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Tuesday, November 27, 2012

Autonomy\'s Ex-Chief Calls on H.P. Board to Defend Allegations

The former head of Autonomy, the British software maker that Hewlett-Packard acquired last year, isn't happy about the technology giant's accusations of accounting fraud at his former company.

So he's calling on H.P. to defend its $8.8 billion write-down tied to the takeover.

In a public letter released on Tuesday, the executive, Mike Lynch, again rejected H.P.'s claims about Autonomy. (He hasn't been accused of wrongdoing.) Instead, he argued that the Silicon Valley pioneer botched its takeover of the British company and mishandled its integration.

“Having no details beyond the limited public information provided last week, and still with no further contact from you, I am writing today to ask you, the board of H.P., for immediate and specific explanations for the allegations H.P. is making,” he wrote in the letter.

Mr. Lynch has been exceptionally vocal about defending his reputation and that of Autonomy, which grew over 16 years to become one of Britain's most successful tech start-ups. He stressed that nothing improper had taken place at the company, and that it followed all the rules set forth under British accounting guidelines. Possible discrepancies over how Autonomy recognized revenue from sales, he said, might be attributable to differences between British and American accounting rules.

In his letter, Mr. Lynch outlined a number of concerns about the $8.8 billion charge. Some of those questions were thinly veiled jabs at H.P., which fired him as the head of Autonomy in May after missing sales estimates. (He doesn't dispute that characterization, but has said that he was hamstrung by a number of obstacles and a string of poor management decisions.)

Among his questions:

  • In order to justify a $5 billion accounting write down, a significant amount of revenue must be involved. Please explain how such issues could possibly have gone undetected during the extensive acquisition due diligenc e process and HP's financial oversight of Autonomy for a year from acquisition until October 2012 (a period during which all of the Autonomy finance reported to HP's CFO Cathie Lesjak).
  • Can H.P. really state that no part of the $5 billion write down was, or should be, attributed to H.P.'s operational and financial mismanagement of Autonomy since the acquisition?
  • Why did HP senior management apparently wait six months to inform its shareholders of the possibility of a material event related to Autonomy?

An H.P. representative wasn't immediately available for comment.

Open Letter to the Board of Hp Final