Welcome!

Java IoT Authors: Sematext Blog, Carmen Gonzalez, JP Morgenthal, Elizabeth White, Liz McMillan

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

Containers Expo Blog: Article

[Update] HP Charges Autonomy with Massive Fraud

It claims it was the victim of accounting improprieties and disclosure failures made by the publicly held British company

HP Tuesday morning charged its Autonomy acquisition with massive fraud.

It claims it was the victim of accounting improprieties and disclosure failures made by the publicly held British company prior to its acquisition last year by HP and downright misrepresentations made to HP in connection with the ultimately $12 billion and something acquisition.

As a result HP will write off most of the inflated purchase price and take an $8.8 billion non-cash charge, worse than the $8 billion goodwill charge HP took this summer on its EDS acquisition.

HP has turned the case over to the SEC and the UK's Serious Fraud Office for civil and criminal prosecution. HP CEO Meg Whitman said the company would also press its own civil and criminal charges against certain unnamed individuals seeking redress for its benighted stockholders. She expects it all to take years.

HP said that after Autonomy founder Mike Lynch was fired earlier this year because the unit was significantly underperforming an unidentified senior member of Autonomy's staff blew the whistle on the company's inflated margins and phony growth rates, and the slight-of-hand that got it so overvalued.

A seven-month internal investigation ensued, leading HP to conclude that Autonomy was overvalued all along.

That investigation is still going on but it found that Autonomy misstated its financial performance, including its revenue, core growth rate and gross margins, and misrepresented its business mix.

Margins were inflated from 28% to 45% by passing low-end hardware sales off as IDOL software license sales; VAR license fees were paraded as revenue when no end customer existed at the time of the sale; VARs paid high up-front fees in exchange lower future fees; and revenues were pulled forward. The idea was to suggest better growth than existed.

"This appears to have been a willful effort on behalf of certain former Autonomy employees to inflate the underlying financial metrics of the company in order to mislead investors and potential buyers," HP said in a statement. "These misrepresentations and lack of disclosure severely impacted HP management's ability to fairly value Autonomy at the time of the deal."

Whitman said HP's board, which voted to make the Autonomy acquisition, "feels terribly" about all this but depended on financials audited by Deloitte and re-audited by KPMG before doing the deal. "You have to depend on audited results," she said, although neither accounting firm tumbled to what had been going on.

Apparently PricewaterhouseCoopers' forensics team finally caught it after in was brought in in May.

According to Meg, "blogs" at the time of the acquisition questioned Autonomy's revenue recognition and what it called a sale but Autonomy's management was allowed to run the reports to ground with the pair of original auditors and claimed there was nothing to them.

After listening to the HP conference call Tuesday morning Lynch "flatly rejected" HP's allegations, "which are false."

Meg blamed her predecessor Leo Apotheker and former head of R&D and strategy Shane Robison. Due diligence at HP no longer reports to M&A, as it was when Apotheker was therem but it's kind of late in the day to give it to the CFO.

Robison has yet to be heard from, but Apotheker, who orchestrated the Autonomy acquisition, issued a statement to the Wall Street Journal saying he was "stunned and disappointed" to learn of thr alleged accounting improprieties and defended HP's due diligence as "meticulous and thorough."

He pointed out that since Autonomy was a public company "much of the process relied on public financial reports - accounting statements approved, filed and backed by Autonomy's leadership, board and auditors" and offered to make himself available "to assist HP and the appropriate authorities to get to the bottom of this."

Autonomy's shenanigans account for $5.3 billion of the charge; the rest stems from HP's declining stock price, which has been in free fall since Apotheker said it was buying Autonomy and disposing of HP's PC unit in order to turn HP into a software company. The company quickly disposed on Mr. Apotheker, replacing him with Whitman, who went through with the Autonomy acquisition and decided to keep PCs. Most outsiders couldn't understand the Autonomy buy.

Although Autonomy's long-term financial performance is expected to be impacted by the mess, Whitman says the company is "100% committed to Autonomy" and expects it to play a "significant role" in HP's recovery.

The disclosure was part of Hewlett-Packard's quarterly report. It lost $6.85 billion, or $3.49 a share, compared to a profit of $239 million, or 12 cents a share, this time last year. Revenue was $29.96 billion, down 4%. Adjusted EPS was $1.16. Analysts were expecting adjusted earnings of $1.14 a share, on revenue of $30.44 billion.

HP said revenue from its PC unit was down 14% since commercial revenues dropped 13% and consumer revenue plunged 16%. Revenue in the enterprise, servers, storage and networking segment dropped about 9%. Printing sales fell about 5%. Services fell about 6%. Software revenue was up 14%.

