Autonomy founder Mike Lynch rejects HP allegations in open letter

Former Autonomy CEO Mike Lynch writes open letter to HP demanding it explain its allegations against the software company it bought in 2011

Autonomy founder and former CEO Mike Lynch has written an open letter to HP calling for immediate and specific explanations to the allegations HP has made about the software company.

HP bought UK software company Autonomy for $11.7bn in 2011. But on 20 November 2012, HP released a statement claiming Autonomy had used “accounting improprieties, misrepresentations and disclosure failures to inflate the underlying financial metrics of the company” to boost its sale price.

As a result, HP wrote down Autonomy's value by $8.8bn and said it had reported the former management of Autonomy to the US Securities and Exchange Commission (SEC) and the UK’s Serious Fraud Office.

In his letter, Mike Lynch said publishing the allegations before contacting him was shocking, adding that he rejected all allegations of impropriety.

Lynch claimed he had still not had any details from HP, bar the public statement it made last week. He called for a breakdown of the write-down figure, specifically the $5bn impairment charge.

“Can HP really state that no part of the $5 billion write-down was, or should be, attributed to HP’s operational and financial mismanagement of Autonomy since the acquisition?” Lynch asked.

Seeming to plea for a quick resolution to the issues, Lynch concluded: “Hewlett Packard is an iconic technology company, which was historically admired and respected all over the world. Autonomy joined forces with HP with real hopes for the future and in the belief that together there was an opportunity to make HP great again.” 

“I have been truly saddened by the events of the past months and am shocked and appalled by the events of the past week.”

HP responds to Mike Lynch

HP issued a stark reply to the letter shortly after, reiterating its allegations, following “an intense internal investigation into a series of accounting improprieties, disclosure failures and outright misrepresentations.”

HP said the matter was in the hands of the authorities now – adding the US department of justice to the SEC and SFO – and confirmed it would be taking its own legal actions against the employees involved.

“While Dr Lynch is eager for a debate, we believe the legal process is the correct method in which to bring out the facts and take action on behalf of our shareholders,” said HP.

“In that setting, we look forward to hearing Dr Lynch and other former Autonomy employees answer questions under penalty of perjury.”

Further developments

IT consultant Alan Pelz-Sharpe has made claims to have reported Autonomy to Serious Fraud Office in 2011, before the HP deal had completed.

More recently, a class action was filed against HP by investors seeking damages for “artificially inflated prices”, between 19 August 2011 – three days before HP announced it was to write down the value of services firm EDS by $8bn – and 20 November 2012, the day of the Autonomy write-down.

HP has yet to respond to the investor class action.

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