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Is HP Right? Autonomy Salesperson Shares Internal Emails

Posted by Soulskill on from the fingers-in-the-cookie-jar dept.

Julie188 writes "You know how HP said it uncovered $5 billion worth of 'improper' revenue at Autonomy? One thing HP has accused Autonomy of doing is booking software-as-a-service contracts as software licensing deals. So how might that type of accounting work? A former Autonomy salesperson fighting a legal battle with HP says she's seen it happen firsthand. She's shared internal Autonomy emails and documents that show the details of one deal. '[While working for software company CA, Virginia Briody] had closed a four-year $1.22 million hosting/software-as-a-service deal with a customer, Pioneer Investments, and was paid her full commission, over $100,000, she says. Autonomy bought the software unit from CA on June 9, 2010, and Briody became an employee of Autonomy and Autonomy inherited the Pioneer contract. But there was an issue. Autonomy didn't acquire all the pieces called for in the original contract, Briody says. It didn't have a partnership with the hosting facility and it didn't gain from CA a critical piece of compliance software the customer needed, she says. Autonomy needed to find substitutions or Pioneer would cancel the contract, Briody says. So in the fall of 2010, she signed a new deal with Pioneer and walked away with a four-year, $1.859 million contract of which Autonomy execs considered $1.8 million as new revenue, she says.'"

9 of 92 comments (clear)

  1. I'm not a nerd anymore... by war4peace · · Score: 5, Insightful

    I read TFS. I understood nothing. My nerd days must be over.
    Looks like nowadays nerds are those who have deep insight into financial dirt. Forget computers, gadgetry, coding and Science Fiction. Welcome corporatism, financial stuff, sales and so on.
    I'm a sad puppy now.

    --
    ...gis sdrawkcab (usually not responding to ACs; don't bother posting as AC)
    1. Re:I'm not a nerd anymore... by Rockoon · · Score: 5, Interesting

      Real nerds dont restrict themselves to computers, gadgetry, coding, and scifi.

      ..and how dare you leave out physics/chemistry.

      --
      "His name was James Damore."
    2. Re:I'm not a nerd anymore... by jonbryce · · Score: 5, Informative

      When they signed the original deal, they should book $25,416.66 as revenue for that month, and the remaining $1,194,583.34 as deferred revenue to be released over the remaining 47 months of the contract. Each month after that, you take $25,416.66 out of deferred revenue and put it in revenue.

      When they signed the new deal, they should cancel whatever is left in deferred revenue, put the new deal in deferred revenue and take $38.729.16 per month to revenue.

      If there are up-front expenses related to the deal, and sales commission may well be one of them, then they go to prepayments, and you expense them every month along with the released deferred revenue.

    3. Re:I'm not a nerd anymore... by Anonymous Coward · · Score: 4, Informative

      1) It's not obvious from TFA that they were double dipping revenues, but it seems that they improperly recognized revenue up front from a long term consultancy/SaaS contract. If HP, as potential acquirers, were to extrapolate the revenue based on Autonomy being a SaaS business, they would get a misleadingly high figure.

      2) The board didn't have access to the numbers on a per-contract level, but they hired two public accounting firms that presumably did.

      Boy, the courtroom is going to get crowded over this case. The accounting firms will be pulled in as well to defend their performances. As for the "whistle blower", she seems a tad greedy trying to get paid two fat commissions for the same deal.

    4. Re:I'm not a nerd anymore... by pesho · · Score: 4, Interesting

      Because their business plan was not to run their business, but to sell it as quickly as possible to the first idiot that they can dupe. The bigger the number at the bottom of their accounting sheet, the easier it would have been to get HP's CEO Apotheker salivating. The bigger the potential reward, the less like he was to do his due diligence. This is standard conman operating procedure.If this particular case does not turn out to be an insulated incident it can put a lot of people in jail.

    5. Re:I'm not a nerd anymore... by alexander_686 · · Score: 4, Interesting

      Because sometimes Autonomy did is the right choice. Companies can either book the revenue upfront or over the lifespan of the contract. No matter which one you pick it can be abused, so the trick is to pick the right one for the situation – which is a subjective accounting decision – and these subjective accounting decisions can be influenced by upper management.

      Software Licensing Deals = buy. You buy a car from Ford and finance it though Ford. Ford books the car as a sale up front. This is

      Software as Service = Lease: You lease a car for 36months from for and finance it though Ford. Ford books the revenue 1/36 each month.

      The accounting issue is that the client was buying software (recognize profit today) and maintenance / support (recognize profit over a period of time) as a single, lump sum. Allocating costs between the 2 is subjective – and open to abuse.

    6. Re:I'm not a nerd anymore... by cheesybagel · · Score: 4, Insightful

      If it gets really serious they will just change their name and continue operating like Arthur Andersen/Accenture.

  2. Re:Ah, the new Slashdot... by presidenteloco · · Score: 4, Funny

    Upward Mobility. (N) Defn: Momentum that may be gained by a swift kick in the assets.

    --

    Where are we going and why are we in a handbasket?
  3. Re:Ah, the new Slashdot... by phantomfive · · Score: 4, Insightful

    Not news for nerds, stuff that doesn't matter unless you wear a $1000 suit.

    Or unless you're thinking of starting a company, working in a startup, or otherwise deal with startups, which actually covers a lot of people on Slashdot.

    --
    "First they came for the slanderers and i said nothing."