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Meg Whitman Says HP Was Defrauded By Autonomy; HP Stock Plunges

Posted by timothy on from the damn-english-ravines dept.

McGruber writes "CNBC is reporting that Meg Whitman claims HP was defrauded in its purchase of Autonomy. 'We believed there is a willful effort on the part of certain members of Autonomy management to mislead shareholders when Autonomy was a publicly traded company, and to mislead potential buyers including HP,' Whitman said. 'We stand by the forensic review that we've seen,' she added. I wish her the same level of success I had when I filed an eBay claim." Also covered at SlashBI, which names the write-down damage: $8.8 billion.

17 of 237 comments (clear)

  1. Meg, Carly by tekrat · · Score: 5, Insightful

    This is a love letter...

    Please don't run any other companies into the groud. Please stop whatever you're doing and go home, and avoid public life as a CEO, or politician. You've both proven you don't know jack.
    The world would be better off without either of you.

    Thanks;
    The rest of the planet.

    --
    If telephones are outlawed, then only outlaws will have telephones.
    1. Re:Meg, Carly by shawn(at)fsu · · Score: 5, Informative

      She wasn't the CEO of HP when the acquisition happend this one isn't her fault.

      --
      500 dollar reward for tip(s) leading to the arrest of the person(s) who stole my sig.
    2. Re:Meg, Carly by localman57 · · Score: 5, Funny

      Yes, but you can use eBay to buy knock off toner cartridges, thereby denying HP of revenue.

    3. Re:Meg, Carly by localman57 · · Score: 5, Informative

      She wasn't the CEO of HP when the acquisition happend this one isn't her fault.

      It's at least partially her fault. Per the FA:

      In an interview with CNBC, Whitman said she regretted voting to approve the deal with Autonomy,

    4. Re:Meg, Carly by jandrese · · Score: 5, Funny

      It's HP, printing money would end up costing you more in ink than the counterfeit bills would be worth.

      --

      I read the internet for the articles.
    5. Re:Meg, Carly by Jeremiah+Cornelius · · Score: 5, Funny

      Look at the picture on CNBC.

      I'm pretty certain, based on this evidence, that Meg Whitman is Steve Ballmer in drag.

      --
      "Flyin' in just a sweet place,
      Never been known to fail..."
    6. Re:Meg, Carly by Ryanrule · · Score: 5, Insightful

      A dead parrot could have run ebay just as well. They were alone in a huge growth market.

    7. Re:Meg, Carly by phantomfive · · Score: 5, Interesting

      Oh, it's all HP's fault. Check this out.

      1) Autonomy tried to sell to Oracle for $6billion, which Oracle rejected as overpriced.
      2) Autonomy CEO denied ever trying to sell to Oracle, said Oracle didn't know anything about Autonomy's financials.
      3) Oracle called the Autonomy CEO a LIAR, publicly, and shared his presentation with the whole world to prove it.

      They put all the info on a page called, "Please Buy Autonomy." You can read it now yourself and decide if you would have bought autonomy in 2011. I've always thought Oracle would be a miserable place to work, but now I see some people are definitely having fun, just not programmers.

      --
      "First they came for the slanderers and i said nothing."
  2. Red herring by Runesabre · · Score: 5, Insightful

    I find it hard to believe that the management of HP failed to uncover fraud of this magnitude during their evaluation in the purchase of Autonomy. What this really means is management failed to do their due diligence in evaluating Autonomy and now need to to distract from poor financial performance due to a lack of competence at the executive level.

    --
    Runesabre
    Enspira Online
    1. Re:Red herring by Anonymous Coward · · Score: 5, Insightful

      I think it's clear that the HP management needs a massive pay rise while everyone else in HP needs to take a pay cut and work longer hours to cover this loss!

    2. Re:Red herring by Patch86 · · Score: 5, Insightful

      Autonomy was a successful money-making business. When HP bought it, there wasn't a soul alive who couldn't see that they were paying an extremely generous price. Take the following article on the BBC at the time:
      http://www.bbc.co.uk/news/business-14582489

      HP paid 64% above the publicly-traded market price for the company. On the markets hearing the news, HP shares ended the trading day 7.6% down, making them the worst faller in the Dow Jones Industrial Average that day.

      Maybe the management at Autonomy were telling porkies to convince HP to pay that much- but why the hell would HP swallow it? If everybody else could see it was mad, why couldn't they?

    3. Re:Red herring by garyebickford · · Score: 5, Insightful

      Good luck with that. There are numerous cases in recent history where large companies have managed to hide their problems prior to a merger, or prior to going completely bust. It can be very, very difficult to figure out the details of how big complex companies are put together - even for the company's own accountants. It can be analogized to the halting problem, or the shortest route problem. A big company's internal transactions constitute a huge dependency graph with an almost unlimited opportunity for cycles within the graph, and then there are all the external transactions - which ones are truly 'external'?