HP's battered shares were down 12.48% to $11.64 in pre-market trades on the news, dropped further as the market woke up and then recouped slightly to $11.87, down 10.68%. Its stock has lost over 48% this year and the company had $21.8 billion in long-term debt at the end of its fiscal fourth quarter

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
Complete Internet of Things (IoT) embedded device security is not just about the device but involves the entire product’s identity, data and control integrity, and services traversing the cloud. A device can no longer be looked at as an island; it is a part of a system. In fact, given the cross-domain interactions enabled by IoT it could be a part of many systems. Also, depending on where the device is deployed, for example, in the office building versus a factory floor or oil field, security ha...
Amazon has gradually rolled out parts of its IoT offerings in the last year, but these are just the tip of the iceberg. In addition to optimizing their back-end AWS offerings, Amazon is laying the ground work to be a major force in IoT – especially in the connected home and office. Amazon is extending its reach by building on its dominant Cloud IoT platform, its Dash Button strategy, recently announced Replenishment Services, the Echo/Alexa voice recognition control platform, the 6-7 strategic...
Everyone knows that truly innovative companies learn as they go along, pushing boundaries in response to market changes and demands. What's more of a mystery is how to balance innovation on a fresh platform built from scratch with the legacy tech stack, product suite and customers that continue to serve as the business' foundation. In his General Session at 19th Cloud Expo, Michael Chambliss, Head of Engineering at ReadyTalk, discussed why and how ReadyTalk diverted from healthy revenue and mor...
As data explodes in quantity, importance and from new sources, the need for managing and protecting data residing across physical, virtual, and cloud environments grow with it. Managing data includes protecting it, indexing and classifying it for true, long-term management, compliance and E-Discovery. Commvault can ensure this with a single pane of glass solution – whether in a private cloud, a Service Provider delivered public cloud or a hybrid cloud environment – across the heterogeneous enter...
Financial Technology has become a topic of intense interest throughout the cloud developer and enterprise IT communities. Accordingly, attendees at the upcoming 20th Cloud Expo at the Javits Center in New York, June 6-8, 2017, will find fresh new content in a new track called FinTech.
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...
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 ...
Bert Loomis was a visionary. This general session will highlight how Bert Loomis and people like him inspire us to build great things with small inventions. In their general session at 19th Cloud Expo, Harold Hannon, Architect at IBM Bluemix, and Michael O'Neill, Strategic Business Development at Nvidia, discussed the accelerating pace of AI development and how IBM Cloud and NVIDIA are partnering to bring AI capabilities to "every day," on-demand. They also reviewed two "free infrastructure" pr...
Unsecured IoT devices were used to launch crippling DDOS attacks in October 2016, targeting services such as Twitter, Spotify, and GitHub. Subsequent testimony to Congress about potential attacks on office buildings, schools, and hospitals raised the possibility for the IoT to harm and even kill people. What should be done? Does the government need to intervene? This panel at @ThingExpo New York brings together leading IoT and security experts to discuss this very serious topic.
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...
"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.
"ReadyTalk is an audio and web video conferencing provider. We've really come to embrace WebRTC as the platform for our future of technology," explained Dan Cunningham, CTO of ReadyTalk, in this SYS-CON.tv interview at WebRTC Summit at 19th Cloud Expo, held November 1-3, 2016, at the Santa Clara Convention Center in Santa Clara, CA.
"At ROHA we develop an app called Catcha. It was developed after we spent a year meeting with, talking to, interacting with senior citizens watching them use their smartphones and talking to them about how they use their smartphones so we could get to know their smartphone behavior," explained Dave Woods, Chief Innovation Officer at ROHA, 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.
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.
The many IoT deployments around the world are busy integrating smart devices and sensors into their enterprise IT infrastructures. Yet all of this technology – and there are an amazing number of choices – is of no use without the software to gather, communicate, and analyze the new data flows. Without software, there is no IT. In this power panel at @ThingsExpo, moderated by Conference Chair Roger Strukhoff, Dave McCarthy, Director of Products at Bsquare Corporation; Alan Williamson, Principal...
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 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...
An IoT product’s log files speak volumes about what’s happening with your products in the field, pinpointing current and potential issues, and enabling you to predict failures and save millions of dollars in inventory. But until recently, no one knew how to listen. In his session at @ThingsExpo, Dan Gettens, Chief Research Officer at OnProcess, discussed recent research by Massachusetts Institute of Technology and OnProcess Technology, where MIT created a new, breakthrough analytics model for ...
Successful digital transformation requires new organizational competencies and capabilities. Research tells us that the biggest impediment to successful transformation is human; consequently, the biggest enabler is a properly skilled and empowered workforce. In the digital age, new individual and collective competencies are required. In his session at 19th Cloud Expo, Bob Newhouse, CEO and founder of Agilitiv, drew together recent research and lessons learned from emerging and established compa...
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.