Autonomy CEO begs shareholders to question HP for merger details
Wednesday, March 19, 2014 @ 4:32pm
| Former chief of HP acquisition Autonomy, Mike Lynch, has fired off a missive accusing HP of misleading shareholders about his former company's accounting problems. In his letter, the executive claims that the company was smeared by HP in the days leading to HP's $8.8 billion write-down in 2012, and asked the shareholders to "help put things right."
Autonomy Corporation was a multinational enterprise software company founded in the UK in 1996. The company used a combination of technologies born out of research at the University of Cambridge. It developed a variety of enterprise search and knowledge-management applications using adaptive pattern recognition techniques centered on Bayesian inference in conjunction with traditional search and data mining methods.
At issue is whether the accounting practices Autonomy used in reporting its finances were entirely above the board. HP alleges that an executive from Autonomy approached them after HP acquired the company, informing them that Autonomy's financial reporting was flawed and misleading. In announcing the write-down, HP accused Autonomy's former executives of a deliberate effort to inflate the company's financial metrics in order to mislead investors and potential buyers.
In 2012, Lynch defended Autonomy, claiming that the company's finances were "handled in accordance with applicable regulations and accounting practices," and states that he "utterly reject[s] all allegations of impropriety." Lynch countered that much of HP's complaint is essentially a misunderstanding, stemming from differences in accounting standards between American firms and some international firms.
Lynch is asking the shareholders to question HP executives about the claims made by CEO Meg Whitman, and others, about the writedown, and claims of impropriety managing the company after the acquisition. "I write to you today to raise serious concerns about the way HP has conducted this affair, and to put forward a number of questions that HP management should answer," Lynch asks in the letter.
Lynch claims that Autonomy executives were denied evidence of problems, while at the same time, HP was leaking information to the media to bolster its accounting fraud claims. He also believes that HP knew exactly and accurately how many sales Autonomy had before it acquired the company, despite claims to the contrary.
A statement by HP following Lynch's open letter notes the response by the company to the irregularities surrounding the acquisition of the company. "As HP has previously reported, it uncovered numerous accounting irregularities at Autonomy before its acquisition by HP. HP reported those irregularities to appropriate civil and criminal regulators in the US and UK. HP continues to co-operate in ongoing investigations by those regulators."