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Meg Whitman Says HP Was Defrauded By Autonomy; HP Stock Plunges 237

Posted by timothy
from the damn-english-ravines dept.
McGruber writes "CNBC is reporting that Meg Whitman claims HP was defrauded in its purchase of Autonomy. 'We believed there is a willful effort on the part of certain members of Autonomy management to mislead shareholders when Autonomy was a publicly traded company, and to mislead potential buyers including HP,' Whitman said. 'We stand by the forensic review that we've seen,' she added. I wish her the same level of success I had when I filed an eBay claim." Also covered at SlashBI, which names the write-down damage: $8.8 billion.
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Meg Whitman Says HP Was Defrauded By Autonomy; HP Stock Plunges

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  • Crashy (Score:4, Interesting)

    by tomalpha (746163) * on Tuesday November 20, 2012 @01:24PM (#42043497)
    I remember waybackwhen I last used Autonomy's categorisation and search engine. It wasn't very reliable and I never thought it did a very good job - neither the categorisation nor the searching. It always felt like a triumph of sales over engineering. I was amazed at the sale price to HP when it happened. Maybe this is something different, but somehow it rings true.
  • Nice bunch of people (Score:5, Interesting)

    by BigBadBus (653823) on Tuesday November 20, 2012 @01:58PM (#42044051) Homepage
    I used to work for Autonomy. I have no sympathy for them.
    My little article is here [usenetreader.co.uk]
    After Autonomy's lawyers bullied me and anyone who supported me to take my article off line. I eventually lost my net access after Autonomy complained to BT, my ISP; they never issued an explanation or apology but still took money from my account. It took years and a letter to the BT chairman before I got a refund.
    The article was originally subtitled "Stress Is More Fun" but seems to have got lost; if you read the article, you'll find out why it had this moniker. To find out what others think, look at Glassdoor [glassdoor.com]
  • My guess (Score:5, Interesting)

    by Zontar_Thing_From_Ve (949321) on Tuesday November 20, 2012 @02:01PM (#42044087)
    I'm just making a wild guess here, but maybe upper HP management decided that Autonomy was the only possible means of getting HP back on track. This probably filtered down the chain of command to the people doing the investigation. They may have just chosen to gloss over anything that seemed funny because they were convinced that management did not want to find any problems as if this acquisition didn't go through, HP was going to get beat up financially in the stock market and more layoffs were likely. Or we have to accept that Autonomy was just insanely good at hiding their malfeasance even though various stock traders had been shorting the stock for months because they felt their financials were fishy and somehow the traders figured out what the investigators couldn't. I find that unlikely.

    I see this as kind of a variation on the way that decisions sometimes got made in the old USSR. During the days of the Soviet Union, bureaucrats got into the habit of anticipating the needs/wishes of their superiors. I'm guessing that there's probably a culture of fear in HP where the masses are afraid of layoffs and those at the top probably shoot the messengers when they get bad news, so this was a natural outcome.
  • Re:Red herring (Score:5, Interesting)

    by ShanghaiBill (739463) on Tuesday November 20, 2012 @02:26PM (#42044423)

    I find it hard to believe that the management of HP failed to uncover fraud of this magnitude ...

    I have sat on a few boards (none nearly as big as HP) and I am not surprised in the least. The CEO wants to "make a deal" to "execute a strategic vision". So he sells it to the board, which is too busy with pissing contests and bike shed arguments [wikipedia.org] to spend much time on it. Then the deal is publicly announced. Only then is the "due diligence" done. If any problem is found, there is enormous pressure to "make the deal happen" to avoid losing face by unwinding the deal. 80% of all mergers end badly for both customers and shareholders, yet every CEO thinks his deal is one of the other 20%. HP was in a bad situation, with their commodity businesses in PCs and printers generating little profit and even less growth. So their "strategic vision" was to move into software and services. The Autonomy merger was part of that, and if it fell apart other potential partners would shy away, and the strategy shift would likely fail. So it is likely that the accountants pointed out lots of problems, but were overruled by people with too much at stake to let the deal fall through.

