|By Maureen O'Gara||
|November 23, 2012 10:00 AM EST||
When Hewlett-Packard CEO Meg Whitman stunned practically everyone within earshot early Tuesday morning by accusing the company's year-old Autonomy acquisition of ripping off HP with phony financials, she said that after she bounced Autonomy's founder out of HP in late April a senior member of Autonomy's staff owned up to the fraud.
She didn't identify the informant, giving Autonomy founder Mike Lynch the opportunity to tell the press that he couldn't possibly imagine who she meant since he was the last senior manager to leave after HP ran everybody else off.
Apparently he didn't count noses all that well.
An informed source says the left-behind informant - and there may have actually been two - told HP that the bogeys Lynch set couldn't be met because they were based on a fiction.
Lynch himself was reportedly fired for missing his forecast by 20%, a sin Meg found insupportable. She supposedly dumped him to set an example. He blamed HP and its rules for it after he heroically tried to keep Autonomy away from HP's bureaucracy because its culture was "special," a device that worked with Meg initially.
Lynch, who categorically denies HP's allegations, told the press late Tuesday that he was "ambushed" by HP's charges, and had no details because he wasn't informed beforehand or contacted by any lawyers or regulators. All he knew was what was in the HP press release and didn't know what Whitman was talking about but was sure it could all be explained.
He ducked behind Deloitte, which he said audited Autonomy's results quarterly, and claimed his books were in line with international accounting standards, which, he said, may be different from US rules.
However, HP's investigators apparently questioned Lynch and the old Autonomy management team in July and found their answers vague and "unhelpful" so he must have known something,
Still Lynch claimed that HP had had hundreds of its people and three auditors doing due diligence before the acquisition closed and said they couldn't have missed an "elephant in the room" as big as HP alleges.
Ex-HP CEO Mark Hurd apparently spied the elephant right off when Autonomy tried to shop itself to Oracle, where Hurd was co-president. Sources say the roll-up was asking $4 billion-$6 billion and Hurd figured it was worth maybe $1.5 billion. Lynch denied trying to sell Autonomy to Oracle but Oracle put his presentation on its web site.
Rejected, Autonomy and the Frank Quattrone Qatalyst crew then breezed by HP - which had already bought 3PAR from Quattrone for a ludicrous $2.35 billion, a 200% premium. They talked to CTO Shane Robison, who convinced then-CEO Leo Apotheker it was worth spending over $12 billion including debt to buy. A year later HP is writing off an amazing $8.8 billion on the adventure.
Lynch blames the "internecine" politics inside HP, its rejection of Apotheker and Robinson's strategy of dumping PCs and focusing on software, and the "coup d'état" that unseated them for his current problem.
With them gone because of the wildly unpopular Autonomy acquisition and with Whitman in charge, he claims HP mismanaged the acquisition, imposing 30% mark-ups on Autonomy software, running off established accounts, and not paying commissions on Autonomy sales but instead paying its salesmen for the competitive software they sold.
He figures Autonomy's prospects deteriorated and that's why HP took the massive write-off - to cover up its mismanagement.
He forgets Autonomy's reputation, at least in England, in the years before HP entered the picture, when it was a public company and the press and analysts were suspicious of its numbers and its vapor-y Bayesian unstructured data IDOL search technology or Intelligent Data Operating Layer, citing pretty much the same kind of "not-as-good-as-it-looks" objections HP is now complaining about.
Forrester Research says Autonomy "didn't invest in R&D; they didn't have regular software releases; they weren't transparent with a roadmap of where they were going; they didn't seek customer feedback. Customers complained, but the promise of managing all their information and making better decisions was so attractive. They bought more."
Lynch must also be aware of the rumors that have circulated about Autonomy since the HP takeover and spreading tales of users throwing out the over-hyped software or getting it for nothing, which may explain why its sales plummeted.
Forbes captures best what reporters have been up against for the last year as reports on hard-to-prove shenanigans were dangled in front of them.
It said, "Here's what my source observed personally":
"Autonomy grew through acquisitions, buying everything from storage companies like Iron Mountain to enterprise software firms like Interwoven. They'd then go to customers and offer them a deal they couldn't refuse. Say a customer had $5 million and four years left on a data-storage contract, or ‘disk,' in the trade. Autonomy would offer them, say, the same amount of storage for $4 million but structure it as a $3 million purchase of IDOL software, paid for up front, and $1 million worth of disk. The software sales dropped to the bottom line and burnished Autonomy's reputation for being a fast-growing, cutting-edge software company a la Oracle, while the revenue actually came from the low-margin, commodity storage business.
"They would basically give them software for free but shift the costs around to make it look like they got $3 million in software sales," the Forbes source, who directly observed such deals, said.
"Lynch's management team was also practiced at the art of wringing attractive-looking growth out of a string of ho-hum acquisitions. The typical strategy was to bolt IDOL and other software onto a company's existing products and try and convince customers to pay more for the ‘new' products. If that failed, they'd milk the existing customer base by halting development and outsourcing support," its source said, "using the cash from the runoff business to fund more acquisitions."
