11 ms·

HP takes a $8.8 billion writeoff, alleging Autonomy accounting fraud

136 points by achille 14y ago

achille 14y ago
The paragraphs in question: "Fourth quarter and full year fiscal 2012 results include a non-cash goodwill and intangible asset impairment charge of $8.8 billion relating to the Autonomy business within the Software segment" "The majority of this impairment charge is linked to serious accounting improprieties, disclosure failures and outright misrepresentations at Autonomy Corporation plc that occurred prior to HP's acquisition of Autonomy and the associated impact of those improprieties, failures and misrepresentations on the expected future financial performance of the Autonomy business over the long-term. The balance of the impairment charge is linked to the recent trading value of HP stock. There will be no cash impact associated with the impairment charge."
kitsune_ 14y ago
What about due dilligence? The fact that this can happen boggles my mind.
- wheaties 14y ago
  Large entities can often mask accounting fraud with the helpnof an accounting firm. Think Enron and Auther Anderson. I'm pretty sure HP is going to sue the begeezus out of a number of complicent players. They should start with the former CEO of Autonomy.
  - raverbashing 14y ago
    In fact, HP should start suing the one that had the brilliant idea of acquiring Autonomy: Leo Apotheker
    - skrebbel 14y ago
      If he got bought, yes. Otherwise, since when is making horrible business decisions a crime?
      - raverbashing 14y ago
        It is naive, given the facts, to consider that it was a mere "horrible business decision" especially in face of the values involved
    - chollida1 14y ago
      > In fact, HP should start suing the one that had the brilliant idea of acquiring Autonomy: Leo Apotheker Why? for making a bad business decision? The board approved it. That's why there is a board. The finance department at HP signed off on it. The tech department at HP looked at the tech and signed off on it. Everyone signed off on it, it didn't' work out.
      - raverbashing 14y ago
        Apparently, not that clear-cut http://www.businessinsider.com/meg-whitman-hp-autonomy-blame-2012-11 http://www.businessinsider.com/meg-whitman-hp-autonomy-blame... "Why didn't the HP board question the purchase price in the first place? That's what Benjamin Reitzes, an analyst for Barclays Capital, asked on the call. Whitman's answer: The board wasn't responsible. The two people who were responsible, in her view, are now gone: her predecessor, Léo Apotheker and HP's longtime strategy chief, Shane Robison, who retired in November 2011, shortly after the Autonomy deal went through. "
        chollida1 14y ago
        I'm not sure that invalidates anything I said. It's true that the buck stops with the CEO. It was after all, his decision to make the deal. My point was what are you going to sue him for? He did the right thing. He made up his mind, ran it past the board for approval, ran it past finance for approval, got an outside auditor to do due diligence. All approved. The deal went through. It turned out to be a stupendously bad business decision. Should twitter be able to sue the developer who made the incredibly bad design decision to use ruby on rails and architect their system as a blog rather than than a message queue? Bad decisions happen, people loose their jobs over them. it's much harder to sue someone when they've done the due diligence and had the decision signed off by many other people.
        raverbashing 14y ago
        Yes, I believe everything you said is valid, it is a bad business decision, unless evidence to something else is found. And in the end, it was not something that was done hidden from other people, if it was a bad decision they should have stood their ground.
  - kitsune_ 14y ago
    Back when the deal was announced I was exteremely skeptical. $10.2 billions for a relatively unknown UK software company that focuses on document management? 10 billions?! Their (Autonomy's) past acquisitions looked rather erratic to me. I also did not understand as to why a hardware company like HP would buy a software company in the first place. Then there were all the glassdoor posts discussed here on HN... the whole deal just looked shady even back then. edit: http://news.ycombinator.com/item?id=2902749 http://news.ycombinator.com/item?id=2902749 I just stumbled upon this comment by AlexMuir, it was the most upvoted comment on the HN discussion about HP's acquisition of Autonomy AlexMuir pretty much called it.
    - maxerickson 14y ago
      One of HPs many personalities wants to be IBM (hence the software services acquisition).
  - rbanffy 14y ago
    They could start with the board who hired Apotheker.
    - VonGuard 14y ago
      The same board that fired Hurd? The HP board needs to go away. They've been fucking things up for years. It's one of those situations where, after 3 CEO's, the first of which was kicking ass, maybe it's time to consider that the board is the problem, not the CEO.
      - TheCondor 14y ago
        Yeah. The same board that spied on itself and executives to find leaks. They are clearly part of the problem. HP's vaunted culture isn't what they think it is and that's part of the problem too. They are too big for their britches, literally, need to cut some pieces off and get smaller again before they become smaller.
  - mongol 14y ago
    Ah, Arthur Andersen. I had to refresh my memory by reading through its Wikipedia page. What a disaster.
- chollida1 14y ago
