All eyes are on Hewlett-Packard today as its shareholders are gathering for its annual meeting in Silicon Valley this afternoon, and the hot topic on everyone's minds will surely be Autonomy.
Furthermore, as The Wall Street Journal reported on Wednesday, several of HP's board members are being braced with the reality that they might not be re-elected following the debacle that unraveled starting last November.
To recall, HP revealed in its Q4 2012 earnings statement that the Autonomy purchase cost its software unit up to $8.8 billion.
On November 26, an HP investor filed a lawsuit at a federal court in San Francisco, alleging that the tech giant knew its statements about its Autonomy acquisition were misleading, which led the stock to fall.
The following day, Autonomy's founder and former CEO Mike Lynch got into an open letter war over allegations by HP regarding "serious accounting improprieties" that were said to have taken place at Autonomy before the acquisition was completed.
In December, Leo Apotheker, the former CEO who was at the helm of HP at the time of the Autonomy purchased, retorted that that the company's board of directors should also take responsibility in this case.
Moody's Investors Service downgraded HP's long-term credit rating from A3 to Baa1, which is three levels above junk, with a negative outlook.
Since then, HP has also cut more jobs from the Autonomy team integrated within its software division.
Now adding fuel to the fire is Lynch's latest open letter directed at shareholders, which he published this morning.
In the memo, Lynch brings up many of the pointed questions he has been publicly asking in the last few months -- either to make HP take responsibility, shift the blame from himself, or some combination of both.
Here's a copy of the open letter in full:
Open letter from Mike Lynch to the shareholders of Hewlett-Packard
20 March 2013
Today HP will hold its annual shareholder meeting. This meeting provides a moment of accountability for HP’s Board of Directors to all its stakeholders, and is an appropriate time for the Board to address material questions.
A significant issue for HP's stakeholders is the allegations HP has made against the former management team of Autonomy in relation to the acquisition of that company, and the related impairment charge of $8.8 billion taken against shareholder funds. As a member of the former management team of Autonomy I have a shared interest with the shareholders of HP (of which I am not one) in getting to the bottom of those allegations, understanding exactly what happened within HP related to this situation and resolving it as soon as possible.
We therefore put forward some questions that we believe HP’s Board of Directors needs to answer at the shareholder meeting:
1. Can the Board provide details and evidence of the allegations it has made against the former management team of Autonomy to shareholders and to the people it has accused, so that everyone can understand the allegations that are being made and how it relates to the decisions and statements the Board has made? Can the Board confirm when it first became aware of these specific allegations? Will the Board provide the report from PwC on which its allegations are based to the former Autonomy management team so that this issue can move toward resolution? Will the Board also make available the conclusions of the findings of the recently appointed committee investigating the circumstances of the acquisition?
2. How did HP calculate the impairment charge it has taken against Autonomy? Several qualified commentators, including a former Chief Accountant of the SEC, have questioned how the alleged irregularities in Autonomy’s accounting could generate such a large write-down. How much of the impairment charge was related to the operating performance of Autonomy post-acquisition?
3. Did HP approach the UK Takeover Panel at any stage in an attempt to rescind its offer to buy Autonomy before completion? If so what was the reason it gave and why was this material change of view not communicated to shareholders?
4. The former management of Autonomy began alerting Ms Whitman as early as December 2011 to significant problems with the integration of Autonomy into HP that were negatively impacting its performance. When did Ms Whitman acknowledge that Autonomy was not performing against expectations? Why was this not communicated to shareholders at that time?
5. Will HP commit to behaving in a transparent manner in providing information about these allegations and the legal processes that have been set in motion? This includes not pre-empting announcements by regulatory authorities and not waiting long periods to disclose information.
We continue to reject the allegations made against us by HP and believe it is in the interests of all parties that these questions be addressed directly by the Board so this issue can be resolved as swiftly as possible. HP has acted in an aggressive and unusual manner throughout this episode, making highly damaging public accusations without providing any supporting evidence, either to the public or to the people they have accused.
As we have said before, we believe the problem with the Autonomy acquisition by HP lies in the mismanagement of that business by HP under its ownership, making it impossible for Autonomy to deliver on HP’s expectations. Autonomy’s accounts were fully audited by Deloitte throughout the period in question and Deloitte has confirmed that it conducted its audit work in full compliance with regulation and professional standards. We refuse to be a scapegoat for HP’s own failings.
Dr Mike Lynch
For more coverage about HP and Autonomy on ZDNet:
- Hewlett-Packard now receiving lawsuits over Autonomy troubles
- HP: Autonomy had 'serious accounting improprieties'
- H-P and Autonomy: unanswered questions
- Autonomy's Lynch fires back at HP, raises more questions
- HP looks as bad a deal as Autonomy
- HP’s Troubles Continue, But Does It Matter?
- Ex-Autonomy boss Lynch sets out defence against HP with new website
- HP's Whitman backs Autonomy '100 percent'
- Autonomy faces fresh heat over pre-HP accounts
- Former Autonomy CEO Mike Lynch launches $1 billion fund