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Autonomy Chief Says Whitman Is Watering Down HP Fraud Claims
McGruber writes "Possibly the wierdest tax-writeoff of the year happened when Meg Whitman claimed that her US-based multinational corporation HP had been defrauded by British-software firm Autonomy; Ms. Whitman and HP claimed an 8.8 billion dollar write-down. As the Los Angeles Times explains, 'HP acquired Autonomy in 2011 for $11 billion, a move it hoped would turn it away from its dependence on sales of computer hardware with its low profit margins, and into the more profitable business of software. However, the price HP paid was widely criticized for being too high, and in part led to the subsequent ouster of Chief Executive Leo Apotheker.' The wierdness continues — in its annual report filed with the U.S. Securities and Exchange Commission, HP claims that the U.S. Department of Justice has opened an investigation into HP's allegations that HP has uncovered widespread accounting fraud at Autonomy. However, The Guardian points out that former Autonomy CEO Mike Lynch claims that HP 'is watering down the accusations it had levelled against him over the accounts filed by his old software company.' Mr. Lynch also says that he has not been contacted by the U.S. Department of Justice, which HP claims is investigating the alleged fraud. Perhaps Slashdot's users can help make sense of this mess and help explain it to me?"
Perhaps Slashdot's users can help make sense of this mess and help explain it to me?"
You don't have to delve too deeply into this one, to be honest. The company took a risk. It lost at the gambling table. Badly. And now it's looking for someone, or something, to blame. And the only way to reduce their debt load without screwing someone over a barrel is if some vaguely-defined "fraud" is found in the accounting books, thus saving HP of a lot of tax money and reducing the liability. Everything else is smoke and mirrors.
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Someone is lying
"When life gives you lemons, don't make lemonade. Make life take the lemons back!" -- Cave Johnson
On the sell side, we have this.
I'll let others comment on the buy side.
HP wants to be what IBM used to be (and still struggles to be), the single source provider for their customer
Autonomy looked like a great opportunity, but just like inexpensive hardware has undercut high-end server sales, open source solutions and tens of thousands of developers using those tools have undercut their market and dimmed the rosy projections that made HP willing to lay down so much cash
I think that this is less about Autonomy's shrinking value and more about HP's willingness to pay any price to enter new markets and their failure to recognize an opportunity to drive down the selling price by being willing to walk away from the deal
On Autonomy's part, they 'enhanced shareholder value' and returned a greater profit to them by negotiating the highest selling price possible, Do we really expect corporations to behave differently?
Wherever You Go, There You Are
Ever since HP bought Compaq (a deal that brought them nothing that they didn't already have) for more than the Chinese later paid for BM's PC division, they have been on a downhill spiral. And the cause of the decline seems to survive by telling the board "don't fire me now, you need to see this through". Meanwhile she keeps taking millions for an inability to run a once great company.
I'm an American. I love this country and the freedoms that we used to have.
About 15 years ago I was buying an HP printer from Canada's equivalent to Best Buy and they were trying to do the usual crap warranty upsell. I told the guy, "For $10 off I'll take an HP product with no warranty." That was 15 years ago. I recently opened a cheap little HP inkjet and the included black cartridge had zero ink in it. I don't mean it had dried out but it had never contained ink as I cut it open and found no sign of ink. I didn't flip out or was even a tiny bit surprised. This is what I expect from HP products.
The same with HP laptops; I expect a mountain of bloated trialware that will be a huge pain to remove and a variety of other cheapnesses such as the whole split left shift key thing.
I also buy servers and with no experience at all with HP servers would simply not touch them with a bargepole due to my experiences with the rest of their product line. But back to their older products. I know people with older(10 years+) laserjets that just keep going and going; while I know others with newer colour laser jets where the red is fading due to dust buildup on a mirror buried deep inside the machine.
And don't get me going on the prices of toner and ink. So my guess is that HP is a company run by MBA types "proving" all kinds of "facts" using spreadsheets while leaving the basics such as loyal happy customers in the dust as those things don't spreadsheet very well. If you are wondering what I mean by the misuse of spreadsheets think about this scenario: You are HP and you have some new trialware product to add to your latest laptop. The product looks like it will make an average of $16.95 per machine. You expect to sell 300,000 units. Well that works out to 6 million dollars. Then you add another trialware column, and another, and another. Soon those machines are simply printing money. But how do you calculate the number of customers who will never buy another HP after realizing that they basically just bought the electronic equivalent to postal junk flyers? Not so easy to put that into a spreadsheet; you can but it tends to be built on more fuzzy information that can be tainted with optimism. My personal guess is that a goodly portion of high priced Apple's sales are built upon people seeing a machine that didn't come with Norton AV and its bloaty brethren. These technologically unsophisticated people then reason that it is worth double to not get this crap. I like Apple products so I am not casting aspersions and I also know that there are many other reasons people buy them both worthy and shallow but I know many people who have no inclination to waste one second fighting with their machine and value their time accordingly.
