Here's what Lynch, Hussain and HPE are saying about Autonomy pre-buyout due diligence

" Lynch and Hussain also accuse HP of not having understood that Autonomy's accounting system was subtly different from the American megalith's practices"

HP has plenty of experience in reseller networks across the world, including the UK, and therefore an appreciation of the accounting methods available. This is either a daft argument by Lynch and Hussein and they will be exposed for it, or, HP really dropped the ball here because they have the internal experience to know how this stuff works.

One of the biggest issues with financial due diligence is that 90+% of the time management are just looking for confirmation of a decision already made. It's very unusual to get as far as DD and not complete the transaction.

Looks like very poor DD

... the key thing when buying a SaaS business and conducting DD, is to look at the *quality* of the revenue, the recurring nature, the amounts which are not recurring. I think this seems to be (but obviously I have not read the mountains of legalese) a case of insufficiently thorough DD... the seller in a deal is expected to be 'coy'... the buyer therefore hires massive teams of expensive accountants and lawyers to look into this. Looks to me like HP were keen to announce to a fixed deadline, so took some expensive shortcuts. Caveat emptor and all that.

HP argued that it "never crossed the minds" of KPMG's due dil team "that Autonomy was making substantial sales of third party hardware on a standalone basis (i.e. pure hardware sales)".

It never crossed their minds?!? Now that's a lame excuse.

KPMG were doing due diligence it's their job to look under every stone and even it that dusty cupboard buried behind all the broken furniture.

HP has a major problem here

The whole chain of "Ich habe es nicht gewußt" arguments from HP's side got problematic from the moment there was evidence that HP's CFO (whose actual job it is to have a look at stuff that involves $$$) strongly, even aggressively advised against the deal.

I'm not sure she did this on the basis of a deeper insight or simply because there was in general a serious mismatch between the value of Autonomy and what HP was going to spend, but the evidence that her objections were overruled is not going to help HP here.

Personally I think that Leo's balls are on the line here - for whatever reason, he made the wrong call. That he then later discovered he had even less than thought is what made it worse, but he's now attempting to use that to make it appear that that was the whole reason for the write off.

I would be surprised if that one will fly, Lynch isn't stupid either.

Reckon I'll start a business and flog it to HP for a few £Billion - how hard can it be if they only spend a few minutes on due diligence?!

Anybody need any more popcorn?

HP should

Just go home and hide under the blankets. What a farce

Leo for Planetary Idiot

Any large software house will sell some hardware and third party software licenses when necessary to close a deal. There are parallels with other businesses were a company will sell additional stuff to sweeten the deal for the customer. The customer gets one-stop-shopping with one vendor to yell at if something does not work and the vendor gets a large contract with more control over the subsystems. Do right this is a win-win for both. So it does not surprise me that Autonomy was selling hardware and third party licenses and I also would not surprise if HP would do the same including third party hardware. So Leo is not the village idiot or national idiot but the planetary idiot for not having a clue or being willfully arrogant believing he next in line to God.

Stuff and nonsense, vs stuffing

Can anyone remind me what "channel stuffing" meant in IT vendor terms, back in the day?

Would the likes of KPMG etc be familiar with the term and the implications? How about the board of HPQ?

HP feel the same way I felt after buying one of their printers.

Motivated reasoning

Another factor might be that Leo Apotheker-- a software guy brought in specifically to transition HP to a pure "services" outfit and looking to reduce HP's dependence on hardware sales-- simply saw what he wanted to see in Autonomy's figures and disregarded how much of their money was coming from hardware sales. None so blind etc.

The CEO always wins

Don't shed any tears for poor Leo Apotheker . Like his predecessor, former CEO Mark Turd, he was handsomely rewarded with a fabulous severance package when he was fired. HP had been one disaster after another since the days when Carly Fiorina became CEO. Each subsequent CEO had also failed the shareholders and employees while walking away with millions after being fired. This is the sad state of affairs in US corporations these days. There is no downside for a CEO to fail.

How does this amount to fraud

'HP argued that it "never crossed the minds" of KPMG's due dil team "that Autonomy was making substantial sales of third party hardware on a standalone basis (i.e. pure hardware sales)'

HPs lack of knowledge of Autonomy's business cannot be blamed on anyone but themeselves and some of the things they claim not to have known defy believe.

"is clear in his evidence that he knew about Autonomy's appliance sales, but that at no point did anyone from Autonomy tell him that Autonomy was reselling third party software as part of its business".

How could Autonomy avoid reselling 3rd party software such as OS licenses? How could anyone imagine that they didn't?

The impression so far is of a reckless and cavalier HP buting Autonomy without no understanding, analysis or even interest in the details of the business. Yes they paid wildly over the odds but why should the seller be responsible for the buyers gross incompetence and recklessness?

As HP's case implodes what does this say about Hussain's conviction and the ability of the US legal system to fairly handle disputes between US companies and foreign companies?