Former HP supremo Leo Apotheker didn’t even read the Autonomy accounts before signing off on the $11 billion deal.
Apotheker made the admission in cross-examination in the London High Court. HPE, HP’s successor company, is suing former Autonomy CEO Mike Lynch and the company’s chief financial officer, Sushovan Hussain, for $5 billion claiming that the pair had been responsible for masterminding an accounting fraud.
The 
war of words between HP and the former owner of Autonomy, Michael Lynch has ended up in a court battle in the UK.
The maker of expensive printer ink has lodged a claim in London against Lynch and a former colleague for damages of about $5.1 billion over their management of Autonomy, the company it bought in 2011.
Lynch will counter sue, seeking $149 million for loss and damage caused by HP’s accusations.
Autonomy was supposed to be the $11.1 billion centrepiece of a move to becoming a more SAP style software organisation. But a year later HP wrote off three-quarters of the British company’s value, accusing Lynch and his colleagues of financial mismanagement.
HP filed a claim against Lynch, the co-founder of Autonomy, and Autonomy’s former finance director Sushovan Hussain in the Chancery Division of London’s High Court on Monday, alleging they engaged in fraudulent activities while executives at Autonomy.
“The lawsuit seeks damages from them of approximately $5.1 billion,” the spokeswoman added.
Lynch, speaking on behalf of Autonomy’s former management, has consistently denied any impropriety, saying the loss in value of the company was down to HP’s mismanagement.
HP’s case might have been weakened by the fact that Britain’s Serious Fraud Office (SFO) said there was not enough evidence to secure a conviction of Autonomy’s former executives.
Maker of expensive printer ink HP has finally won court approval of its settlement with shareholders over its botched Autonomy deal.
US District Judge Charles Breyer in San Francisco granted preliminary approval to the accord Friday, saying that unlike the last proposal it doesn’t provide officers and directors with broad protection against possible lawsuits that have nothing to do with the Autonomy acquisition.
The settlement releases HP from investor claims related to Autonomy in exchange for a set of corporate governance reforms and no money damages.
Executives at HP and Autonomy have been spatting over who’s responsible for the $8.8 billion writedown related to the $10 billion 2011 takeover of the UK software company. HP blamed much of the writedown on inaccurate financial statements, said it was the victim of fraud by Autonomy’s managers. Former Autonomy executives say HP missed it all up.
They argued, HP should be forced to litigate the shareholder suit, because then it would have to reveal documents that the Autonomy bosses believe will exonerate them of any wrongdoing. That doesn’t seem likely to happen.
The governance reforms apply to both entities to be formed when HP splits into two companies.
The reforms include the creation of a senior executive-led risk management committee, modifications to board-level oversight of mergers and acquisitions and a new due diligence policy for mergers.
The Serious Fraud Office (SFO) has abandoned its probe of an inquiry into Autonomy, taken over by Hewlett Packard.
It looks like shareholders are not allowed to collude with HP board members to blame its god-awful Autonomy buy on the British company after all.
Shareholders and HP agreed to bury the hatchet so that they could sue the former owners of Autonomy. US district judge has said that such a deal was wrong because it absolves HP completely from any blame.
Judge Charles Breyer concluded in a San Francisco court filing that the shareholders appear to be relinquishing a whole universe of potential claims regarding HP governance and practices with no factual predicates that overlap the Autonomy acquisition – the subject of this litigation.
He rejected the motion for preliminary approval of the second amended settlement. Judge Breyer added that HP had abdicated its duty to ensure that shareholders’ rights were being protected.
HP bought UK data search and analysis firm Autonomy for $10 billion, but a year later it claimed it found “serious accounting improprieties” and had to write off $8.8bn from the transaction.
Autonomy has denied any wrongdoing and argued that it played by the rules and HP knew about its accounting practices prior to the buyout.
HP said it was disappointed the court did not approve the settlement as submitted, the court recognised that a settlement releasing the HP directors and officers from Autonomy-related claims ‘represents a fair and reasonable resolution of the litigation’ HP remains committed to holding the architects of the Autonomy fraud accountable.
A new document, being waved angrily by former Autonomy boss Mike Lynch appears to question how the maker of expensive printer ink wrote down the value of Autonomy.
HP conducted a re-basing exercise after Lynch left. The process was led by Chris Yelland, a senior HP executive who had been parachuted in to Autonomy shortly after the acquisition and went on to run its finance team.
The findings of the re-basing exercise was produced on December 19 2012 by a member of the revenues team at HP Autonomy. According to Lynch, it raises questions about HP’s reasoning for its $8.8 billion writedown of Autonomy in November 2012, $5.5 billion of which was stated to be due to “accounting misrepresentations” at the company.
“The document was completed a month after HP made those allegations and any future valuation of the company would have had to include them. HP’s own court filings repeatedly assert the rebasing analysis includes the effects of the allegations,” he said.
In a series of spreadsheets, HP placed Autonomy’s deals into different columns, according to whether it believed revenues were correctly booked under the UK’s IFRS accounting standards or whether they would meet US GAAP rules, the accounting standard used by HP.
