The purchase of Autonomy in 2010 for more than $10 billion must have seemed a good idea at the time. The big data buzz was just beginning, and Autonomy finds ‘meaning in information.’ But just over a week ago (20 November), HP announced an $8.8 billion writedown ($5 billion relating to Autonomy) and claimed it had discovered "serious accounting improprieties" and "a willful effort by Autonomy to mislead shareholders.” The finger was pointed at Mike Lynch, the Irish-born former chief executive at Autonomy, starting the inevitable blame game that accompanies all such incidents.
HP referred the matter to the US Securities and Exchange Commission and the UK Serious Fraud Office – and the FBI is now also apparently involved. CEO Meg Whitman has disclaimed responsibility for HP, saying “The board relied on audited financials, audited by Deloitte. Not Brand X accounting firm, but Deloitte," she said, adding that KPMG was hired to audit Deloitte (Reuters). Mike Lynch, for his part, claims to be ‘shocked’ and has ‘flatly rejected’ allegations of wrongdoing.
Lynch then produced an open letter to HP. “Can HP really state that no part of the $5 billion writedown was, or should be, attributed to HP's operational and financial mismanagement of Autonomy since the acquisition?”, he asked. But HP responded in an email to Reuters: “While Dr. Lynch is eager for a debate, we believe the legal process is the correct method in which to bring out the facts and take action on behalf of our shareholders. In that setting, we look forward to hearing Dr. Lynch and other former Autonomy employees answer questions under penalty of perjury.”
The court cases have already started with Tuesday’s shareholder lawsuit filed in San Jose, California. Deloitte has denied knowledge of any improprieties in Autonomy’s accounts, and KPMG has said its services to Deloitte were not related to the Autonomy audit. It is likely to take years to settle everything – and meanwhile, as always, it is the shareholders who suffer. HP share price crashed to $11.35 on the initial news – its lowest price since 1994. It has climbed slightly to $12.73, but that remains well down on the 52-week high of $30.00.