Mike Lynch attacks HP over "smears" relating to Autonomy acquisition

Autonomy founder Mike Lynch has accused HP of “smearing” him and “misleading” the company’s shareholders, as the bitter war of words over the acquisition of Autonomy continues.

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Lynch has written an open letter to HP shareholders ahead of the IT giant’s annual stockholder meeting tonight. The move is his latest response to HP’s allegations in November 2012 that he and the Autonomy management team deliberately misled HP over the true state of the software firm’s accounts when it was taken over by HP in a £7bn deal in 2011.

A year later, HP wrote off $8.8bn as a result of what it called “accounting improprieties, misrepresentations and disclosure failures to inflate the underlying financial metrics of the company.”

Lynch said in the letter that since the allegations were made, the former Autonomy team has still not received any evidence to substantiate HP’s claims.

“Instead, [HP] has selectively leaked documents and information to the international media, frequently using material taken out of context to create false impressions and smear our reputations,” he said.

“Since the last HP shareholder meeting, reports in the media have demonstrated that HP has documents in its possession that show beyond doubt that statements it made on November 20th 2012 were misleading. Further, these reports have shown that senior people at HP knew these statements were misleading long before they were made.”

HP has claimed that Autonomy regularly sold off hardware at a loss and, following its acquisition, told HP it was having trouble selling its hardware, having previously sold Dell equipment to customers. 

HP only criticised the firm for this practice in November 2012 after a former Autonomy employee whistle-blower came forward, saying it had used the sales to cover up shortfalls in its other revenues.

Last month, the Financial Times claimed to have seen a number of emails and documents showing HP executives were in the know about the practice soon after the deal closed in October 2011. The newspaper said saw an email that went as far up the hierarchy as HP CEO Meg Whitman.

In his latest letter, Lynch detailed a series of questions about HP’s behaviour and allegations, and urged shareholders to seek answers.

“Meg Whitman has made incendiary and defamatory accusations on behalf of her company. She should now present the detailed evidence that justifies those allegations and a $5.5bn write-down in the value of your company,” he said.

In May last year, some HP investors launched a class action lawsuit over the company’s botched acquisition of Autonomy, in which damages could exceed $1bn.

Whitman has consistently defended HP’s attack on Lynch and his former colleagues. In April last year she said: “There is no question that HP overpaid for Autonomy, which is a smaller, less profitable company than HP was led to believe.”

Lynch initially joined HP when Autonomy was acquired, but was later sacked by the firm – although his departure was not related to the accounting allegations.