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Autonomy Chief Says Whitman Is Watering Down HP Fraud Claims

timothy posted about a year ago | from the series-of-tangled-webs dept.

Businesses 117

McGruber writes "Possibly the wierdest tax-writeoff of the year happened when Meg Whitman claimed that her US-based multinational corporation HP had been defrauded by British-software firm Autonomy; Ms. Whitman and HP claimed an 8.8 billion dollar write-down. As the Los Angeles Times explains, 'HP acquired Autonomy in 2011 for $11 billion, a move it hoped would turn it away from its dependence on sales of computer hardware with its low profit margins, and into the more profitable business of software. However, the price HP paid was widely criticized for being too high, and in part led to the subsequent ouster of Chief Executive Leo Apotheker.' The wierdness continues — in its annual report filed with the U.S. Securities and Exchange Commission, HP claims that the U.S. Department of Justice has opened an investigation into HP's allegations that HP has uncovered widespread accounting fraud at Autonomy. However, The Guardian points out that former Autonomy CEO Mike Lynch claims that HP 'is watering down the accusations it had levelled against him over the accounts filed by his old software company.' Mr. Lynch also says that he has not been contacted by the U.S. Department of Justice, which HP claims is investigating the alleged fraud. Perhaps Slashdot's users can help make sense of this mess and help explain it to me?"

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117 comments

I can explain it. (0)

Anonymous Coward | about a year ago | (#42426721)

That conniving gristly old shrew is up to no good, as usual.

Smoke and mirrors (5, Interesting)

girlintraining (1395911) | about a year ago | (#42426733)

Perhaps Slashdot's users can help make sense of this mess and help explain it to me?"

You don't have to delve too deeply into this one, to be honest. The company took a risk. It lost at the gambling table. Badly. And now it's looking for someone, or something, to blame. And the only way to reduce their debt load without screwing someone over a barrel is if some vaguely-defined "fraud" is found in the accounting books, thus saving HP of a lot of tax money and reducing the liability. Everything else is smoke and mirrors.

Re:Smoke and mirrors (0)

Anonymous Coward | about a year ago | (#42427131)

Honestly, for me it is hard to believe that HP's management was that incompetent - everyone was telling that this price is extremely high. So in my opinion this was a high level scam - but not necessarily by Autonomy alone - someone at HP signed for it including the board's members like current CEO.

Are they that incompetent? Or some group cleverly siphoned billions out of HP?

Re:Smoke and mirrors (2)

lightknight (213164) | about a year ago | (#42429177)

The CEO at the time, if I am remembering correctly, previously worked at SAP, and wanted to transition HP (a company by and large built on hardware) into a software services company. I guess he either missed working at SAP, or thought that HP should pull an IBM.

Because his vision was so...mismatched for HP, a lot of bad ideas were thrown around. To put things into perspective for the common man, it's like buying a baking company, and trying to turn it into an agricultural company -> true, baking and agriculture are loosely related, but not enough for it to be a good idea to suddenly switch out the foundation of the company. In much the same sense, hardware and software are related, and interact with one another, but in a hardware company, you are going to have tons of Electrical Engineers, and in a software company, tons of Software Engineers / Computer Scientists. Electrical Engineers can write code, but they are not as...tuned as a SE / CS person might be, making the enterprise somewhat inefficient; whereas a Software Engineer / Computer Scientist might design a FPGA or put together a circuit on a bread-board, but it will probably not be as efficient as the thing an Electrical Engineer would put together. That does not mean that there aren't a lot of great Electrical Engineer programmers, or some SE / CS people who can't design some amazing hardware; it just means their emphasis was on something a little different.

WRONG (0)

Anonymous Coward | about a year ago | (#42429321)

If Apotheker had been more of a politician and less an honest man, he would have sold the PC division for 1 dollar to Asus, Acer or the like and focused on the software biz. That is how IBM did it, and their SW business is a key contributor to profitability. Apotheker was quite right. But he had not read enough Machiavelli, apparently.

Re:WRONG (0)

Anonymous Coward | about a year ago | (#42429567)

I forgot to note that HP did gave serious software development and consulting operations for a long time. How do you think the got HP-UX and MPE going. Then, OpenView, Allbase SQL and many more.

Re:Smoke and mirrors (1)

erp_consultant (2614861) | about a year ago | (#42430697)

Yes, Apotheker worked for SAP prior to joining HP. By many accounts he didn't do a terrific job at SAP. When he got to HP he quickly realized that the company was mired in a low margin business and correctly summarized that services was the place to be. Unfortunately they paid way too much for EDS. IBM snagged PWC for about a 1/4 of the price that HP paid for EDS and PWC was a more prestigious firm. Dell then made a similar mistake by buying Perot Systems for a similarly inflated price with the goal of also getting into the consulting business. So I think that Apotheker had good instincts but poor execution.

Hardware and software are very different kinds of businesses and not many can pull off being successful at both. Hardware generally has a low margin but a relatively predictable cash flow. Consulting has long sales cycles and you have to put a lot of money in before you get any out. You have to train your consultants to keep them on top of the new developments. Hardware companies have a lot of EE's, as you noted, but they also have a fair amount of relatively unskilled labor (assembly work). Consulting companies, on the other hand, tend to have a lot of highly skilled people (consultants) that are highly mobile and change jobs frequently. If you don't treat them well they will leave.

Basically the two industries have different mind sets. While the profits of consulting can look juicy you lose more deals than you win.

