HP is seeing some massive blowback from its announcement that it has taken an $8.8 billion impairment charge, and that around $5 billion of it is due to " serious accounting improprieties, misrepresentations, and disclosure failures" at Autonomy. HP purchased the enterprise search and knowledge management service company just over one year ago for $10.2 billion. It claims that soon after Autonomy founder Mike Lynch left the company, a whistleblower stepped forward about “a series of questionable accounting and business practices at Autonomy prior to the acquisition by HP.”
The day of the announcement, Lynch spoke out against the allegations of accounting fraud, saying that he and other Autonomy executives had been "ambushed." He stated that the allegations are "completely and utterly wrong." An accounting auditor name-dropped by HP CEO Meg Whitman in the latest HP earnings call also came forward to deny any knowledge of accounting improprieties or misrepresentations.
Lynch hasn't stayed quiet following his zero-day remarks, though. In an interview segment published today over at Business Insider, Lynch put the blame for Autonomy's value loss squarely on HP's shoulders. He stated that HP is torn between executives who want the company to focus more on software and executives who's positions in the company require a focus on hardware.
Lynch points to infighting between HP divisions as the reason for the recent impairment charge. He claims that much of Autonomy's "great, playful, lively young talent" left the company due to internal bureaucracy. In fact, Lynch claims, he and the entire Autonomy management team eventually "gave up." He states that the unnamed senior Autonomy whistleblower HP claims revealed the accounting fraud couldn't have been from the senior management team at Autonomy. Lynch states that the name of the whistleblower that circulated to him was "an HP software person who was brought in a month before I left," and suggested this person came into Autonomy with an agenda.
It's clear from HP's financial position that things at the company aren't going completely smoothly. However Lynch, who compared HP to an airplane with its engine on fire, also hasn't fully addressed the claims of misrepresentations at Autonomy, preferring to stay on the offensive against HP. No doubt many lawsuits are currently being prepared, and the truth of both sides' claims will be put to the test in court over the coming years, with a lot of dirty laundry to go with them.