Welcome!

Apache Authors: Pat Romanski, Liz McMillan, Elizabeth White, John Mertic, Janakiram MSV

Related Topics: Containers Expo Blog, Microservices Expo, Agile Computing, Log Management, @CloudExpo, Apache

Containers Expo Blog: Article

HP, Mike Lynch & the Autonomy Whistleblower

Lynch, who categorically denies HP’s allegations, told the press late Tuesday that he was “ambushed” by HP’s charges

When Hewlett-Packard CEO Meg Whitman stunned practically everyone within earshot early Tuesday morning by accusing the company's year-old Autonomy acquisition of ripping off HP with phony financials, she said that after she bounced Autonomy's founder out of HP in late April a senior member of Autonomy's staff owned up to the fraud.

She didn't identify the informant, giving Autonomy founder Mike Lynch the opportunity to tell the press that he couldn't possibly imagine who she meant since he was the last senior manager to leave after HP ran everybody else off.

Apparently he didn't count noses all that well.

An informed source says the left-behind informant - and there may have actually been two - told HP that the bogeys Lynch set couldn't be met because they were based on a fiction.

Lynch himself was reportedly fired for missing his forecast by 20%, a sin Meg found insupportable. She supposedly dumped him to set an example. He blamed HP and its rules for it after he heroically tried to keep Autonomy away from HP's bureaucracy because its culture was "special," a device that worked with Meg initially.

Lynch, who categorically denies HP's allegations, told the press late Tuesday that he was "ambushed" by HP's charges, and had no details because he wasn't informed beforehand or contacted by any lawyers or regulators. All he knew was what was in the HP press release and didn't know what Whitman was talking about but was sure it could all be explained.

He ducked behind Deloitte, which he said audited Autonomy's results quarterly, and claimed his books were in line with international accounting standards, which, he said, may be different from US rules.

However, HP's investigators apparently questioned Lynch and the old Autonomy management team in July and found their answers vague and "unhelpful" so he must have known something,

Still Lynch claimed that HP had had hundreds of its people and three auditors doing due diligence before the acquisition closed and said they couldn't have missed an "elephant in the room" as big as HP alleges.

Ex-HP CEO Mark Hurd apparently spied the elephant right off when Autonomy tried to shop itself to Oracle, where Hurd was co-president. Sources say the roll-up was asking $4 billion-$6 billion and Hurd figured it was worth maybe $1.5 billion. Lynch denied trying to sell Autonomy to Oracle but Oracle put his presentation on its web site.

Rejected, Autonomy and the Frank Quattrone Qatalyst crew then breezed by HP - which had already bought 3PAR from Quattrone for a ludicrous $2.35 billion, a 200% premium. They talked to CTO Shane Robison, who convinced then-CEO Leo Apotheker it was worth spending over $12 billion including debt to buy. A year later HP is writing off an amazing $8.8 billion on the adventure.

Lynch blames the "internecine" politics inside HP, its rejection of Apotheker and Robinson's strategy of dumping PCs and focusing on software, and the "coup d'état" that unseated them for his current problem.

With them gone because of the wildly unpopular Autonomy acquisition and with Whitman in charge, he claims HP mismanaged the acquisition, imposing 30% mark-ups on Autonomy software, running off established accounts, and not paying commissions on Autonomy sales but instead paying its salesmen for the competitive software they sold.

He figures Autonomy's prospects deteriorated and that's why HP took the massive write-off - to cover up its mismanagement.

He forgets Autonomy's reputation, at least in England, in the years before HP entered the picture, when it was a public company and the press and analysts were suspicious of its numbers and its vapor-y Bayesian unstructured data IDOL search technology or Intelligent Data Operating Layer, citing pretty much the same kind of "not-as-good-as-it-looks" objections HP is now complaining about.

Forrester Research says Autonomy "didn't invest in R&D; they didn't have regular software releases; they weren't transparent with a roadmap of where they were going; they didn't seek customer feedback. Customers complained, but the promise of managing all their information and making better decisions was so attractive. They bought more."

Lynch must also be aware of the rumors that have circulated about Autonomy since the HP takeover and spreading tales of users throwing out the over-hyped software or getting it for nothing, which may explain why its sales plummeted.

Forbes captures best what reporters have been up against for the last year as reports on hard-to-prove shenanigans were dangled in front of them.

It said, "Here's what my source observed personally":

"Autonomy grew through acquisitions, buying everything from storage companies like Iron Mountain to enterprise software firms like Interwoven. They'd then go to customers and offer them a deal they couldn't refuse. Say a customer had $5 million and four years left on a data-storage contract, or ‘disk,' in the trade. Autonomy would offer them, say, the same amount of storage for $4 million but structure it as a $3 million purchase of IDOL software, paid for up front, and $1 million worth of disk. The software sales dropped to the bottom line and burnished Autonomy's reputation for being a fast-growing, cutting-edge software company a la Oracle, while the revenue actually came from the low-margin, commodity storage business.

