HP, Shareholder Settlement Is Latest Chapter In Autonomy Saga

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Today, HP announced it had reached a settlement with its shareholders over its handling of the purchase of Autonomy for $10B back in 2011, but it’s far from the end of the story as the fight over the Autonomy purchase will very likely head to court, this time with HP and its shareholders at one table and Autonomy’s former executives at the other.

Apparently, HP shareholders decided it was better to become frenemies with the company and fight Autonomy together, rather than bicker over who was at fault.  Now HP and its shareholders will join forces in a common lawsuit against Autonomy over alleged bookkeeping improprieties at the time of the sale.

Since the sale closed, the two sides have been having the business equivalent of a food fight over this pact.  It started when HP took an $8.8B write-down on the deal, claiming it had found what it characterized at the time as “some serious accounting improprieties.”

That’s when the shareholders got involved, upset that HP had not seen the problems they alleged with the deal and unhappy about the size of the write-down. Today’s settlement would appear to end that part of the tale, but it’s far from the end of the story.

Autonomy’s former CEO Mike Lynch fought back after the public allegations against him and his company by starting a blog called AutonomyAccounts.org, which is still live to this day. He has made several public statements in the aftermath of the write-down and subsequent allegations continually denying his company ever did anything wrong.

In fact, Lynch published a short reaction to the shareholder settlement earlier this week accusing HP CEO Meg Whitman of being the wrong-doer. The blog lists Lynch as the admin.

“We continue to reject HP’s allegations, and note that over recent months a number of documents have emerged that prove Meg Whitman misled her shareholders. We hope this matter will now move beyond a smear campaign based on selective disclosure and HP will finally give a full explanation,” Lynch wrote.

Obviously, Lynch doesn’t agree with HP’s conclusions, and very likely saw a house divided as a greater advantage than the two sides teaming together, but regardless, the war of words continues and now the former Autonomy executive team will have to fight the shareholders and HP together.

It’s worth noting that in January, 2013 FierceContentManagement story, 451 Research analyst, Alan Pelz-Sharpe told me “that prior to Autonomy’s sale to HP, he shared allegations of fraud at the company with the British Serious Fraud Office. The allegations were in papers that had been passed to him anonymously.” What’s more, he told me that the allegations in the papers were very similar to those that later surfaced from HP.

To this day, however, it remains unclear if Autonomy did anything wrong, or why HP failed to turn up the issues that surfaced after the sale went through during its due diligence prior to the sale. In today’s statement, HP claimed that after conducting an internal investigation made up of what they called an “independent committee of directors,” they found that they had grounds for a lawsuit, and that HP was cleared of any wrong-doing.

The court needs to approve this settlement between the shareholders and HP, but assuming they do, this could finally move into the court phase where Autonomy’s former executive team or HP and its CEO Whitman could have some serious ‘splaining to do.

For now, we are caught in the same he said/ she said argument we have been seeing since HP wrote down the deal.

At the time of the sale, industry experts I spoke to were surprised by the price. As industry analyst Irina Guseva told me at the time, “The first shocker is the $10B sticker price, which looks to be hugely overpriced,”

As it turns out, it appears that HP had a serious case of buyer’s remorse shortly thereafter, but for now, the saga continues, and we will most likely eventually have to sort this all out in court to learn once and for all who is the wrong-doer (if anyone) in this unfortunate deal.

Photo Credit: (c) Can Stock Photo