  I once asked this when I started at the hedge fund I currently work at. The answer I got was that for a large company, hiding things on the balance sheet is like getting a home inspection and finding out later that the house has some big problems with it. The point being is that inspections find somethings but can never find all issues. What they meant was that if you dig deep enough you can always find out the problems, but when your going through the aquisition, you often don't have the proper access to the records you want, or the time to do the entire audit. HP has owned autonomy for over a year and just found out this quarter. There is no way they would have had such access to autonomy's books during the due diligence phase nor is there anyway that autonomy would have let them take over a year to do their due diligence
  - cperciva 14y ago
    I understand that due diligence is hard and there's always going to be things which get missed... but I have trouble understanding how it's possible to miss 8.8 billion dollars.
    - chollida1 14y ago
      > but I have trouble understanding how it's possible to miss 8.8 billion dollars. I think we all are this morning. Unfortunetly the chatter we are hearing is that this type of accounting cover up, if true, would require help from their auditor. Which means we may be down another accounting firm by the time this is over.
    - jfb 14y ago
      It's also not in anyone's immediate short-term interest to find a reason to scotch an 1.0x10^10$ deal, and whatever we'll kick this stinker of a deal down the road for the next CEO/CFO/&c.
    - benth 14y ago
      I agree. When I heard HP was buying Autonomy for that much, I immediately thought of MS's purchase of aQuantive. And now both end up with huge write-downs.
  - 14y ago
objclxt 14y ago
Mike Lynch (ex-Autonomy CEO) is speaking today at a start-up conference in London. Who wants to bet he won't be taking questions? What the HP press release doesn't mention, but what the BBC and others are reporting[2] is that HP are both planning to refer it to the SEC/SFO and take civil action against "various parties". It's not a huge leap of faith to suggest Mike Lynch is probably one of the parties involved. [1]: http://www.wired.co.uk/news/archive/2012-10/25/mike-lynch http://www.wired.co.uk/news/archive/2012-10/25/mike-lynch [2]: http://www.bbc.co.uk/news/business-20412186 http://www.bbc.co.uk/news/business-20412186
- buro9 14y ago
  If the second sentence is true, then he can't answer questions. Rock and a hard place for Mike Lynch.
- peteretep 14y ago
  From the BBC article: > Autonomy founder Mike Lynch is a non-executive director of the BBC. This is the beauty of a free non-commercial press.
- dabeeeenster 14y ago
  I was at the event - he didn't attend...
bugsbunnyak 14y ago
I thought this sounded familiar - AlexMuir called it: http://news.ycombinator.com/item?id=2902749 http://news.ycombinator.com/item?id=2902749 and score one for Larry Ellison: http://news.ycombinator.com/item?id=3051730 http://news.ycombinator.com/item?id=3051730
- halfwit 14y ago
  Yeah, go back and actually look at those comments RE: Larry Ellison. Everyone is pissed that he wasn't acting professionally; it's all about decorum and how Ellison is a jerk that nerds wouldn't want to work for, due to appearances. Zero interest in whether what was posted on Oracle.com was correct. The focus on optics and "niceness" here is really unfortunate. Because, the thing about when somebody says something that's not nice, that you wouldn't repeat to your grandmother, maybe even contains words like "fuck", is that it could still be true. And it should be treated that way.
- debacle 14y ago
  halfwit, you appear to be hellbanned on HN. You might want to take that up with pg.
  - shasta 14y ago
    Do to the frequency with which I see people attempting to alert a hell banned party (which obviously defeats its purpose), I wouldn't be surprised to learn that the hell banned can't see any post that contains the word 'hell banned'.
    - jobu 14y ago
      Sorry continuing this off-topic thread, but I'm actually curious what it takes to become 'hell banned'. I've noticed several banned users lately, and this is another case where none of the user's comments/submissions seem overly trollish or offensive.
  - halfwit 14y ago
    I know. And I'm sure pg could not care less. Thank you, though.
deleted 14y ago
[deleted]
lifeisstillgood 14y ago
This is an "intangibles and goodwill" writeoff - its not nothing but it is also a "guesstimate" of value. Essentially they "guessed" a year ago Autonomy was worth 10bn, now they are guessing its worth its yearly sales cash income - ie no goodwill at all. Given that at the time of purchase it had 1bn in sales, and now they have lopped that (plus deprecation) to the same suggests the problem is to do with allocation of revenue than the actual viability of the software
ccozan 14y ago
[disclaimer: worked for Autonomy. This view represents my personal sole oppinion and not of the (former) employer] I can't tell too much, but everyone I knew was in shock when they announced the price (12$bn), this was, way, way over what I internally valued the company ( I was counting about 2$bn max - stock was better but is a result of offer/demand). Either Mike was/is a good seller, or HP ( or Leo Apoteker ) was corrupt or dumb.
- rbanffy 14y ago
  > or HP ( or Leo Apoteker ) was corrupt or dumb I wouldn't bet on Apotheker being dumb. In his career he probably made more money than many of us ever will.
  - kitsune_ 14y ago
    Is making money a proof for one's intelligence?
    - rbanffy 14y ago
