Former Autonomy CFO Tosses Legal Flechette at HP
July 22, 2014
I read “Former Autonomy CFO seeks to Block HP-Shareholder Settlement.” You may have to answer some questions to see the document or try to log in to the paywalled Financial Times’ Web site. Yep, that’s the wonky orange newspaper that is a must read in London, but not so much in Harrod’s Creek, Kentucky.
The story seems to be straightforward. The former chief financial officer of Autonomy has “filed a legal motion to block” the Hewlett Packard shareholder deal. The idea is that if shareholders agree to let HP off the hook for its acquisition of Autonomy and the fascinating $5 billon write down, then HP will go after Autonomy. The law firm assisting HP will be the same outfit that helped shareholders sue HP for the deal in the first place. Got that?
The Financial Times quoted Mr.Hussein’s legal document about the legal action:
“HP seeks to forever bury from disclosure the real reason for its 2012 write down of Autonomy: HP’s own destruction of Autonomy’s success after the acquisition. And, by the broad bar order it seeks, HP seeks to absolve itself of its own responsibility for its losses.”
The FT did not include the link to the actual filing. You can find it at this link.
The issue, according to the Autonomy CFO’s document is that HP is using the shareholder settlement to bury certain facts about HP’s handling of Autonomy. Autonomy’s argument is that HP fumbled the ball after it conducted due diligence and bought Autonomy.
Autonomy wants HP to provide proof that Autonomy fooled HP, its Board, and its consultants. The idea is that Autonomy allowed these folks to review the financials, the marketing collateral, and other sources of information before deciding to buy Autonomy for $11 billion.
I am no longer surprised by the claims and counter claims. Several observations:
First, search and content processing as business sectors generate a disproportionate amount of thrashing. HP analyzes Autonomy. HP buys Autonomy. HP sues Autonomy. Shareholders sue HP. An individual no longer employed at HP Autonomy sues HP. Etc., etc. Fast Search was the leader in post sale legal maneuvering. Autonomy seems to be following the “fast” track now.
Second, HP bought Autonomy and then said it was tricked. Remember this is not like buying a bagel. Autonomy bought a company with thousands of customers and hundreds of million in revenue. If a bagel is bad, I either demand a different one or walk to another bagel shop.
Third, the acquisition took place three years ago. In that time, the enterprise search sector has been subjected to considerable pressure. Just check out the latest Gartner Magic Quadrant, G00260831. Notice that Elasticsearch (the fastest growing search system) is not in the Gartner analysis. The Gartner enterprise search report appears to mirror the nature of the enterprise search market itself. The HP Autonomy matter AND the preceding Fast Search & Transfer matter have, in my view, contributed to a general malaise for the search and content processing software. The equation in my mind works like this: Buying a search system = Trouble.
Net net: With the parties to the matter allowing their attorneys to put the pedal to the metal, there will be more excitement in the near future. Billing functions at law firms have steamrollers to operate.
Stephen E Arnold, July 22, 2014
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