HP Hit With Shareholder Lawsuit Over Autonomy

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

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.

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
man-family-office-suit

New Cyberoam UTM targets remote workers

Security device aimed at small offices

hands-dollars

What you give is what you get: Symantec partner program post-split

Firm's impending split may leave some partners better off, but what about the others?

contract-drafting

RackWare signs up to NetApp partner program

Firm integrating technology with NetApp and IBM

data-quality

Value over volume, RackWare says of expanded channel partner program

Aim is to have the right coverage with close relationships, VP says

Visitor comments
Add comments
blog comments powered by Disqus
In-depth
hands-dollars

What you give is what you get: Symantec partner program post-split

Firm's impending split may leave some partners better off, but what about the others?

steps55

Time to step up: vendors missing the mark on IoT

A new study by AVG Technologies finds that SMBs and MSPs see tremendous potential in the Internet of Things as a driver of business growth – provided IT vendors and solution providers step up their game

wael-aggan-cloudmask

Vendor Q&A Series: Wael Aggan, CloudMask

The latest vendor executive to sit in the Channelnomics hotseat is Wael Aggan, CEO of CloudMask

healthy-heart

Microsoft getting healthy, thanks to consumers

Is it time to take the software giant off the watch list of tech companies in distress, at least on the consumer side, asks Larry Walsh