      Money in itself is not sufficient to prove someone is smart, but Apotheker clearly did right something I'm doing wrong ;-)
      - jrogers65 14y ago
        This assumes that everything in life depends only on you. Luck plays a big role in business.
      - lmm 14y ago
        Not at all clear; maybe he just took much bigger risks than you and got lucky.
        chollida1 14y ago
        I think we'd all agree that luck plays a big part in all of our lives, but he did become the CEO of one of the largest companies in the world. If you think this was due to "luck" then I'd strongly disagree. Luck provides opportunities, but people have to take them and make the absolute most of those opportunities to even come close to the career that this man has had.
paraschopra 14y ago
Wow, what would anyone do with billions of dollar if their reputation is hit so hard? I'm actually curious about moral position of people who engage in such frauds. Is there any research on such white-collar "crime"? What motivates them and why?
- raverbashing 14y ago
  Why would you care about your reputation when you're in a five star hotel at the Caribbean with billions in your bank account?!
  - VonGuard 14y ago
    Pretty much. That kind of money is "fuck you" money. You can go somewhere away from the business, and pay people to pamper you for the rest of your life. Who would even be able to get close enough to you to tell you yer a shithead? And, of course, there's the standard business mantra that business is war, and all's fair in love and war. These guys tell themselves that they're just crazy slick and smart, not criminals.
- deleted 14y ago
  [deleted]
- wpietri 14y ago
  You will probably find the book "Snakes in Suits" enlightening: http://www.amazon.com/Snakes-Suits-When-Psychopaths-Work/dp/0061147893 http://www.amazon.com/Snakes-Suits-When-Psychopaths-Work/dp/... You know those charmingly manipulative psychopathic serial killers? It turns out many people like that just aren't violent. Instead, they like money and power. A person like this probably feels just fine about what they did. "Psychopaths are without conscience and incapable of empathy, guilt, or loyalty to anyone but themselves."
patrickgzill 14y ago
Deloitte (large accounting firm) signed off on the independant auditor's report... summary here: http://www.zerohedge.com/news/2012-11-20/deloittes-2011-autonomy-independent-auditor-all-clear-sign http://www.zerohedge.com/news/2012-11-20/deloittes-2011-auto... Is it just me, or does this kind of stuff scream "the system itself, allows massive fraud to occur" ?
- enraged_camel 14y ago
  Given the nature of the economic meltdown we had just a few years ago, I think the system allowing massive fraud to occur is a given. The question is, what can be done about it, short of letting it all burn and rebuilding from scratch?
lupatus 14y ago
This looks like a huge capital loss for HP. But, is it actually a move to lower HP's tax burden ahead of the expiring Bush tax cuts? It seems to me that they valued it one-way a year ago, based mainly on intangible value. But now, they are valuing it another way, based on actual sales, that gives it a lower value that looks like a capital loss for HP. In real terms though, what capital has been lost? They still have all the Autonomy resources they paid for a year ago.
- twoodfin 14y ago
  I was unaware the Bush tax cuts had any effect on corporate tax rates (excluding things like S corporations that pay individual rates).
  - lupatus 14y ago
    Yeah. IANA lawyer or tax professional, but it seems to me that capital gains and dividend taxes for C Corporations will be going up if the Bush tax cuts expire: http://www.deanmead.com/deanmead-newsletter/effects-of-tax-rate-changes-after-extension-to-bush-tax-cuts-end-2/ http://www.deanmead.com/deanmead-newsletter/effects-of-tax-r...
    - twoodfin 14y ago
      C Corporations don't pay capital gains and dividend taxes. Their investors do. Unless this announcement has a positive effect on HP's stock, there are no additional gains or dividends to be had ahead of the tax rates going up. For a real example of corporate maneuvers around the 'fiscal cliff', see Wal-Mart, which is moving up its dividend to help its investors avoid a potentially higher rate: http://www.reuters.com/article/2012/11/19/walmart-dividend-idUSL4N08Z3CB20121119 http://www.reuters.com/article/2012/11/19/walmart-dividend-i...
danso 14y ago
Back in May, ex-Autonomy CEO Mike Lynch was ousted by HP (or left out of frustration, depending on the source) http://www.telegraph.co.uk/finance/newsbysector/mediatechnologyandtelecoms/electronics/9287201/Mike-Lynch-ousted-from-HP-after-Autonomy-disappoints.html http://www.telegraph.co.uk/finance/newsbysector/mediatechnol... I have to say, I can't recall hearing about Autonomy...not that I keep up with all the tech news, but a $10B valuation is pretty big. Is it just accounting fraud that's going on, or was the technology not what it was claimed to be? $10B for tech that would encroach on what Google/Apple/the NSA would do seems like it would make Autonomy more of a household-tech name, even if it was based in the enterprise sector: http://en.wikipedia.org/wiki/Autonomy_Corporation http://en.wikipedia.org/wiki/Autonomy_Corporation > Autonomy's technology attempts to "understand" any form of unstructured information, including text, voice, and video, and based on that understanding perform automatic operations, for example inferring what the user wants and on that basis finding other information that may be of interest.
- seldo 14y ago