Lynch said that the way HP labelled columns in this document shows Meg Whitman’s attempt to blame Autonomy and HP’s former management for her own mismanagement is no longer tenable.
HP believed about $350 million worth of deals at Autonomy between 2010 and the first three quarters of 2011 were booked improperly. Deals worth $8.4 million were considered “Not IFRS compliant confirmed,” whereby HP believed they fell short of UK accounting standards.
More than $252.4 million worth of revenues was considered “Not IFRS compliant probable”. This suggests that the US company considered the accounting for these Autonomy deals was suspicious, but had not conclusively found it did not meet UK accounting standards.
In addition, $83.6 million worth of deals were placed in a category labelled “Management Difference/US GAAP difference,” where these transactions had been removed for not meeting the requirements set by US GAAP accounting standards.
Lynch also objected to the reasons why HP considered some deals improper.
The document placed Autonomy transactions in several different categories, such as “hardware resale”: deals where PCs and other devices were, in the majority of cases, sold without Autonomy software being preloaded. Although these sales generated revenues, they often made an overall loss.
HP claimed hardware deals such as these were not commercially sound and were used purely to inflate revenue however, Autonomy has argued they served a marketing purpose, such as helping to establish commercial links with blue-chip customers.
HP also did not like how Autonomy booked part of the revenue from a continuing contract as an upfront licence payment, and “reciprocal deals”, whereby Autonomy sold software to a company while claiming to buy a product or service from that same customer.
HP said that Autonomy used early-payment discounts to encourage customers to pay future hosting fees early, then booked these as revenue immediately when they should have been spread across future periods.
HP has not revealed the precise calculations that led to its writedown on the company, more than $5 billion of which was due to alleged accounting improprieties.
Lynch claims the document raised doubts as to the reasons why HP took its writedown and the size of the charge. “Three years post-acquisition, Meg Whitman needs to explain the exact calculation of the writedown to her shareholders, as well as to the relevant authorities where accounts have been restated and attempts made to reclaim tax on the basis of her allegations,” he said.
A US judge is not happy about a proposed agreement struck between HP and plaintiff shareholders to settle a lawsuit over the computing giant’s acquisition of Autonomy.
US District Judge Charles Breyer rejected several million dollars in fees that shareholder attorneys would have recouped under the settlement.
But he added that he would have to make further inquiries into whether dismissing claims against HP officers, including current Chief Executive Officer Meg Whitman, was fair for shareholders.
Under the terms of the settlement, shareholders agreed to drop all claims against HP’s current and former executives, including Whitman, board members and advisers to the company. Instead the two sides would team up to bash former Autonomy executives, including Chief Executive Michael Lynch.
Laughing all the way to the bank were the shareholder attorneys who would have collected $18 million in fees.
The court heard how HP is also gunning for British unit of Deloitte & Touche over its role in auditing Autonomy.
HP’s allegations of accounting improprieties, misrepresentation and disclosure failures at Autonomy have prompted an investigation by the U.S. Securities and Exchange Commission and the Federal Bureau of Investigation, as well as the UK’s Serious Fraud Office. However so far there have been no actual charges levelled against Lynch and co.
Former Autonomy Chief Financial Officer Sushovan Hussain objected to the settlement too saying that it was a “whitewash” and asked that he be allowed to review internal HP documents that absolved Whitman and others of wrongdoing.
HP has vigorously contested Hussain’s ability to review documents that gets Whitman off the hook.
Breyer said he would need to weigh the evidence against HP officers as part of his analysis on whether the deal absolving them of liability is fair for shareholders.
Bryer said that something went terribly wrong with the Autonomy acquisition.
Pundits are grabbing their popcorn as the opening rounds of handbag swinging between HP and the former owners of Autonomy begin in earnest.
HP wants to sue former Autonomy Chief Financial Officer Sushovan Hussain as he seeks to block HP’s settlement of three shareholder lawsuits over its purchase of the British software outfit.
Hussain wants to block the settlement, saying HP officials were wrongly absolved in the ill-fated acquisition of Autonomy for $11.1 billion in 2011.
HP wrote down Autonomy’s value by $8.8 billion a year later and accused Autonomy officials of accounting fraud.
Hussain said that is rubbish and it was HP’s mismanagement which stuffed up the company he used to run.
But what has triggered this round of handbag swinging was that HP reached a settlement with shareholders to end efforts to force current and former HP officials, including Chief Executive Officer Meg Whitman, to pay damages over its Autonomy purchase.
Instead they have agreed to help HP pursue claims against former Autonomy officials such as Hussain and former CEO Michael Lynch.
HP said that the notion that Hussain should be permitted to intervene and challenge the substance of a settlement designed to protect the interests of the company he defrauded is ludicrous.
It now says that shareholders agree with HP that Hussain, along with Autonomy’s founder and CEO, Michael Lynch, should be held accountable for this fraud.
