Tuesday, May 12, 2015

HP's Unhealthy Obsession With Mike Lynch

We've written about this several times, but HP are back at it again. Just as they approach the biggest event in their corporate history, the splitting off of HP into two companies, the issue of Autonomy's purchase has moved back center stage. This is after Britain's Serious Fraud Office ended a two-year inquiry into Autonomy's alleged misrepresentation of its financial results and deciding to take no further action on the matter.

I can't find the original court document of the current complaint, but the link above outlines the current allegations.  Former Autonomy CFO Sushovan Hussain noted that if $2 billion in fraudulent or imaginary revenue were recognized under Autonomy's IFRS standards, then among other things, an analyst would have a hard time reconciling cash using the balance sheets and income statement. He then essentially dares HP to explain how why this alleged fraud isn't evident from a very conventional analytic method.

Aggressive accounting?  It seems to have been the case, but most of the discussion seems to center on differences between US-GAAP and IFRS. By continuing to pursue this issue, HP is, by inference, casting aspersions on the Big 4 auditors, several of which were involved as auditors or consultants on the transaction.

Why not claw back money from former CEO Apotheker?  HP overruled its own CFO on the transaction.  Suits against HP show some comments by Apotheker that seem to say HP's zeal and haste to close the transaction resulted in shoddy due diligence.

By continuing this unproductive path, HP continues to make its go forward technology company look unworthy of shareholder confidence and the confidence of its customers and business partners. Let it go, HP.  Markets have already long forgotten.

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