  Autonomy is more of a household name in Europe -- when I lived in London I remember seeing billboards, etc., like you do with Oracle in the bay area. That said, enterprise software is never particularly "famous"; you would be surprised at the number of $10bn-valued companies you've never heard of. (Of course, that doesn't preclude them being super-shady; Enron was a household name)
- iomike 14y ago
  They have a best in breed, magic quadrant, CMS. If you're in content management, they're the best. Outside of that, no one has a reason to know them.
  - kitsune_ 14y ago
    Bold claims. Do you really trust Gartner with their CMS recommendations?
    - iomike 14y ago
      Garner AND Forrester. Yes, from hands-on use, my experience seems to agree with their assessments.
gadders 14y ago
Cross-posted from the other Autonomy thread: I have no comment on Autonomy's finances. We did however evaluate it's product vs Google's search appliance. The Google Appliance we pretty much plugged in and let it do it's thing. After a few days it was giving excellent results on our massive (80,000 people) company intranet. The Autonomy server had to be constantly tweaked and fiddled with to even get it near to the relevance of the results. Unfortunately, Autonomy had flogged a loads of licenses to another part of the business for peanuts, so we had to go with their inferior product.
ry0ohki 14y ago
The other big acquisition in the enterprise search space around that time (Fast, bought by Microsoft for $1.2 billion) had similar problems, kind of odd. http://techcrunch.com/2008/07/03/did-the-enron-of-norway-pull-a-fast-one-on-microsoft-more-details-about-the-mess-at-fast-search-transfer/ http://techcrunch.com/2008/07/03/did-the-enron-of-norway-pul...
- hboon 14y ago
  I can't comment on the 2 companies financials, but as an ex-FAST employee, I can vouch that working there in a pre-sales role was fun times for me. I have only heard of people saying it's horrible to work in Autonomy, but it might be selection bias. If anyone of you are in the enterprise software space as an engineer, you really ought to consider working in pre-sales. You get to build a highly valuable skill set that compliments what you know already.
AlexMuir 14y ago
For me, this highlights why tech investing is so frustrating. I saw this coming and would have shorted Autonomy if I had the money. But guess what? I'd have lost a fortune even though I was (allegedly) right. DHH has been shorting Salesforce for a good while. He's losing that bet as well. Equity investing often bears no relation whatsoever to reality. The "bigger fool" element is huge. That said, I think this may be the end of HP. A bold claim, but they are going to have to fight some serious allegations of corruption, incompetence and negligence.
- twoodfin 14y ago
  The market can stay irrational longer than you can stay solvent. I think it's like any other kind of investing: You have to diversify your doom and gloom. DHH was short Zynga too, and he claims that his last short of Salesforce ended up in positive territory: http://www.horsesaysinternet.com/people/dhh-vs-the-stock-market/ http://www.horsesaysinternet.com/people/dhh-vs-the-stock-mar... (Don't miss DHH's recent comment at the bottom.)
- ChuckMcM 14y ago
  It is sad that there isn't a "better" way to bet against (or for) a company. Per pg's startup ideas though it does seem to suggest a small opportunity. Sort of a variation on the sports book where you get to bet for or against company outcomes. The tricky bit would be to capture this sort of event (purchase then giant write down) as a wager.
  - adam 14y ago
    You could use prediction markets for something like this (disclaimer: i founded a prediction market software company) but unfortunately using real money isn't allowed in the States which would limit the interest of more serious traders.
    - ChuckMcM 14y ago
      Presumably because this is classified as a form of gambling right? (how the stock market gets away with it I'll never know.) Given that options are a financial instrument that converts a prediction market into something you can invest in, I wonder if there is some other financial instrument you could work out here.
trimbo 14y ago
Also note that all of their business units except one are down or flat year over year.
hboon 14y ago
For the ones who say due diligence is constrained by time and the company not showing visible signs of fraud, accusations have been flying around for a long time. See http://email-museum.com/2010/04/22/autonomy-creative-accounting/ http://email-museum.com/2010/04/22/autonomy-creative-account... for example. And note that HP and Autonomy were close partners, HP sells and deployed Autonomy's software. It's not like they have only worked together occasionally. This kind of stuff is everywhere. Disclaimer: worked at ex-competitor.
mark-r 14y ago
Any chance this is just a smokescreen for other problems at HP?
- gsibble 14y ago
  The thought occurs, but lying to investors of a publicly traded company (ie. HP lying about accounting fraud) would in and of itself be massive fraud that would open HP and its officers and board to incredible penalties. I can't imagine how any scenario would make it worthwhile, especially if you consider the personal ramifications for the officers.
  - mark-r 14y ago
    I'm not saying they're lying, but certain things like timing are under their control. I also wonder how much leeway they have for the amount of the writedown. Certainly the numbers need justification but you can always tilt the evidence to support your desired outcome.