"They would basically give them software for free but shift the costs around to make it look like they got $3 million in software sales," the Forbes source, who directly observed such deals, said.

"Lynch's management team was also practiced at the art of wringing attractive-looking growth out of a string of ho-hum acquisitions. The typical strategy was to bolt IDOL and other software onto a company's existing products and try and convince customers to pay more for the ‘new' products. If that failed, they'd milk the existing customer base by halting development and outsourcing support," its source said, "using the cash from the runoff business to fund more acquisitions."

"Mike Lynch was famous for saying Autonomy never put an end-of-life on any product. But the customers were screaming."

In sales meetings, Lynch reportedly "loved to do vague and theoretical academic-type presentations to show what a visionary he was." And the product "looked like a lot of vaporware wrapped up in fancy Cambridge talk and the kind of accounting tricks managers have engaged in since the dawn of publicly traded stock."

HP's admission of being snookered means its CEO and its board, which voted for the acquisition, have put their heads on the chopping block given HP's history of incompetent management.

More Stories By Maureen O'Gara

Maureen O'Gara the most read technology reporter for the past 20 years, is the Cloud Computing and Virtualization News Desk editor of SYS-CON Media. She is the publisher of famous "Billygrams" and the editor-in-chief of "Client/Server News" for more than a decade. One of the most respected technology reporters in the business, Maureen can be reached by email at maureen(at)sys-con.com or paperboy(at)g2news.com, and by phone at 516 759-7025. Twitter: @MaureenOGara

Comments (0)

Share your thoughts on this story.

Add your comment
You must be signed in to add a comment. Sign-in | Register

In accordance with our Comment Policy, we encourage comments that are on topic, relevant and to-the-point. We will remove comments that include profanity, personal attacks, racial slurs, threats of violence, or other inappropriate material that violates our Terms and Conditions, and will block users who make repeated violations. We ask all readers to expect diversity of opinion and to treat one another with dignity and respect.