"Mike Lynch was famous for saying Autonomy never put an end-of-life on any product. But the customers were screaming."
In sales meetings, Lynch reportedly "loved to do vague and theoretical academic-type presentations to show what a visionary he was." And the product "looked like a lot of vaporware wrapped up in fancy Cambridge talk and the kind of accounting tricks managers have engaged in since the dawn of publicly traded stock."
HP's admission of being snookered means its CEO and its board, which voted for the acquisition, have put their heads on the chopping block given HP's history of incompetent management.
In his session at @ThingsExpo, Chris Klein, CEO and Co-founder of Rachio, will discuss next generation communities that are using IoT to create more sustainable, intelligent communities. One example is Sterling Ranch, a 10,000 home development that – with the help of Siemens – will integrate IoT technology into the community to provide residents with energy and water savings as well as intelligent security. Everything from stop lights to sprinkler systems to building infrastructures will run ef...
Apr. 30, 2016 05:30 PM EDT Reads: 688
Whether your IoT service is connecting cars, homes, appliances, wearable, cameras or other devices, one question hangs in the balance – how do you actually make money from this service? The ability to turn your IoT service into profit requires the ability to create a monetization strategy that is flexible, scalable and working for you in real-time. It must be a transparent, smoothly implemented strategy that all stakeholders – from customers to the board – will be able to understand and comprehe...
Apr. 30, 2016 04:45 PM EDT Reads: 1,044
SYS-CON Events announced today that Peak 10, Inc., a national IT infrastructure and cloud services provider, will exhibit at SYS-CON's 18th International Cloud Expo®, which will take place on June 7-9, 2016, at the Javits Center in New York City, NY. Peak 10 provides reliable, tailored data center and network services, cloud and managed services. Its solutions are designed to scale and adapt to customers’ changing business needs, enabling them to lower costs, improve performance and focus inter...
Apr. 30, 2016 04:45 PM EDT Reads: 990
You think you know what’s in your data. But do you? Most organizations are now aware of the business intelligence represented by their data. Data science stands to take this to a level you never thought of – literally. The techniques of data science, when used with the capabilities of Big Data technologies, can make connections you had not yet imagined, helping you discover new insights and ask new questions of your data. In his session at @ThingsExpo, Sarbjit Sarkaria, data science team lead ...
Apr. 30, 2016 04:45 PM EDT Reads: 577
So, you bought into the current machine learning craze and went on to collect millions/billions of records from this promising new data source. Now, what do you do with them? Too often, the abundance of data quickly turns into an abundance of problems. How do you extract that "magic essence" from your data without falling into the common pitfalls? In her session at @ThingsExpo, Natalia Ponomareva, Software Engineer at Google, will provide tips on how to be successful in large scale machine lear...
Apr. 30, 2016 04:15 PM EDT Reads: 1,034
Machine Learning helps make complex systems more efficient. By applying advanced Machine Learning techniques such as Cognitive Fingerprinting, wind project operators can utilize these tools to learn from collected data, detect regular patterns, and optimize their own operations. In his session at 18th Cloud Expo, Stuart Gillen, Director of Business Development at SparkCognition, will discuss how research has demonstrated the value of Machine Learning in delivering next generation analytics to im...
Apr. 30, 2016 04:15 PM EDT Reads: 1,663
There is an ever-growing explosion of new devices that are connected to the Internet using “cloud” solutions. This rapid growth is creating a massive new demand for efficient access to data. And it’s not just about connecting to that data anymore. This new demand is bringing new issues and challenges and it is important for companies to scale for the coming growth. And with that scaling comes the need for greater security, gathering and data analysis, storage, connectivity and, of course, the...
Apr. 30, 2016 03:15 PM EDT Reads: 723
This is not a small hotel event. It is also not a big vendor party where politicians and entertainers are more important than real content. This is Cloud Expo, the world's longest-running conference and exhibition focused on Cloud Computing and all that it entails. If you want serious presentations and valuable insight about Cloud Computing for three straight days, then register now for Cloud Expo.
Apr. 30, 2016 02:30 PM EDT Reads: 1,700
IoT device adoption is growing at staggering rates, and with it comes opportunity for developers to meet consumer demand for an ever more connected world. Wireless communication is the key part of the encompassing components of any IoT device. Wireless connectivity enhances the device utility at the expense of ease of use and deployment challenges. Since connectivity is fundamental for IoT device development, engineers must understand how to overcome the hurdles inherent in incorporating multipl...
Apr. 30, 2016 02:15 PM EDT Reads: 1,447
The increasing popularity of the Internet of Things necessitates that our physical and cognitive relationship with wearable technology will change rapidly in the near future. This advent means logging has become a thing of the past. Before, it was on us to track our own data, but now that data is automatically available. What does this mean for mHealth and the "connected" body? In her session at @ThingsExpo, Lisa Calkins, CEO and co-founder of Amadeus Consulting, will discuss the impact of wea...