136 points by achille 14y ago

The paragraphs in question: "Fourth quarter and full year fiscal 2012 results include a non-cash goodwill and intangible asset impairment charge of $8.8 billion relating to the Autonomy business within the Software segment" "The majority of this impairment charge is linked to serious accounting improprieties, disclosure failures and outright misrepresentations at Autonomy Corporation plc that occurred prior to HP's acquisition of Autonomy and the associated impact of those improprieties, failures and misrepresentations on the expected future financial performance of the Autonomy business over the long-term. The balance of the impairment charge is linked to the recent trading value of HP stock. There will be no cash impact associated with the impairment charge."

kitsune_ 14y ago

What about due dilligence? The fact that this can happen boggles my mind.

wheaties 14y ago
Large entities can often mask accounting fraud with the helpnof an accounting firm. Think Enron and Auther Anderson. I'm pretty sure HP is going to sue the begeezus out of a number of complicent players. They should start with the former CEO of Autonomy.
- raverbashing 14y ago
  In fact, HP should start suing the one that had the brilliant idea of acquiring Autonomy: Leo Apotheker
  - skrebbel 14y ago
    If he got bought, yes. Otherwise, since when is making horrible business decisions a crime?
    - raverbashing 14y ago
      It is naive, given the facts, to consider that it was a mere "horrible business decision" especially in face of the values involved
  - chollida1 14y ago
    > In fact, HP should start suing the one that had the brilliant idea of acquiring Autonomy: Leo Apotheker Why? for making a bad business decision? The board approved it. That's why there is a board. The finance department at HP signed off on it. The tech department at HP looked at the tech and signed off on it. Everyone signed off on it, it didn't' work out.
    - raverbashing 14y ago
      Apparently, not that clear-cut http://www.businessinsider.com/meg-whitman-hp-autonomy-blame-2012-11 http://www.businessinsider.com/meg-whitman-hp-autonomy-blame... "Why didn't the HP board question the purchase price in the first place? That's what Benjamin Reitzes, an analyst for Barclays Capital, asked on the call. Whitman's answer: The board wasn't responsible. The two people who were responsible, in her view, are now gone: her predecessor, Léo Apotheker and HP's longtime strategy chief, Shane Robison, who retired in November 2011, shortly after the Autonomy deal went through. "
      - chollida1 14y ago
        I'm not sure that invalidates anything I said. It's true that the buck stops with the CEO. It was after all, his decision to make the deal. My point was what are you going to sue him for? He did the right thing. He made up his mind, ran it past the board for approval, ran it past finance for approval, got an outside auditor to do due diligence. All approved. The deal went through. It turned out to be a stupendously bad business decision. Should twitter be able to sue the developer who made the incredibly bad design decision to use ruby on rails and architect their system as a blog rather than than a message queue? Bad decisions happen, people loose their jobs over them. it's much harder to sue someone when they've done the due diligence and had the decision signed off by many other people.
        raverbashing 14y ago
        Yes, I believe everything you said is valid, it is a bad business decision, unless evidence to something else is found. And in the end, it was not something that was done hidden from other people, if it was a bad decision they should have stood their ground.
- kitsune_ 14y ago
  Back when the deal was announced I was exteremely skeptical. $10.2 billions for a relatively unknown UK software company that focuses on document management? 10 billions?! Their (Autonomy's) past acquisitions looked rather erratic to me. I also did not understand as to why a hardware company like HP would buy a software company in the first place. Then there were all the glassdoor posts discussed here on HN... the whole deal just looked shady even back then. edit: http://news.ycombinator.com/item?id=2902749 http://news.ycombinator.com/item?id=2902749 I just stumbled upon this comment by AlexMuir, it was the most upvoted comment on the HN discussion about HP's acquisition of Autonomy AlexMuir pretty much called it.
  - maxerickson 14y ago
    One of HPs many personalities wants to be IBM (hence the software services acquisition).
- rbanffy 14y ago
  They could start with the board who hired Apotheker.
  - VonGuard 14y ago
    The same board that fired Hurd? The HP board needs to go away. They've been fucking things up for years. It's one of those situations where, after 3 CEO's, the first of which was kicking ass, maybe it's time to consider that the board is the problem, not the CEO.
    - TheCondor 14y ago
      Yeah. The same board that spied on itself and executives to find leaks. They are clearly part of the problem. HP's vaunted culture isn't what they think it is and that's part of the problem too. They are too big for their britches, literally, need to cut some pieces off and get smaller again before they become smaller.
- mongol 14y ago
  Ah, Arthur Andersen. I had to refresh my memory by reading through its Wikipedia page. What a disaster.
chollida1 14y ago
I once asked this when I started at the hedge fund I currently work at. The answer I got was that for a large company, hiding things on the balance sheet is like getting a home inspection and finding out later that the house has some big problems with it. The point being is that inspections find somethings but can never find all issues. What they meant was that if you dig deep enough you can always find out the problems, but when your going through the aquisition, you often don't have the proper access to the records you want, or the time to do the entire audit. HP has owned autonomy for over a year and just found out this quarter. There is no way they would have had such access to autonomy's books during the due diligence phase nor is there anyway that autonomy would have let them take over a year to do their due diligence
- cperciva 14y ago
  I understand that due diligence is hard and there's always going to be things which get missed... but I have trouble understanding how it's possible to miss 8.8 billion dollars.
  - chollida1 14y ago
    > but I have trouble understanding how it's possible to miss 8.8 billion dollars. I think we all are this morning. Unfortunetly the chatter we are hearing is that this type of accounting cover up, if true, would require help from their auditor. Which means we may be down another accounting firm by the time this is over.
  - jfb 14y ago
    It's also not in anyone's immediate short-term interest to find a reason to scotch an 1.0x10^10$ deal, and whatever we'll kick this stinker of a deal down the road for the next CEO/CFO/&c.
  - benth 14y ago
    I agree. When I heard HP was buying Autonomy for that much, I immediately thought of MS's purchase of aQuantive. And now both end up with huge write-downs.
- 14y ago