  • by garyebickford (222422) <gar37bic@@@gmail...com> on Tuesday November 20, 2012 @02:31PM (#42044513)

    Hate HP for making us individual taxpayers pick up the slack

    So you are arguing that taxes should be paid on total gross revenue, regardless of costs? That's gonna make your grocery bill go up by about 30% (grocery stores typically run on 2% to 5% margins, so taxing on gross revenues instead of profits means they will pay taxes of 35% of the total bill rather than on the 2% profit.)

    I'll just add that according to many economists, as a class corporations essentially don't pay taxes - they only pass those taxes on to customers (whether corporate or individual) as increased prices.

    And if you think the money just goes to management, that's rarely true (though widely publicized). When competition is working as it should, corporations that keep the money that would have gone to taxes will be forced to reduce their prices to match their competitors. And if board management is working (which it often isn't), even if they can keep the prices and profits up, the money will be passed to the investors as dividends and/or stock price increases. Since the vast, vast majority of stock is held by institutions such as 401-K funds, pension funds and the like, most of the money still ends up eventually in the hands of individuals like you and me.

  • by sgtrock (191182) on Tuesday November 20, 2012 @02:32PM (#42044527)

    There's a very persuasive argument to be made that the Compaq acquisition is what really finished HP as an engineering company. Apparently there was some ferocious in-fighting after it. Sadly, the Compaq guys won for the most part and took the company to an almost entirely sales and marketing based strategy.

    Those of us who cut our teeth on HP test equipment, early HP/UX workstations and servers, HP LaserJet printers, and HP calculators still mourn the death of Bill and Dave's dream. :-(

  • Due Dilligence Fail (Score:4, Interesting)

    by dave562 (969951) on Tuesday November 20, 2012 @02:43PM (#42044687) Journal

    It never ceases to amaze me how often this happens. I have seen it first hand during an acquisition I was aware of, and here it is at HP. In the case I was aware of, my co-workers and others were doing everything we could to illuminate the problems before the acquisition went through, but the concerns fell upon deaf ears. It took years to clean up that mess. Of course the senior management who were responsible for the acquisition came through it unscathed, while the rest of us worked our asses off to "make it work". It looks like the same thing happened at HP.

    As an executive, these people are paid to take care of these things. They are supposed to be able to handle M&A work. That is what all of those fancy degrees and business school is for. In the tech world, if you say that you can build an environment and then fail, it is obvious and you get fired. Yet some how in the C-suite world, if you say you can build a company and fail... nothing happens. I am totally in the wrong profession.

  • Re:Meg, Carly (Score:3, Interesting)

    by mcrbids (148650) on Tuesday November 20, 2012 @02:48PM (#42044765) Journal

    Two words: Skype purchase.

    When Meg took over as CEO, the company was already headed skyward, already had upward momentum. Mostly she just had to not screw up too badly to make it successful. EBay was actually rather late to implement such features as "Buy it now" which were already innovated in competing marketplaces that didn't have the same mind share. (I should'a patented that one, oh well)

    Ebay's purchase of Skype was the most random purchase ever, it was for a quajillion dollars (Ebay lost virtually all of it) and they didn't even buy the source code.

    Oh, and don't forget Meg Whitman 2010! [cnet.com] Spent crazy amounts of money on ads that were not effective during a time when the political climate almost could not be better.

  • Re:Meg, Carly (Score:5, Interesting)

    by phantomfive (622387) on Tuesday November 20, 2012 @02:58PM (#42044945) Journal
    Oh, it's all HP's fault. Check this out. [oracle.com]

    1) Autonomy tried to sell to Oracle for $6billion, which Oracle rejected as overpriced.
    2) Autonomy CEO denied ever trying to sell to Oracle, said Oracle didn't know anything about Autonomy's financials.
    3) Oracle called the Autonomy CEO a LIAR, publicly, and shared his presentation with the whole world to prove it.

