Welcome!

Apache Authors: Elizabeth White, Pat Romanski, John Mertic, Liz McMillan, 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
Businesses and business units of all sizes can benefit from cloud computing, but many don't want the cost, performance and security concerns of public cloud nor the complexity of building their own private clouds. Today, some cloud vendors are using artificial intelligence (AI) to simplify cloud deployment and management. In his session at 20th Cloud Expo, Ajay Gulati, Co-founder and CEO of ZeroStack, will discuss how AI can simplify cloud operations. He will cover the following topics: why clou...
"Dice has been around for the last 20 years. We have been helping tech professionals find new jobs and career opportunities," explained Manish Dixit, VP of Product and Engineering at Dice, in this SYS-CON.tv interview at 19th Cloud Expo, held November 1-3, 2016, at the Santa Clara Convention Center in Santa Clara, CA.
More and more brands have jumped on the IoT bandwagon. We have an excess of wearables – activity trackers, smartwatches, smart glasses and sneakers, and more that track seemingly endless datapoints. However, most consumers have no idea what “IoT” means. Creating more wearables that track data shouldn't be the aim of brands; delivering meaningful, tangible relevance to their users should be. We're in a period in which the IoT pendulum is still swinging. Initially, it swung toward "smart for smar...
The Internet of Things will challenge the status quo of how IT and development organizations operate. Or will it? Certainly the fog layer of IoT requires special insights about data ontology, security and transactional integrity. But the developmental challenges are the same: People, Process and Platform and how we integrate our thinking to solve complicated problems. In his session at 19th Cloud Expo, Craig Sproule, CEO of Metavine, demonstrated how to move beyond today's coding paradigm and sh...
In his keynote at 18th Cloud Expo, Andrew Keys, Co-Founder of ConsenSys Enterprise, provided an overview of the evolution of the Internet and the Database and the future of their combination – the Blockchain. Andrew Keys is Co-Founder of ConsenSys Enterprise. He comes to ConsenSys Enterprise with capital markets, technology and entrepreneurial experience. Previously, he worked for UBS investment bank in equities analysis. Later, he was responsible for the creation and distribution of life sett...
We are always online. We access our data, our finances, work, and various services on the Internet. But we live in a congested world of information in which the roads were built two decades ago. The quest for better, faster Internet routing has been around for a decade, but nobody solved this problem. We’ve seen band-aid approaches like CDNs that attack a niche's slice of static content part of the Internet, but that’s it. It does not address the dynamic services-based Internet of today. It does...
The WebRTC Summit New York, to be held June 6-8, 2017, at the Javits Center in New York City, NY, announces that its Call for Papers is now open. Topics include all aspects of improving IT delivery by eliminating waste through automated business models leveraging cloud technologies. WebRTC Summit is co-located with 20th International Cloud Expo and @ThingsExpo. WebRTC is the future of browser-to-browser communications, and continues to make inroads into the traditional, difficult, plug-in web ...
WebRTC is the future of browser-to-browser communications, and continues to make inroads into the traditional, difficult, plug-in web communications world. The 6th WebRTC Summit continues our tradition of delivering the latest and greatest presentations within the world of WebRTC. Topics include voice calling, video chat, P2P file sharing, and use cases that have already leveraged the power and convenience of WebRTC.
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.
"We're a cybersecurity firm that specializes in engineering security solutions both at the software and hardware level. Security cannot be an after-the-fact afterthought, which is what it's become," stated Richard Blech, Chief Executive Officer at Secure Channels, in this SYS-CON.tv interview at @ThingsExpo, held November 1-3, 2016, at the Santa Clara Convention Center in Santa Clara, CA.
The Internet of Things (IoT) promises to simplify and streamline our lives by automating routine tasks that distract us from our goals. This promise is based on the ubiquitous deployment of smart, connected devices that link everything from industrial control systems to automobiles to refrigerators. Unfortunately, comparatively few of the devices currently deployed have been developed with an eye toward security, and as the DDoS attacks of late October 2016 have demonstrated, this oversight can ...
Fact is, enterprises have significant legacy voice infrastructure that’s costly to replace with pure IP solutions. How can we bring this analog infrastructure into our shiny new cloud applications? There are proven methods to bind both legacy voice applications and traditional PSTN audio into cloud-based applications and services at a carrier scale. Some of the most successful implementations leverage WebRTC, WebSockets, SIP and other open source technologies. In his session at @ThingsExpo, Da...
Internet-of-Things discussions can end up either going down the consumer gadget rabbit hole or focused on the sort of data logging that industrial manufacturers have been doing forever. However, in fact, companies today are already using IoT data both to optimize their operational technology and to improve the experience of customer interactions in novel ways. In his session at @ThingsExpo, Gordon Haff, Red Hat Technology Evangelist, will share examples from a wide range of industries – includin...
Unless your company can spend a lot of money on new technology, re-engineering your environment and hiring a comprehensive cybersecurity team, you will most likely move to the cloud or seek external service partnerships. In his session at 18th Cloud Expo, Darren Guccione, CEO of Keeper Security, revealed what you need to know when it comes to encryption in the cloud.
We're entering the post-smartphone era, where wearable gadgets from watches and fitness bands to glasses and health aids will power the next technological revolution. With mass adoption of wearable devices comes a new data ecosystem that must be protected. Wearables open new pathways that facilitate the tracking, sharing and storing of consumers’ personal health, location and daily activity data. Consumers have some idea of the data these devices capture, but most don’t realize how revealing and...
"We build IoT infrastructure products - when you have to integrate different devices, different systems and cloud you have to build an application to do that but we eliminate the need to build an application. Our products can integrate any device, any system, any cloud regardless of protocol," explained Peter Jung, Chief Product Officer at Pulzze Systems, in this SYS-CON.tv interview at @ThingsExpo, held November 1-3, 2016, at the Santa Clara Convention Center in Santa Clara, CA.
In his general session at 19th Cloud Expo, Manish Dixit, VP of Product and Engineering at Dice, discussed how Dice leverages data insights and tools to help both tech professionals and recruiters better understand how skills relate to each other and which skills are in high demand using interactive visualizations and salary indicator tools to maximize earning potential. Manish Dixit is VP of Product and Engineering at Dice. As the leader of the Product, Engineering and Data Sciences team at D...
Data is the fuel that drives the machine learning algorithmic engines and ultimately provides the business value. In his session at 20th Cloud Expo, Ed Featherston, director/senior enterprise architect at Collaborative Consulting, will discuss the key considerations around quality, volume, timeliness, and pedigree that must be dealt with in order to properly fuel that engine.
In addition to all the benefits, IoT is also bringing new kind of customer experience challenges - cars that unlock themselves, thermostats turning houses into saunas and baby video monitors broadcasting over the internet. This list can only increase because while IoT services should be intuitive and simple to use, the delivery ecosystem is a myriad of potential problems as IoT explodes complexity. So finding a performance issue is like finding the proverbial needle in the haystack.
According to Forrester Research, every business will become either a digital predator or digital prey by 2020. To avoid demise, organizations must rapidly create new sources of value in their end-to-end customer experiences. True digital predators also must break down information and process silos and extend digital transformation initiatives to empower employees with the digital resources needed to win, serve, and retain customers.