Hussain said in his court filing that the “collusive and unfair” settlement, if approved by a federal judge, would let HP “forever bury from disclosure the real reason for its 2012 write-down of Autonomy.
“This breathless ranting from HP is the sort of personal smear we’ve come to expect. As the emotional outbursts go up, the access to facts seems to go down,” Autonomy swung back.
“Meg Whitman is buying off a bunch of lawyers so she doesn’t have to answer charges of incompetence and misdirection in front of a judge and jury.”
Ooooohhh get her.
Autonomy’s former chief financial officer is seeking to block the maker of expensive printer ink, HP from settling three shareholder lawsuits over its troubled purchase of the British software company.
Sushovan Hussain, said the “collusive and unfair” settlement in which HP officials are wrongly absolved of a $8.8 billion writedown.
Hussain, said the “collusive and unfair” settlement, if approved by a federal judge, would let HP “forever bury from disclosure the real reason for its 2012 write-down of Autonomy.
“This motion reveals the depth of the corruption that permeates the settlement,” the spokesman said. “The shareholders who have borne the losses get nothing, and learn nothing about what really happened.”
He said that it ignored HP’s destruction of Autonomy’s success after the acquisition.
The June 30 accord called for HP shareholders to end efforts to force current and former officials, including Chief Executive Officer Meg Whitman, to pay damages to the Palo Alto, California-based company over its disastrous $11.1 billion Autonomy purchase.
Instead, the shareholders agreed to help HP pursue sue former Autonomy officials like Hussain and former CEO Michael Lynch.
HP announced the $8.8 billion writedown in November 2012, just over one year after buying Autonomy, and claimed it as down to accounting fraud and inflated financials by Autonomy executives.
HP spokesman Howard Clabo shrugged and said that Hussain’s opposition to the settlement is baseless. He thought that at the end of the process, the jury will conclude that Hussain engaged in a multi-billion dollar fraud.
At its Global Partner Conference event here in Sands conference centre in Las Vegas today, HP boldly said it will spend $5.1 billion on the channel, worldwide, in financial year 2013. It will cut out some channel partners.
Dan Tindall, VP of worldwide channel sales (pictured) gave what he described as an overarching account of HP’s Partner One programme on different levels, including alliances and OEM deals.
It will introduce a simplified compensation model with rebates earned from the first units sold, better rewards for specialisations, and rationalised certifications.
“Our compensation model will be easier without gates,” said Tindall. HP will give increased rebates with a “more for more” model. Expert One is one of HP’s programme – it is cutting own 44 specialisations to 22. HP will cut down the six month model to a three month model for rebates. It will simplify the programme in 2014 fiducial year too.
Tindall said it is improving the software tools for its partners. It will do joint business plans rather than the “ad hoc model” it had before on the MDF (marketing development funds) front. Resellers will be able to close deals faster.
Alliance One is for ISVs and improving it by education, programme certifications and test and development, particularly regarding the cloud, claimed HP. It will build up communities and let ISVs get to HP stuff immediately, online.
HP Autonomy will also simplify, or rather create a partner programme. That will all change. It will have one programme across all partners. HP is at a point where the next phase of growth is partners, who give it reach into customers. Autonomy programmes were too complicated. HP Autonomy will follow the HP model and move it channel wise before 2018.
The worldwide programme will roll out on the 1st of May. HP sees no distinction between resellers in any territory.
Following Dell’s acquisition of, er, Dell – taking the behemoth off the public market – CEO Michael Dell has penned an open letter to the company’s customers which promises “organic” and “inorganic” investment. Translation: Dell’s patent-packed Supermarket Sweep shopping spree will be ongoing.
At Dell Tech Camp, Amsterdam, last week, the company was very keen to assert the importance of acquisitions in its portfolio. Wyse, Kace, and the others were wheeled into Dell’s Software Group and it is clear from the time given to each that the company’s intended message was that it’s growing. It wants to continue to compete with HP and IBM in enterprise, and there are plenty of pre-packaged firms out there it believes it can pick up.
The letter opened by saying Dell’s agreement represents an “exciting new chapter for our company and for you, our customers”. Ultimately, more control in the paws of Michael Dell will define Dell at this transitional point in the company’s history.
“As always, our unwavering focus is on delivering a fantastic customer experience and creating value for your organisation,” the letter reads. “We believe that our proposed new ownership will provide long-term support to help Dell innovate, invest for growth and accelerate our transformation strategy. We’ll have the flexibility to continue organic and inorganic investment and drive industry leading innovation”.
Mentioning the past few years, Dell claimed that strategic execution has been “consistent”, and again mentioned that portfolio it has managed to swell. Considering the enterprise represents the overwhelming lion’s share of Dell’s products, services and technologies – will we see Mike pick Apotheker two from HP’s notebook under the latter’s short lived leadership? Some pundits guffawed when IBM dumped its consumer division, but it turned out to be for the better.
HP, meanwhile, struggles with ‘restructuring’ and was forced to write down the insanity of its Autonomy buy. We’ll say it right now: it will be Michael Dell’s hated box-shifting label for whom the Dell tolls.
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