HP, Autonomy’s Mike Lynch Trade Barbs

Data analytics is normally a somewhat bloodless business: IT vendors build analytical software, which companies buy in order to crunch data. Occasionally a CEO like Oracle’s Larry Ellison will stand onstage and rail against a competitor, providing a little meat for the tech journalists who cover the sector, but otherwise there are precious few chances for high drama.

Hewlett-Packard’s escalating fiasco with its Autonomy data-analytics subsidiary might buck that trend.

Earlier this month, HP accused Autonomy’s management team of using “accounting improprieties, misrepresentations and disclosure failures to inflate the underlying financial metrics of the company.” It alerted the SEC’s Enforcement Division and the United Kingdom’s Serious Fraud Office (Autonomy is based in the U.K.). If that wasn’t bad enough, HP also announced it would take an $8.8 billion write-down on Autonomy’s value.

A couple billion dollars and accusations of fraud are more than enough to raise anyone’s emotional temperature. In a rather lengthy public statement this week, former Autonomy CEO Mike Lynch pushed back against HP—hard.

In an open letter to HP’s Board of Directors, Lynch wrote that he rejected “all allegations of impropriety,” and that Autonomy’s finances prior to the acquisition “were handled in accordance with applicable regulations and accounting practices.” He then asked HP for “the interim report and any other documents which you say you have provided to the SEC and the SFO so that I can answer whatever is alleged.”

Lynch then devoted the second half of the letter to lashing back at HP, questioning the tech titan’s math in determining the size of the write-down. “Can HP really state that no part of the $5 billion write down was, or should be, attributed to HP’s operational and financial mismanagement of Autonomy since the acquisition?” he wrote at one point—just one query on a very long list of them.

HP was having none of it. “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,” the company wrote in a Nov. 27 statement. “In that setting, we look forward to hearing Dr. Lynch and other former Autonomy employees answer questions under penalty of perjury.”

That statement also emphasized HP’s “intense internal investigation” and uncovering of “extensive evidence of a willful effort on behalf of certain former Autonomy employees to inflate the underlying financial metrics of the company.”

As the man once said, let’s get ready to rumble.


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