objclxt 14y ago

Mike Lynch (ex-Autonomy CEO) is speaking today at a start-up conference in London. Who wants to bet he won't be taking questions? What the HP press release doesn't mention, but what the BBC and others are reporting[2] is that HP are both planning to refer it to the SEC/SFO and take civil action against "various parties". It's not a huge leap of faith to suggest Mike Lynch is probably one of the parties involved. [1]: http://www.wired.co.uk/news/archive/2012-10/25/mike-lynch http://www.wired.co.uk/news/archive/2012-10/25/mike-lynch [2]: http://www.bbc.co.uk/news/business-20412186 http://www.bbc.co.uk/news/business-20412186

buro9 14y ago
If the second sentence is true, then he can't answer questions. Rock and a hard place for Mike Lynch.
peteretep 14y ago
From the BBC article: > Autonomy founder Mike Lynch is a non-executive director of the BBC. This is the beauty of a free non-commercial press.
dabeeeenster 14y ago
I was at the event - he didn't attend...

bugsbunnyak 14y ago

I thought this sounded familiar - AlexMuir called it: http://news.ycombinator.com/item?id=2902749 http://news.ycombinator.com/item?id=2902749 and score one for Larry Ellison: http://news.ycombinator.com/item?id=3051730 http://news.ycombinator.com/item?id=3051730

halfwit 14y ago
Yeah, go back and actually look at those comments RE: Larry Ellison. Everyone is pissed that he wasn't acting professionally; it's all about decorum and how Ellison is a jerk that nerds wouldn't want to work for, due to appearances. Zero interest in whether what was posted on Oracle.com was correct. The focus on optics and "niceness" here is really unfortunate. Because, the thing about when somebody says something that's not nice, that you wouldn't repeat to your grandmother, maybe even contains words like "fuck", is that it could still be true. And it should be treated that way.
debacle 14y ago
halfwit, you appear to be hellbanned on HN. You might want to take that up with pg.
- shasta 14y ago
  Do to the frequency with which I see people attempting to alert a hell banned party (which obviously defeats its purpose), I wouldn't be surprised to learn that the hell banned can't see any post that contains the word 'hell banned'.
  - jobu 14y ago
    Sorry continuing this off-topic thread, but I'm actually curious what it takes to become 'hell banned'. I've noticed several banned users lately, and this is another case where none of the user's comments/submissions seem overly trollish or offensive.
- halfwit 14y ago
  I know. And I'm sure pg could not care less. Thank you, though.

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lifeisstillgood 14y ago

This is an "intangibles and goodwill" writeoff - its not nothing but it is also a "guesstimate" of value. Essentially they "guessed" a year ago Autonomy was worth 10bn, now they are guessing its worth its yearly sales cash income - ie no goodwill at all. Given that at the time of purchase it had 1bn in sales, and now they have lopped that (plus deprecation) to the same suggests the problem is to do with allocation of revenue than the actual viability of the software

ccozan 14y ago

[disclaimer: worked for Autonomy. This view represents my personal sole oppinion and not of the (former) employer] I can't tell too much, but everyone I knew was in shock when they announced the price (12$bn), this was, way, way over what I internally valued the company ( I was counting about 2$bn max - stock was better but is a result of offer/demand). Either Mike was/is a good seller, or HP ( or Leo Apoteker ) was corrupt or dumb.