      For example, a company like Best Buy may have over one thousand subsidiaries, nested three to four levels deep, in over 100 countries. None of those countries require the level of accounting rigor of the US, especially since Sarbanes-Oxley (the so-called 'Enron law' - case in point). Now try to analyze millions of transactions large and small between the various subsidiaries and to/from outside entities, and determine which of those transactions is part of a complex money laundering process, and which ones are part of some accountant's method for skimming money off the top. In fact, with a company that big and complex, the odds are that several of the accountants or executives in smaller subsidiaries are, in fact, skimming - perhaps by 'selling' goods to a dummy company that never happens to pay its bills. Now separate those actions from some larger process that the parent company has set up to avoid visibility of losses.

      It can happen by accident as well, without any intent to do evil. I know of a at least one IPO that was cancelled when a company doing the required due diligence before going public discovered to their dismay that while they thought they were going gangbusters, they were in fact insolvent (hint: growth is expensive). So instead of IPO, bankruptcy followed.

      There are zillions of other ways to use 'creative' accounting methods to hide problems - companies often don't know until it's too late. It's a mistake to consider a large corporation as a monolithic entity. One group of large companies that I work with literally don't know who their customers are - they are the product of dozens of mergers over decades, and have never integrated the accounting systems together - I won't go into why that is but there are good reasons, which are related to risk, cost and disruption.

      tl;dr: the complexity of companies can be arbitrarily large; finding problems may be impossible with the limited data available prior to merger.

      --
      It's easier to be a result of the past, but more fun to be a cause of the future! http://www.spacefinancegroup.com/
    4. Re:Red herring by ShanghaiBill · · Score: 5, Interesting

      I find it hard to believe that the management of HP failed to uncover fraud of this magnitude ...

      I have sat on a few boards (none nearly as big as HP) and I am not surprised in the least. The CEO wants to "make a deal" to "execute a strategic vision". So he sells it to the board, which is too busy with pissing contests and bike shed arguments to spend much time on it. Then the deal is publicly announced. Only then is the "due diligence" done. If any problem is found, there is enormous pressure to "make the deal happen" to avoid losing face by unwinding the deal. 80% of all mergers end badly for both customers and shareholders, yet every CEO thinks his deal is one of the other 20%. HP was in a bad situation, with their commodity businesses in PCs and printers generating little profit and even less growth. So their "strategic vision" was to move into software and services. The Autonomy merger was part of that, and if it fell apart other potential partners would shy away, and the strategy shift would likely fail. So it is likely that the accountants pointed out lots of problems, but were overruled by people with too much at stake to let the deal fall through.

  3. Wait a second... by fuzzyfuzzyfungus · · Score: 5, Insightful

    So, an 8.8 billion write-down on an 11.2 billion purchase and they are only alleging that "serious improprieties", rather than something like "epic, the-whole-boardroom-is-going-to-federal-country-club-for-maybe-five-years-or-so, fraud"?

    Either corporate PR drivel is unusually polite, or white collar crime is absurdly superior on a risk/reward basis compared to little people crime...

  4. Nice bunch of people by BigBadBus · · Score: 5, Interesting

    I used to work for Autonomy. I have no sympathy for them.
    My little article is here
    After Autonomy's lawyers bullied me and anyone who supported me to take my article off line. I eventually lost my net access after Autonomy complained to BT, my ISP; they never issued an explanation or apology but still took money from my account. It took years and a letter to the BT chairman before I got a refund.
    The article was originally subtitled "Stress Is More Fun" but seems to have got lost; if you read the article, you'll find out why it had this moniker. To find out what others think, look at Glassdoor

    --
    My web domain.
  5. My guess by Zontar_Thing_From_Ve · · Score: 5, Interesting

    I'm just making a wild guess here, but maybe upper HP management decided that Autonomy was the only possible means of getting HP back on track. This probably filtered down the chain of command to the people doing the investigation. They may have just chosen to gloss over anything that seemed funny because they were convinced that management did not want to find any problems as if this acquisition didn't go through, HP was going to get beat up financially in the stock market and more layoffs were likely. Or we have to accept that Autonomy was just insanely good at hiding their malfeasance even though various stock traders had been shorting the stock for months because they felt their financials were fishy and somehow the traders figured out what the investigators couldn't. I find that unlikely.

    I see this as kind of a variation on the way that decisions sometimes got made in the old USSR. During the days of the Soviet Union, bureaucrats got into the habit of anticipating the needs/wishes of their superiors. I'm guessing that there's probably a culture of fear in HP where the masses are afraid of layoffs and those at the top probably shoot the messengers when they get bad news, so this was a natural outcome.

  6. Re:Step 1. Buy a really expensive company... by sgtrock · · Score: 5, Interesting

    There's a very persuasive argument to be made that the Compaq acquisition is what really finished HP as an engineering company. Apparently there was some ferocious in-fighting after it. Sadly, the Compaq guys won for the most part and took the company to an almost entirely sales and marketing based strategy.

    Those of us who cut our teeth on HP test equipment, early HP/UX workstations and servers, HP LaserJet printers, and HP calculators still mourn the death of Bill and Dave's dream. :-(