So when I hear that HP is squabbling over $11 billion that would potentially be detectable from the proper use of spreadsheets (accounting) I just laugh like a drain.
HP paid $11bn for Autonomy, despite Autonomy showing only $3.5bn of total assets (as of June 2011). HP recorded nearly $7bn of Goodwill (difference between the price HP thought it was worth and what the rest of the market thought it was worth) and surprise, surprise the market knew better than HP.
HP's story simply does not stack up - it would mean Autonomy were fiddling their books to the tune of $5bn on a $3.5bn balance sheet. Much more likely is that HP vastly overpaid and are now trying to shift the blame, I'd expect these charges to get even more diluted in the near future.
Ignoring all the bad decisions HP has made over the past 20 years, HP simply doesn't want to pay too much in taxes. Other large corps, like Intel, have used the multi-billion dollar write-down to escape taxes, course the rest of us will end up paying more.
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they know everything about everything, don't you know?
Hm, close. That was definitely smug and/or snidely sarcastic enough, but that's not in the form of a car analogy.
Or, and this has just occurred to me and might be a bit way out for Slashdot, are you thinking of the art of persuading another person to drop his or her underpants in an intimate setting?
From scarped cliff or quarried stone she cries "A thousand types are gone, I care for nothing, no not one."
HP are complaining that they were defrauded of between 80 and 90% of what they paid for Autonomy. On a ten digit deal, surely they employed all the best accountants and lawyers around to check it out? I mean, $100 million on advisers is still only 1% of the deal. If they did, why are they not suing these advisers (possibly as well, but certainly first)? If they did not, they they really have only themselves to blame and all concerned (not just the top man) should be ejected without parachutes.
Consciousness is an illusion caused by an excess of self consciousness.
yeah, damn the MBA's... oh wait I am one, but then I had already been working in software development for over a decade before I chose to learn about the dark side
The business education was painful and enlightening. It was both maddening in how companies rate investment against perceived roi (no business person would ever fund pure research with no clear return on investment over what they could make just shutting down research in favor of a stock portfolio) and troubling (how business 'ethics' has been transformed into an all-out race for short term profits to meet shareholder expectations regardless of long-term outcomes)
If left to the business people, this entire country would be reduced to a backwater selling buggy whips in MLM schemes that maximize profits at the top and the rest of the world would be scrambling to leave us in the dust. I think that the most dangerous thing for a technology company to do is to allow their fate to fall into the hands of a business person with no technical background that only cares about the next quarters returns and ignores the need to plan ahead 5, 10 and 20 years into the future
Wherever You Go, There You Are
She's the one cleaning up the mess, not the one that made it (though how well she's doing is certainly open to debate). That credit goes to Leo Apotheker, who, as the summary pointed out, was ousted largely due to the whole Autonomy buyout that he oversaw, but that was far from the only mess he made; he was also the one who announced plans to shut down HP's PC business. Whitman is just trying to put as much distance between the company and that deal as she can at this point, that way they can move on.
As for eBay, she started there when it only had 30 employees, so it's not like she came in when it was the massive (though garish) success it is now and just kept it running. And what destruction has she left behind elsewhere? Last I checked, after she left eBay, she more or less took a break for a few years, serving on the boards at a few different companies that seemed to do rather well with her helping them (e.g. Dreamworks). And since coming on as CEO at HP, she's been systematically undoing the damage her predecessor did before he floated away on a golden parachute. Whether or not she's succeeding is not something I want to argue, since I don't think I'm well-informed on that subject, but it looks to me like the blame lies elsewhere, and that she's just trying to get them out of it.
I'm not a fan of Whitman either, but let's at least be fair in our treatment and rely on actual facts, rather than generalizations that don't seem to line up with reality.
She as a member of HPs board of directors voted for buying Autonomy at the ridiculous price they paid. She most certainly IS responsible for it.
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