Perspective on the HP/Autonomy Fiasco – eDiscovery Trends
November 26, 2012
It’s not exactly Dr. Evil’s $100 billion, but it’s not “chump change” either…
By now, you’ve probably heard that, on Tuesday, Hewlett-Packard (HP) took an $8.8 billion charge resulting from its acquisition of Autonomy back in 2011, one of the largest acquisitions in the eDiscovery industry in history. HP has called on US and British authorities to investigate what it called "serious accounting improprieties, disclosure failures and outright misrepresentations at Autonomy" before the acquisition in a developing scandal that also involves accounting firms Deloitte and KPMG, who audited the sale.
In a statement, HP said “HP is extremely disappointed to find that some former members of Autonomy’s management team used accounting improprieties, misrepresentations, and disclosure failures to inflate the underlying financial metrics of the company, prior to Autonomy’s acquisition by HP”. The deal was brokered by former HP CEO Leo Apotheker and Autonomy founder Mike Lynch – both are no longer with HP.
Some notable stats:
- The $8.8 billion charge is 85% of the widely reported $10.3 billion purchase price that HP paid for Autonomy in October 2011;
- On Tuesday, HP’s shares traded down $1.74, or 13%, at $11.56 in morning trading – just after the open, they hit $11.35, the lowest level since 2002;
- HP's net loss for the fiscal fourth quarter (which ended Oct. 31) was $6.85 billion, compared with net income of $239 million in the same period in 2011.
For his part, Lynch fiercely denies allegations that Autonomy falsified its financial statements. In a statement to the Guardian on Tuesday, his spokesperson said: “HP has made a series of allegations against some unspecified former members of Autonomy Corporation PLC's senior management team. The former management team of Autonomy was shocked to see this statement today, and flatly rejects these allegations, which are false…HP's due diligence review was intensive, overseen on behalf of HP by KPMG, Barclays and Perella Weinberg. HP's senior management has also been closely involved with running Autonomy for the past year…It took 10 years to build Autonomy's industry-leading technology and it is sad to see how it has been mismanaged since its acquisition by HP.”
Additional articles discussing the HP/Autonomy controversy are available here, here, here and here. As for what will become of HP and its Autonomy division (that previously acquired Zantaz, Interwoven and Iron Mountain, among others), remains to be seen. Expect a long legal battle.
So, what do you think? How will this affect future acquisitions of eDiscovery companies? Will we all be working with the HP/Autonomy public domain data set someday? ;-) Please share any comments you might have or if you’d like to know more about a particular topic.Disclaimer: The views represented herein are exclusively the views of the author, and do not necessarily represent the views held by CloudNine Discovery. eDiscoveryDaily is made available by CloudNine Discovery solely for educational purposes to provide general information about general eDiscovery principles and not to provide specific legal advice applicable to any particular circumstance. eDiscoveryDaily should not be used as a substitute for competent legal advice from a lawyer you have retained and who has agreed to represent you.