Apr. 30, 2016 01:15 PM EDT Reads: 656
SYS-CON Events announced today that Stratoscale, the software company developing the next generation data center operating system, will exhibit at SYS-CON's 18th International Cloud Expo®, which will take place on June 7-9, 2016, at the Javits Center in New York City, NY. Stratoscale is revolutionizing the data center with a zero-to-cloud-in-minutes solution. With Stratoscale’s hardware-agnostic, Software Defined Data Center (SDDC) solution to store everything, run anything and scale everywhere...
Apr. 30, 2016 01:15 PM EDT Reads: 1,523
Angular 2 is a complete re-write of the popular framework AngularJS. Programming in Angular 2 is greatly simplified – now it's a component-based well-performing framework. This immersive one-day workshop at 18th Cloud Expo, led by Yakov Fain, a Java Champion and a co-founder of the IT consultancy Farata Systems and the product company SuranceBay, will provide you with everything you wanted to know about Angular 2.
Apr. 30, 2016 12:45 PM EDT Reads: 1,692
SYS-CON Events announced today that Men & Mice, the leading global provider of DNS, DHCP and IP address management overlay solutions, will exhibit at SYS-CON's 18th International Cloud Expo®, which will take place on June 7-9, 2016, at the Javits Center in New York City, NY. The Men & Mice Suite overlay solution is already known for its powerful application in heterogeneous operating environments, enabling enterprises to scale without fuss. Building on a solid range of diverse platform support,...
Apr. 30, 2016 12:00 PM EDT Reads: 2,283
You deployed your app with the Bluemix PaaS and it's gaining some serious traction, so it's time to make some tweaks. Did you design your application in a way that it can scale in the cloud? Were you even thinking about the cloud when you built the app? If not, chances are your app is going to break. Check out this webcast to learn various techniques for designing applications that will scale successfully in Bluemix, for the confidence you need to take your apps to the next level and beyond.
Apr. 30, 2016 11:30 AM EDT Reads: 1,463
We’ve worked with dozens of early adopters across numerous industries and will debunk common misperceptions, which starts with understanding that many of the connected products we’ll use over the next 5 years are already products, they’re just not yet connected. With an IoT product, time-in-market provides much more essential feedback than ever before. Innovation comes from what you do with the data that the connected product provides in order to enhance the customer experience and optimize busi...
Apr. 30, 2016 11:15 AM EDT Reads: 881
Increasing IoT connectivity is forcing enterprises to find elegant solutions to organize and visualize all incoming data from these connected devices with re-configurable dashboard widgets to effectively allow rapid decision-making for everything from immediate actions in tactical situations to strategic analysis and reporting. In his session at 18th Cloud Expo, Shikhir Singh, Senior Developer Relations Manager at Sencha, will discuss how to create HTML5 dashboards that interact with IoT devic...
Apr. 30, 2016 11:00 AM EDT Reads: 911
Artificial Intelligence has the potential to massively disrupt IoT. In his session at 18th Cloud Expo, AJ Abdallat, CEO of Beyond AI, will discuss what the five main drivers are in Artificial Intelligence that could shape the future of the Internet of Things. AJ Abdallat is CEO of Beyond AI. He has over 20 years of management experience in the fields of artificial intelligence, sensors, instruments, devices and software for telecommunications, life sciences, environmental monitoring, process...
Apr. 30, 2016 11:00 AM EDT Reads: 878
SYS-CON Events announced today that Ericsson has been named “Gold Sponsor” of SYS-CON's @ThingsExpo, which will take place on June 7-9, 2016, at the Javits Center in New York, New York. Ericsson is a world leader in the rapidly changing environment of communications technology – providing equipment, software and services to enable transformation through mobility. Some 40 percent of global mobile traffic runs through networks we have supplied. More than 1 billion subscribers around the world re...
Apr. 30, 2016 11:00 AM EDT Reads: 861
Digital payments using wearable devices such as smart watches, fitness trackers, and payment wristbands are an increasing area of focus for industry participants, and consumer acceptance from early trials and deployments has encouraged some of the biggest names in technology and banking to continue their push to drive growth in this nascent market. Wearable payment systems may utilize near field communication (NFC), radio frequency identification (RFID), or quick response (QR) codes and barcodes...
Apr. 30, 2016 10:00 AM EDT Reads: 700
SYS-CON Events announced today that Fusion, a leading provider of cloud services, will exhibit at SYS-CON's 18th International Cloud Expo®, which will take place on June 7-9, 2016, at the Javits Center in New York City, NY. Fusion, a leading provider of integrated cloud solutions to small, medium and large businesses, is the industry's single source for the cloud. Fusion's advanced, proprietary cloud service platform enables the integration of leading edge solutions in the cloud, including cloud...
Apr. 30, 2016 09:45 AM EDT Reads: 2,553