    They put all the info on a page called, "Please Buy Autonomy." You can read it now yourself and decide if you would have bought autonomy in 2011. I've always thought Oracle would be a miserable place to work, but now I see some people are definitely having fun, just not programmers.
  • Re:Meg, Carly (Score:3, Interesting)

    by MightyYar (622222) on Tuesday November 20, 2012 @03:09PM (#42045095)

    Traditional credit card processors are even worse. They rake you over the coals when you sign up AND they keep your money (for 6 months in my case) when your account hits certain, unknowable magic thresholds. In my case it was because we were selling data.

    Now, in their defense, we DID have idiots claiming chargebacks months and months after the transactions were posted. I can't really fault them for their policy of holding on to the money - but their policy of not disclosing this up-front is borderline criminal. You shouldn't have to sue your credit card processor to get your money. And then when you get upset for being sued and cancel the account, you should at least have the decency to inform the poor reseller, who can't figure out why you aren't paying them anymore or where your account went.

  • Re:Meg, Carly (Score:5, Interesting)

    by Jah-Wren Ryel (80510) on Tuesday November 20, 2012 @04:03PM (#42045805)

    Two words: Skype purchase.

    Two more words: Paypal purchase.

    Probably the best business move that Ebay ever made - sucks for customers but the vertical monopoly it created is great for Ebay. Also occured while Whitman was CEO there.

    I'm not a Whitman sycophant, I just think that if you are going to cherry-pick you should at least pick a good cherry when you pick a bad one.

  • by jrminter (1123885) on Tuesday November 20, 2012 @04:04PM (#42045815)
    The statement that caused me most concern was, "'We stand by the forensic review that we've seen." Excuse me? Somebody didn't look closely enough. Wouldn't a deal this big require a bond? Were I an HP shareholder, that statement would start my petitions to the BOD that Meg should go. Were I an HP shareholder, I would expect at least a statement like: "We have commissioned an independent review to insure that our forensic accountants used due diligence. HP will actively support the authorities with appropriate jurisdiction in the prosecution any fraud." Hindsight is always 20:20, but the shareholders deserve a specific analysis of what went wrong and assurance that the company will support prosecution of fraud.
  • by gelfling (6534) on Tuesday November 20, 2012 @04:39PM (#42046237) Homepage Journal

    They are done. They are Alcatel and Xerox. They are profoundly broken and no amount of strategizing the paradigm and clousourcing the B2B experience is going to fix that. HP is now just a brand with nothing behind it and dysfunctional organization that doesn't know what the fuck its doing behind it.

    They finally reached the critical mass of disorganized bullshit and mismanaged acquisitions run by a senior staff of psychopathic feudal warlords who do nothing except protect their own shit while the CEO, is busy molesting secretaries or running for public office.

  • Re:Red herring (Score:2, Interesting)

    by garyebickford (222422) <gar37bic@@@gmail...com> on Tuesday November 20, 2012 @05:03PM (#42046535)

    Clue: The US Defense Department is the latest agency to give up on auditing or setting up GAAP accounting - several agencies have tried to set up real corporate accounting systems and failed.

    If any publicly-held company's accounting were as bad as the US government's, the principals would be headed to jail. By some estimates 10% of the money just wanders off into the bushes, never to be seen again. It is not necessarily taken, or stolen, it's just lost track of like the Ark of the Covenant stored in an army warehouse in that movie, never to be seen again. The US government (and probably most other governments) has a large number of sofas, with change amounting to $billions lost in the cushions.

    A big chunk of it wanders through various internal accounts and ends up at CIA, NSA and Lockheed's Skunkworks.

    Fixing those systems would require a huge refactoring of all government operations. There are probably 100,000 workers in US government that are essentially 'lost' - they do something, they get paid, but they're not accounted for anywhere. IMHO, of course, this is yet another reason why all governmental activities should be done at the lowest, most local level possible. Centralizing management works about as well as centralizing the economy - badly. A system comprised of many small entities making small decisions based on good information is much more robust and adaptive than a single large entity. Such a system will have proportionately more errors, but their impact will be proportionately smaller, and the cost and speed of correction will be much better. (IOW it's hard for a centipede to trip and fall down.)

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