UK tech poster-boy Mike Lynch slams HP over fraud claim
Hewlett Packard claims it was tricked by ‘accounting misrepresentations’ to pay $11bn for Autonomy
TECHNOLOGY entrepreneur Mike Lynch has reacted with shock to claims by Hewlett Packard that it was lied to about the value of Autonomy, the company he sold to the computing giant in October 2011.
Lynch, described in 2009 by The Sunday Times as “the closest thing Britain has to its own Bill Gates”, accused HP of attempting to distract attention from its own terrible financial results after it claimed "a very senior person" from Autonomy had come forward "with specific details [of accounting misrepresentations], according to the BBC.
HP made the claims during its fourth quarter earnings report yesterday, when it announced that it was writing down $8.8bn of the $11.1bn Autonomy takeover deal. “Serious” accounting improprieties at the British software company were responsible for more than $5bn of the writedown, the Financial Times reports.
Investigations by the US Securities and Exchange Commission and the British Serious Fraud Office are likely to follow. HP says it will take legal action to recoup money on behalf of its shareholders.
HP CEO Meg Whitman said: "We did a whole host of due diligence but when you're lied to, it's hard to find. [Autonomy] was smaller and less profitable than we thought."
Lynch made $800m from the sale and departed as CEO six months later after Autonomy failed to meet second-quarter forecasts.
He founded Autonomy in Cambridge in 1996, an event partly responsible for the coining of the phrase ‘Silicon Fen’ to describe the area’s profusion of tech start-ups. He quickly became a poster-boy for those who would like to see Britain leading the way in the technology industry.
As well as being a science and technology advisor to David Cameron, Lynch is a trustee of the National Endowment for Science, Technology and the Arts and a non-executive director of the BBC.
According to The Daily Telegraph, Lynch, who has a Cambridge PhD in computing, has a certain “academic arrogance”, especially towards City professionals and their knowledge of technology.
“In the case of a 2001 clash with a Merrill Lynch analyst - who ended up apologising for claiming Autonomy was losing staff to Microsoft after Lynch complained to the LSE - Lynch’s hard-headed approach appeared to be justified,” says the paper.
However, “those who got short shrift from Lynch for criticising Autonomy in recent years - one analyst was banned from meetings - may well feel vindicated now”.
Speaking to the BBC yesterday, Lynch said he was “pretty shocked” and felt “ambushed” by HP’s allegations, and pointed to the “intensive” due diligence carried out by HP prior to the Autonomy takeover.
“I think HP paid a very large amount of money for Autonomy and it’s a company that’s very troubled by a lot of internecine warfare and it’s managed the company very badly,” he said.
“[Autonomy] lost around half the staff before I left and the whole of the management team, and the value of the company has now fallen and they've been forced to write it off."
He said he believes HP is distracting from its own management problem and “the worst results in its 70-year history”.