rbanffy 14y ago
> or HP ( or Leo Apoteker ) was corrupt or dumb I wouldn't bet on Apotheker being dumb. In his career he probably made more money than many of us ever will.
- kitsune_ 14y ago
  Is making money a proof for one's intelligence?
  - rbanffy 14y ago
    Money in itself is not sufficient to prove someone is smart, but Apotheker clearly did right something I'm doing wrong ;-)
    - jrogers65 14y ago
      This assumes that everything in life depends only on you. Luck plays a big role in business.
    - lmm 14y ago
      Not at all clear; maybe he just took much bigger risks than you and got lucky.
      - chollida1 14y ago
        I think we'd all agree that luck plays a big part in all of our lives, but he did become the CEO of one of the largest companies in the world. If you think this was due to "luck" then I'd strongly disagree. Luck provides opportunities, but people have to take them and make the absolute most of those opportunities to even come close to the career that this man has had.

paraschopra 14y ago

Wow, what would anyone do with billions of dollar if their reputation is hit so hard? I'm actually curious about moral position of people who engage in such frauds. Is there any research on such white-collar "crime"? What motivates them and why?

raverbashing 14y ago
Why would you care about your reputation when you're in a five star hotel at the Caribbean with billions in your bank account?!
- VonGuard 14y ago
  Pretty much. That kind of money is "fuck you" money. You can go somewhere away from the business, and pay people to pamper you for the rest of your life. Who would even be able to get close enough to you to tell you yer a shithead? And, of course, there's the standard business mantra that business is war, and all's fair in love and war. These guys tell themselves that they're just crazy slick and smart, not criminals.
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wpietri 14y ago
You will probably find the book "Snakes in Suits" enlightening: http://www.amazon.com/Snakes-Suits-When-Psychopaths-Work/dp/0061147893 http://www.amazon.com/Snakes-Suits-When-Psychopaths-Work/dp/... You know those charmingly manipulative psychopathic serial killers? It turns out many people like that just aren't violent. Instead, they like money and power. A person like this probably feels just fine about what they did. "Psychopaths are without conscience and incapable of empathy, guilt, or loyalty to anyone but themselves."

patrickgzill 14y ago

Deloitte (large accounting firm) signed off on the independant auditor's report... summary here: http://www.zerohedge.com/news/2012-11-20/deloittes-2011-autonomy-independent-auditor-all-clear-sign http://www.zerohedge.com/news/2012-11-20/deloittes-2011-auto... Is it just me, or does this kind of stuff scream "the system itself, allows massive fraud to occur" ?

enraged_camel 14y ago
Given the nature of the economic meltdown we had just a few years ago, I think the system allowing massive fraud to occur is a given. The question is, what can be done about it, short of letting it all burn and rebuilding from scratch?

lupatus 14y ago

This looks like a huge capital loss for HP. But, is it actually a move to lower HP's tax burden ahead of the expiring Bush tax cuts? It seems to me that they valued it one-way a year ago, based mainly on intangible value. But now, they are valuing it another way, based on actual sales, that gives it a lower value that looks like a capital loss for HP. In real terms though, what capital has been lost? They still have all the Autonomy resources they paid for a year ago.

twoodfin 14y ago
I was unaware the Bush tax cuts had any effect on corporate tax rates (excluding things like S corporations that pay individual rates).
- lupatus 14y ago
  Yeah. IANA lawyer or tax professional, but it seems to me that capital gains and dividend taxes for C Corporations will be going up if the Bush tax cuts expire: http://www.deanmead.com/deanmead-newsletter/effects-of-tax-rate-changes-after-extension-to-bush-tax-cuts-end-2/ http://www.deanmead.com/deanmead-newsletter/effects-of-tax-r...
  - twoodfin 14y ago
    C Corporations don't pay capital gains and dividend taxes. Their investors do. Unless this announcement has a positive effect on HP's stock, there are no additional gains or dividends to be had ahead of the tax rates going up. For a real example of corporate maneuvers around the 'fiscal cliff', see Wal-Mart, which is moving up its dividend to help its investors avoid a potentially higher rate: http://www.reuters.com/article/2012/11/19/walmart-dividend-idUSL4N08Z3CB20121119 http://www.reuters.com/article/2012/11/19/walmart-dividend-i...

danso 14y ago

Back in May, ex-Autonomy CEO Mike Lynch was ousted by HP (or left out of frustration, depending on the source) http://www.telegraph.co.uk/finance/newsbysector/mediatechnologyandtelecoms/electronics/9287201/Mike-Lynch-ousted-from-HP-after-Autonomy-disappoints.html http://www.telegraph.co.uk/finance/newsbysector/mediatechnol... I have to say, I can't recall hearing about Autonomy...not that I keep up with all the tech news, but a $10B valuation is pretty big. Is it just accounting fraud that's going on, or was the technology not what it was claimed to be? $10B for tech that would encroach on what Google/Apple/the NSA would do seems like it would make Autonomy more of a household-tech name, even if it was based in the enterprise sector: http://en.wikipedia.org/wiki/Autonomy_Corporation http://en.wikipedia.org/wiki/Autonomy_Corporation > Autonomy's technology attempts to "understand" any form of unstructured information, including text, voice, and video, and based on that understanding perform automatic operations, for example inferring what the user wants and on that basis finding other information that may be of interest.

