Autonomy, Not So Autonomous Anymore: HP CSO Bill Veghte Steps In, Founder Mike Lynch Steps Down

Within HP’s quarterly results today, a bit of a development for Autonomy, the company’s $10.2 billion enterprise software purchase from last year that was profitable when HP bought it but in the last quarter saw “significant” declines in its core licensing revenue: its founder and head Mike Lynch is stepping down, and he is getting replaced by a HP man: chief strategy officer and EVP of enterprise software Bill Veghte.

HP says in its Q2 earnings release that this is being done to help improve Autonomy’s performance. In an internal memo to employees, which TechCrunch has obtained, CEO Meg Whitman says that the move is being made to as a mark of how HP is “investing to speed development across Security, Information and Management Infrastructure for both on-premise IT and in the cloud – with a key focus on software-as-a-service offerings.” The same strategy will be applied to the company’s Vertica business, Whitman noted in the memo.

HP’s Q2 earnings saw revenues down by three percent to $30.7 billion. Within that, the company saw a mixed (but overall declining performance) in its different divisions:

  • The Personal Systems group saw flat revenues with a 5.5 percent operating margin. Commercial revenues were up three percent but the bigger portion, consumer revenue, declined by four percent. Total unit sales were down by one percent.
  • Services were down by one percent with 11.3 percent operating marging.
  • Imaging and printing (which is merging with PSG) is down 10 percent.
  • Enterprise servers, storage and networking also down by six percent.
  • HP financial services up by nine percent with a 9.9 percent operating margin.
  • Sofware revenue up most of all: 22 percent with a 17.7 percent operating margin (no wonder this is the part that previous CEO, Leo Apotheker, wanted to keep and ditch all hardware). However, within this Autonomy saw a “significant” decline in license revenue.

Autonomy’s performance probably represents something of a disappointment — and perhaps surprise to HP, since the unit seemed to be doing much better when the acquisition was announced in October. At the time of the deal, Apotheker noted:

“Autonomy presents an opportunity to accelerate our strategic vision to decisively and profitably lead a large and growing space…Together with Autonomy, we plan to reinvent how both unstructured and structured data is processed, analyzed, optimized, automated and protected. Autonomy has an attractive business model, including a strong cloud based solution set, which is aligned with HP’s efforts to improve our portfolio mix. We believe this bold action will squarely position HP in software and information to create the next-generation Information Platform, and thereby, create significant value for our shareholders…Autonomy is a highly profitable and globally respected software company, with a well-regarded management team and talented, dedicated employees. We look forward to partnering with a company who shares our commitment to solving customer problems by creating smart, cutting-edge products and solutions.”

Mike Lynch, the founder and current head, will be stepping down after a transition period, HP says, and it doesn’t look like it’s giving up on Autonomy any time soon: “the market and competitive positioning for Autonomy remain strong, particularly in cloud offerings,” the company writes in its statement.

Autonomy, founded in the UK, offers a software infrastructure solution in which enterprises can get different applications to “communicate” with each other.

It has 20,000 customers worldwide, and there are over 400 OEM companies that offer licenses to more than 500 products. Applications include those that handle information access technology, pan-enterprise search, information governance, end-to-end eDiscovery and archiving, records management, business process management, web content management, customer interaction solutions, and video and audio analysis.

Following are some other founder departures from other companies HP has acquired — as you can see it looks like all of the others may have been working through their earn-outs (typically two years; although Chris Lynch stayed for just over a year after Vertica was bought, to join Atlas Ventures). Between Autonomy getting bought in October and today, it’s been about eight months.

HP acquired Opsware for $1.6 billion in 2007.  President & CEO Ben Horowitz stayed a year before leaving in 2009 to launch Andreesen Horowitz.

HP acquired Vertica for $350 million in February 2011. CEO Chris Lynch left in March 2012 to join Atlas Ventures, a VC firm.

HP acquired Stratavia in August 2010.  Terms not disclosed.  CEO Thor Culverhouse left in February 2012 to found new company.

HP acquired ArcSight for $1.5 billion in September 2010.  CEO Tom Reilly left HP in May 2012.

HP acquired Fortify in August 2010. Terms not disclosed. CEO John M. Jack left in January 2012.