Reaction to Financial Times article

From Mike Lynch:

“Meg Whitman accused Autonomy of “active concealment” but these revelations prove we were open and transparent with our auditors who continue to stand by the accounts. Meg Whitman must answer to her shareholders with what she knew, when she knew it and how she and her senior colleagues made such factually incorrect and serious statements that were so easy to check from the audit packs.

“Why would Meg say we had withheld information from our auditors? She should explain or resign.”

Reaction:

Meg Whitman accused us of “active concealment” but these revelations prove we were open and transparent with our auditors. These revelations not only confirm this, but show that a large number of Hewlett Packard staff and their advisers were familiar and comfortable with Autonomy accounting practices for over a year before HP made its announcement. We now ask that Meg Whitman explain to her shareholders what she knew, when she knew it and how her senior colleagues could have made factually incorrect statements that were so easy to check from the Deloitte audit packs.

In November 2012, Meg Whitman and her senior management team told the world they had discovered that Autonomy had been selling hardware and booking it as high-margin software and that it had inappropriately booked value-added reseller (VAR) sales where there had been no sell-through. She further stated that these facts were so well hidden that they came to light only when a whistle-blower surfaced in June 2012, a position untenable now that details of Deloitte’s audit packs have emerged. Deloitte has stated it “categorically denies any knowledge of any accounting improprieties or misrepresentations in Autonomy’s financial statements.”

Despite waiting a year and HP trawling through thousands of deals we are presented with three examples of value of about $24m out of $2.1bn, and a couple of out-of-context email quotes. We now see why, as the FT puts it, “her standing is increasingly blemished by HP’s failure to provide convincing evidence” to substantiate a $5bn write-down.

There is another explanation for the failure of Autonomy to meet the financial expectations in place at the time of its takeover by HP. It is entirely to do with HP’s failure to properly integrate the company it bought. That failure became clear early in the process and is recorded in the documents revealed today. Given that there were early indications of these difficulties, reported to Ms Whitman and her team by senior figures at Autonomy, we ask why she waited until November 2012 until informing her shareholders of a write-down in value.

Whilst we are pleased that light has been shed on this situation, Meg Whitman now has some very serious questions to answer. And we ask that HP no longer pursue this matter through partial leaks, information out of context and spin.