@ThingsExpo Stories
@ThingsExpo has been named the ‘Top WebRTC Influencer' by iTrend. iTrend processes millions of conversations, tweets, interactions, news articles, press releases, blog posts - and extract meaning form them and analyzes mobile and desktop software platforms used to communicate, various metadata (such as geo location), and automation tools. In overall placement, @ThingsExpo ranked as the number one ‘WebRTC Influencer' followed by @DevOpsSummit at 55th.
"There's a growing demand from users for things to be faster. When you think about all the transactions or interactions users will have with your product and everything that is between those transactions and interactions - what drives us at Catchpoint Systems is the idea to measure that and to analyze it," explained Leo Vasiliou, Director of Web Performance Engineering at Catchpoint Systems, in this SYS-CON.tv interview at 18th Cloud Expo, held June 7-9, 2016, at the Javits Center in New York Ci...
The 20th International Cloud Expo has announced that its Call for Papers is open. Cloud Expo, to be held June 6-8, 2017, at the Javits Center in New York City, brings together Cloud Computing, Big Data, Internet of Things, DevOps, Containers, Microservices and WebRTC to one location. With cloud computing driving a higher percentage of enterprise IT budgets every year, it becomes increasingly important to plant your flag in this fast-expanding business opportunity. Submit your speaking proposal ...
SYS-CON Events announced today that Linux Academy, the foremost online Linux and cloud training platform and community, will exhibit at SYS-CON's 20th International Cloud Expo®, which will take place on June 6-8, 2017, at the Javits Center in New York City, NY. Linux Academy was founded on the belief that providing high-quality, in-depth training should be available at an affordable price. Industry leaders in quality training, provided services, and student certification passes, its goal is to c...
20th Cloud Expo, taking place June 6-8, 2017, at the Javits Center in New York City, NY, will feature technical sessions from a rock star conference faculty and the leading industry players in the world. Cloud computing is now being embraced by a majority of enterprises of all sizes. Yesterday's debate about public vs. private has transformed into the reality of hybrid cloud: a recent survey shows that 74% of enterprises have a hybrid cloud strategy.
In the next five to ten years, millions, if not billions of things will become smarter. This smartness goes beyond connected things in our homes like the fridge, thermostat and fancy lighting, and into heavily regulated industries including aerospace, pharmaceutical/medical devices and energy. “Smartness” will embed itself within individual products that are part of our daily lives. We will engage with smart products - learning from them, informing them, and communicating with them. Smart produc...
"What is the next step in the evolution of IoT systems? The answer is data, information, which is a radical shift from assets, from things to input for decision making," stated Michael Minkevich, VP of Technology Services at Luxoft, in this SYS-CON.tv interview at @ThingsExpo, held November 3-5, 2015, at the Santa Clara Convention Center in Santa Clara, CA.
The emerging Internet of Everything creates tremendous new opportunities for customer engagement and business model innovation. However, enterprises must overcome a number of critical challenges to bring these new solutions to market. In his session at @ThingsExpo, Michael Martin, CTO/CIO at nfrastructure, outlined these key challenges and recommended approaches for overcoming them to achieve speed and agility in the design, development and implementation of Internet of Everything solutions with...
WebRTC sits at the intersection between VoIP and the Web. As such, it poses some interesting challenges for those developing services on top of it, but also for those who need to test and monitor these services. In his session at WebRTC Summit, Tsahi Levent-Levi, co-founder of testRTC, reviewed the various challenges posed by WebRTC when it comes to testing and monitoring and on ways to overcome them.
Internet of @ThingsExpo, taking place June 6-8, 2017 at the Javits Center in New York City, New York, is co-located with the 20th International Cloud Expo and will feature technical sessions from a rock star conference faculty and the leading industry players in the world. @ThingsExpo New York Call for Papers is now open.
Smart Cities are here to stay, but for their promise to be delivered, the data they produce must not be put in new siloes. In his session at @ThingsExpo, Mathias Herberts, Co-founder and CTO of Cityzen Data, discussed the best practices that will ensure a successful smart city journey.
Every successful software product evolves from an idea to an enterprise system. Notably, the same way is passed by the product owner's company. In his session at 20th Cloud Expo, Oleg Lola, CEO of MobiDev, will provide a generalized overview of the evolution of a software product, the product owner, the needs that arise at various stages of this process, and the value brought by a software development partner to the product owner as a response to these needs.
In 2014, Amazon announced a new form of compute called Lambda. We didn't know it at the time, but this represented a fundamental shift in what we expect from cloud computing. Now, all of the major cloud computing vendors want to take part in this disruptive technology. In his session at 20th Cloud Expo, John Jelinek IV, a web developer at Linux Academy, will discuss why major players like AWS, Microsoft Azure, IBM Bluemix, and Google Cloud Platform are all trying to sidestep VMs and containers...
SYS-CON Events announced today that MobiDev, a client-oriented software development company, will exhibit at SYS-CON's 20th International Cloud Expo®, which will take place June 6-8, 2017, at the Javits Center in New York City, NY, and the 21st International Cloud Expo®, which will take place October 31-November 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA. MobiDev is a software company that develops and delivers turn-key mobile apps, websites, web services, and complex softw...
The cloud market growth today is largely in public clouds. While there is a lot of spend in IT departments in virtualization, these aren’t yet translating into a true “cloud” experience within the enterprise. What is stopping the growth of the “private cloud” market? In his general session at 18th Cloud Expo, Nara Rajagopalan, CEO of Accelerite, explored the challenges in deploying, managing, and getting adoption for a private cloud within an enterprise. What are the key differences between wh...
"Tintri was started in 2008 with the express purpose of building a storage appliance that is ideal for virtualized environments. We support a lot of different hypervisor platforms from VMware to OpenStack to Hyper-V," explained Dan Florea, Director of Product Management at Tintri, in this SYS-CON.tv interview at 18th Cloud Expo, held June 7-9, 2016, at the Javits Center in New York City, NY.
The security needs of IoT environments require a strong, proven approach to maintain security, trust and privacy in their ecosystem. Assurance and protection of device identity, secure data encryption and authentication are the key security challenges organizations are trying to address when integrating IoT devices. This holds true for IoT applications in a wide range of industries, for example, healthcare, consumer devices, and manufacturing. In his session at @ThingsExpo, Lancen LaChance, vic...
WebRTC has had a real tough three or four years, and so have those working with it. Only a few short years ago, the development world were excited about WebRTC and proclaiming how awesome it was. You might have played with the technology a couple of years ago, only to find the extra infrastructure requirements were painful to implement and poorly documented. This probably left a bitter taste in your mouth, especially when things went wrong.
Big Data, cloud, analytics, contextual information, wearable tech, sensors, mobility, and WebRTC: together, these advances have created a perfect storm of technologies that are disrupting and transforming classic communications models and ecosystems. In his session at @ThingsExpo, Erik Perotti, Senior Manager of New Ventures on Plantronics’ Innovation team, provided an overview of this technological shift, including associated business and consumer communications impacts, and opportunities it m...
You have great SaaS business app ideas. You want to turn your idea quickly into a functional and engaging proof of concept. You need to be able to modify it to meet customers' needs, and you need to deliver a complete and secure SaaS application. How could you achieve all the above and yet avoid unforeseen IT requirements that add unnecessary cost and complexity? You also want your app to be responsive in any device at any time. In his session at 19th Cloud Expo, Mark Allen, General Manager of...