going out the door.
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