seldo 14y ago
Autonomy is more of a household name in Europe -- when I lived in London I remember seeing billboards, etc., like you do with Oracle in the bay area. That said, enterprise software is never particularly "famous"; you would be surprised at the number of $10bn-valued companies you've never heard of. (Of course, that doesn't preclude them being super-shady; Enron was a household name)
iomike 14y ago
They have a best in breed, magic quadrant, CMS. If you're in content management, they're the best. Outside of that, no one has a reason to know them.
- kitsune_ 14y ago
  Bold claims. Do you really trust Gartner with their CMS recommendations?
  - iomike 14y ago
    Garner AND Forrester. Yes, from hands-on use, my experience seems to agree with their assessments.

gadders 14y ago

Cross-posted from the other Autonomy thread: I have no comment on Autonomy's finances. We did however evaluate it's product vs Google's search appliance. The Google Appliance we pretty much plugged in and let it do it's thing. After a few days it was giving excellent results on our massive (80,000 people) company intranet. The Autonomy server had to be constantly tweaked and fiddled with to even get it near to the relevance of the results. Unfortunately, Autonomy had flogged a loads of licenses to another part of the business for peanuts, so we had to go with their inferior product.

ry0ohki 14y ago

The other big acquisition in the enterprise search space around that time (Fast, bought by Microsoft for $1.2 billion) had similar problems, kind of odd. http://techcrunch.com/2008/07/03/did-the-enron-of-norway-pull-a-fast-one-on-microsoft-more-details-about-the-mess-at-fast-search-transfer/ http://techcrunch.com/2008/07/03/did-the-enron-of-norway-pul...

hboon 14y ago
I can't comment on the 2 companies financials, but as an ex-FAST employee, I can vouch that working there in a pre-sales role was fun times for me. I have only heard of people saying it's horrible to work in Autonomy, but it might be selection bias. If anyone of you are in the enterprise software space as an engineer, you really ought to consider working in pre-sales. You get to build a highly valuable skill set that compliments what you know already.

AlexMuir 14y ago

For me, this highlights why tech investing is so frustrating. I saw this coming and would have shorted Autonomy if I had the money. But guess what? I'd have lost a fortune even though I was (allegedly) right. DHH has been shorting Salesforce for a good while. He's losing that bet as well. Equity investing often bears no relation whatsoever to reality. The "bigger fool" element is huge. That said, I think this may be the end of HP. A bold claim, but they are going to have to fight some serious allegations of corruption, incompetence and negligence.

twoodfin 14y ago
The market can stay irrational longer than you can stay solvent. I think it's like any other kind of investing: You have to diversify your doom and gloom. DHH was short Zynga too, and he claims that his last short of Salesforce ended up in positive territory: http://www.horsesaysinternet.com/people/dhh-vs-the-stock-market/ http://www.horsesaysinternet.com/people/dhh-vs-the-stock-mar... (Don't miss DHH's recent comment at the bottom.)
ChuckMcM 14y ago
It is sad that there isn't a "better" way to bet against (or for) a company. Per pg's startup ideas though it does seem to suggest a small opportunity. Sort of a variation on the sports book where you get to bet for or against company outcomes. The tricky bit would be to capture this sort of event (purchase then giant write down) as a wager.
- adam 14y ago
  You could use prediction markets for something like this (disclaimer: i founded a prediction market software company) but unfortunately using real money isn't allowed in the States which would limit the interest of more serious traders.
  - ChuckMcM 14y ago
    Presumably because this is classified as a form of gambling right? (how the stock market gets away with it I'll never know.) Given that options are a financial instrument that converts a prediction market into something you can invest in, I wonder if there is some other financial instrument you could work out here.

trimbo 14y ago

Also note that all of their business units except one are down or flat year over year.

hboon 14y ago

For the ones who say due diligence is constrained by time and the company not showing visible signs of fraud, accusations have been flying around for a long time. See http://email-museum.com/2010/04/22/autonomy-creative-accounting/ http://email-museum.com/2010/04/22/autonomy-creative-account... for example. And note that HP and Autonomy were close partners, HP sells and deployed Autonomy's software. It's not like they have only worked together occasionally. This kind of stuff is everywhere. Disclaimer: worked at ex-competitor.

mark-r 14y ago

Any chance this is just a smokescreen for other problems at HP?

gsibble 14y ago
The thought occurs, but lying to investors of a publicly traded company (ie. HP lying about accounting fraud) would in and of itself be massive fraud that would open HP and its officers and board to incredible penalties. I can't imagine how any scenario would make it worthwhile, especially if you consider the personal ramifications for the officers.
- mark-r 14y ago
  I'm not saying they're lying, but certain things like timing are under their control. I also wonder how much leeway they have for the amount of the writedown. Certainly the numbers need justification but you can always tilt the evidence to support your desired outcome.