HP Hit With Shareholder Lawsuit Over Autonomy

Shareholders filed suit against Hewlett-Packard, alleging the company violated securities regulations by not disclosing the true value of Autonomy when it acquired the Big Data vendor. Who knew what, and when, isn’t the real issue -- the lawsuit should be about what happened after Autonomy was in the fold.

  • Tweet  
  • LinkedIn  
  • Facebook  
  • Google plus  
  • Send to Kindle
  • Send to  

As if Hewlett-Packard Co. didn’t have enough to worry about, it’s now facing a shareholder class-action lawsuit that alleges management violated securities regulations by not disclosing the true value of Autonomy, causing its stock price to plummet.

A lawsuit filed yesterday in U.S. District Court in San Francisco by shareholder Allan Nicolow charges HP with issuing “false and misleading statements” about Autonomy’s worth when it announced the $11 billion acquisition deal in August 2011. Within six months of the deal, HP announced Autonomy sales were plummeting. Last week, HP wrote off $8.8. billion related to the acquisition, saying Autonomy management used accounting tricks to inflate its value.

Related articles

While HP shareholders have the right to sue, they may be suing over the wrong issue. The wrongdoing, if any, may be in what happened after the Autonomy deal was struck.

For shareholders, such lawsuits are a necessity. Investors make purchase decisions based on disclosure statements and financial filings mandated by law. Wall Street neither makes nor expects guarantees, but there is an expectation of transparency in financial transactions that will affect stock prices.

HP’s stock has steadily declined since February 2011, when the company embarked on strategies around tablets and the WebOS operating system. The stock price went into a free fall in August 2011, when HP announced its TouchPad product launch had failed. It withdrew from the tablet market, shelved the WebOS operating system, considered spinning off its $40 billion PC business and announced the acquisition of Autonomy.

>> CHECK OUT: We Were Wrong about HP TouchPad, WebOS

At the time the acquisition was announced, everyone -- analysts, competitors, shareholders and even HP CFO Cathie Lesjak -- said HP was grossly overpaying for Autonomy, which was generating approximately $1.1 billion in revenue. Then-CEO Leo Apotheker plowed ahead. The deal and the bumbled tablet/PC strategy cost Apotheker his job. Current CEO Meg Whitman proceeded with the Autonomy deal, as it was too far down the road to reverse course.

Should HP have paused to listen to all the warnings? Should HP have done more due diligence? Did HP rush into a deal it had too little experience to pull off? These are good questions, but not as good as asking what happened after the deal closed.

The first signs the Autonomy deal was in trouble came last May when HP blamed Autonomy's sagging sales for its poor second quarter financial performance. The precise numbers weren’t available, but HP’s software sales for that quarter tallied at $970 million -- less than the pre-acquisition sales for both companies combined. The sharp decline cost Autonomy founder Mike Lynch his job; he was replaced by former Microsoft executive Robert Youngjohns.

Lynch denies any accounting shenanigans designed to inflate the value of his company. Instead, he says, HP did a poor job integrating the sales organizations. HP sales teams were still being incented to sell competing products and no incentives to sell Autonomy software, he says. Further, HP imposed strict margin requirements and raised prices by as much as 30 percent, turning off existing customers.

HP and the former Autonomy management teams are likely to wage a war of words for some months to come. Allegations of financial reporting improprieties have been turned over to U.S. and U.K. authorities for review.

Yes, shareholders and partners should be concerned about what happened with Autonomy. The due diligence should have caught any “irregularities.” Moreover, HP’s shareholders and partners should look at what came after, as it’s a reflection of the current management and its ability to right the listing giant.

The Autonomy issue is equally about integration, go-to-market strategies, sales execution, channel performance and, ultimately, the creation of new opportunities that result in value.

 

  • Tweet  
  • LinkedIn  
  • Facebook  
  • Google plus  
  • Send to Kindle
  • Send to  
More on Channel Business
spam

Spam a window of opportunity for partners

Sale of additional services can result from effective spam-filtering offering

consultants

Consulting of various-sized companies needed for CRM success

bpm'online partners talk capitalizing in CRM with consideration of cloud

change11

Plan to change, change to succeed

Effective change management means assessing where you are today and plotting your course for tomorrow

marketing-plan

Fortinet partner calls for improved marketing to secure more customers

VAR says missed opportunities result when Fortinet isn't at the forefront of end user research

Visitor comments
Add comments
blog comments powered by Disqus
In-depth
tim-harmon

Through-channel marketing: The channel is more than a sales channel

In this quarter's Analyst Column, Forrester discusses the growth of marketing in the channel

Business birthday anniversary

High 5! Channelnomics celebrates fifth birthday

Founder and former editor looks back at the Channelnomics journey

change11

Plan to change, change to succeed

Effective change management means assessing where you are today and plotting your course for tomorrow

kenobermanheadshot2

Vendor Q&A Series: Ken Oberman, SanDisk

The latest channel exec to sit in the Channelnomics hotseat is SanDisk's VP of worldwide commercial sales