Former Autonomy CEO Mike Lynch: 7 Questions For HP's Board Of Directors6:15 PM EST Tue. Nov. 27, 2012
Former Autonomy CEO Mike Lynch is calling on HP's board of directors to back up its allegations of $5 billion in accounting improprieties at Autonomy with "specific" data. The maverick entrepreneur, referred to in some circles as the Bill Gates of the United Kingdom, says he is shocked that HP "put non-specific but highly damaging allegations into the public domain without prior notification or contact" with him. Here then are seven questions that the former Autonomy CEO, who was fired by HP last May for failing to meet sales targets, has for HP's board of directors.
Rather than releasing what he called "selective disclosure of non-material information via background discussions with the media," Lynch (pictured) asked HP's board of directors to release the internal report with specific information on alleged Autonomy accounting improprieties. "I am writing today to ask you, the board of HP, for immediate and specific explanations for the allegations HP is making," he wrote in his open public letter. "HP should provide me with the interim report and any other documents you have provided to the SEC [Securities and Exchange Commission] and the [U.K.] SFO [Securities Fraud Office] so that I can answer whatever is alleged."
"Many observers are stunned by HP's claims that these allegations account for a $5 billion write down and fail to understand how HP reaches that number," wrote Lynch. "Please publish the calculations used to determine the $5 billion impairment charge. Please provide a breakdown of the relative contribution for revenue, cash flow, profit."
"Please explain how such issues could possibly have gone undetected during the extensive acquisition due diligence process and HP's financial oversight of Autonomy for a year from acquisition until October 2012 (a period during which all of the Autonomy finance reported to HP's CFO Cathie Lesjak)," says Lynch. HP CEO Meg Whitman (pictured) has told Wall Street analysts that the HP Board of Directors did "extensive due diligence" on the Autonomy acquisition relying on audited financials from Deloitte and KPMG, which audited Deloitte.
Lynch has told Business Insider that he is simply being hung out to dry by HP as a scapegoat. He has blamed the problems that HP is now facing with Autonomy on HP mismanagement of the Autonomy asset. "People certainly realize I'm not going to be used as Hewlett-Packard's scapegoat when it's got itself in a mess," he told Business Insider.
CRN reported last May that HP was forced to shuffle its executive leadership team in the wake of resignations from a number of former top-level Autonomy senior executives. Among the executives that walked: Stouffer Egan, CEO of Autonomy's U.S. business unit; Joel Scott, COO of Autonomy's U.S. business; Eloy Avila, CTO; and Ian Black, head of global operations. That is in addition to the departures during that time of Autonomy President Sushovan Hussain, CTO Peter Menell, CMO Nicole Eagan and COO Andy Kanter.
Lynch wants to know if HP CEO Meg Whitman and CFO Cathie Lesjak (pictured) were aware that HP's Worldwide Director of Software Revenue Recognition Paul Curtis met with KPMG and Ernest & Young in December 2011 as part of what he called "detailed studies of Autonomy's software revenue recognition with a view to optimizing for U.S. GAAP [Generally Accepted Accounting Principles]."
Lynch wants to know why HP waited to inform shareholders of the alleged accounting improprieties. HP CEO Meg Whitman has said that the accounting issues were discovered through an internal investigation "after a senior member of Autonomy's leadership team came forward following the departure of Mike Lynch on May 23."