 

Re:Smoke and mirrors (5, Informative)

greg1104 (461138) | about a year ago | (#42427775)

This is a useful overview, but it doesn't cover the details of the confusing part.

My take is that the whole DOJ angle is part of HP looking for a scapegoat to cover both their own mismanagement and lack of ability to due anything useful with Autonomy's IP. It's a fishing expedition to find one, but they have no hard evidence yet of who's to blame. Autonomy itself used aggressive accounting measures to inflate its sale price, as all companies being acquired will try to do. What HP really wants is to ignore the whole thing and write off the loss, since catching any accounting mess should have happened before the purchase. But they can't just do that due to class action lawsuits saying it's HP who is at fault. So they're going through the motions of prosecuting other people to shift the blame, but so far they don't have any hard evidence of that fraud. If they did, they'd be leading with that.

Here's how I sequenced all the events here to sort out what happened:

  • August 22, 2012: earnings are terrible, and we're going to blame the Enterprise Services division.
  • November 20, 2012: The scapegoat picked for the bad performance of Enterprise Services is the Autonomy aquisition. HP wants to write off a 8.8B loss right now for that. They can't admit "we fucked up", so they blame accounting issues at Autonomy.
  • November 21, 2012: The U.S. Department of Justice is called in to help push blame toward Autonomy, along with the U.K. Serious Fraud Office (Autonomy was originally a British company) and the SEC.
  • November 26, 2012: a class action lawsuit [stanford.edu] is filed by HP stockholders. That claims this is all bullshit, and HP itself is the source of fraud here. Similar class action lawsuits are filed against the accounting firms involved [yahoo.com] .
  • December 28, 2012: Former Autonomy head Mike Lynch points out that HP hasn't actually given out any detailed accounting for where that 8.8B figure comes from. And the US Justice department hasn't actually gotten him involved in things yet.

It may be the case that HP's forensic accounting here finds something lawsuit worthy. It's telling that so far, all they've done is contact the DOJ. If they had a smoking gun, they'd have sued the responsible partly directly instead. That's why I suspect this is just fishing without solid evidence so far.

Re:Smoke and mirrors (4, Interesting)

homey of my owney (975234) | about a year ago | (#42428093)

No, it does not cover the details of the confusing part.

Moreover, it incorrectly implies that Enterprise Services is Autonomy. The first hammer to fall in August was the write down of $8B for the acquisition of EDS --- NOT Autonomy. The November write down of $8.8B was for Autonomy.

The only thing clear here is that HP had a mess of losses associated with Enterprise Services, and that the first hint that things were really hosed was when they identified EDS as the reason for the first $8B+ write down.

Well, for starters... (1)

msauve (701917) | about a year ago | (#42427793)

"You don't have to delve too deeply into this one, to be honest."

You're right on that.

It becomes much clearer when one understands that the quote in the summary attributed to the former Autonomy CEO, Lynch, is actually from the Guardian. And, that "watering down" doesn't mean what the Guardian thinks it means (if one waters down an argument, they make it weaker than it actually is). Assuming someone got something right, what Lynch actually said was "Simply put, these allegations are false."

Re:Smoke and mirrors (0)

Anonymous Coward | about a year ago | (#42428741)

BBC have a summary here. It's a radio documentary.

http://www.bbc.co.uk/programmes/b00jkr1q

Re:Smoke and mirrors (2)

Cassini2 (956052) | about a year ago | (#42428857)

The 3 envelopes [notboring.com] joke clearly explains what is happening.

More seriously, the easiest person for Whitman to blame this fiasco on, is someone else, ideally from outside HP. Viola - the previous Autonomy CEO ...

Nothing to explain (3, Insightful)

TheRealMindChild (743925) | about a year ago | (#42426739)

Someone is lying

Re:Nothing to explain (0)

Anonymous Coward | about a year ago | (#42426943)

I'll bet you a dollar it's Mormon Meg.

Re:Nothing to explain (0)

Anonymous Coward | about a year ago | (#42427557)

Mormon? she's a Jewish

Re:Nothing to explain (3, Interesting)

Shoten (260439) | about a year ago | (#42426961)

Someone is lying

Well, yeah...it's HP we're talking about. I mean, this is the company that spied on journalists who didn't say nice things about their products. Anytime you have a company that gets dragged before Congress to account for what they've done, you know something's wrong. Anytime you have a company whose actions resulted in new laws to clarify why what they did should be illegal, you know someone's willing to play around with the fine line between simply immoral and actually illegal. And people that make such distinctions...or think they count, in an ethical sense, are nothing more than intelligent lowlives.

Re:Nothing to explain (0)

Anonymous Coward | about a year ago | (#42427219)

Oh I thot this strip was a parody of Steve Jobs (1)

Press2ToContinue (2424598) | about a year ago | (#42427707)

Totally my mistake, so sorry - I guess the "magical" reference threw me off. (plants tongue firmly in cheek)

Re:Oh I thot this strip was a parody of Steve Jobs (0)

Anonymous Coward | about a year ago | (#42429971)

(Tongue ignored.)

Your mistake is thinking that it applies to any one CEO, in much the same way that people think that Spinal Tap applies to any one band.

SEC Filings. (1)

Oxford_Comma_Lover (1679530) | about a year ago | (#42427167)

Someone is lying

Also, Nobody is actually meant to read SEC Filings. They are really only looked at if there's a lawsuit--and then they are looked at reluctantly.

Re:Nothing to explain (3, Informative)

tri44id (576891) | about a year ago | (#42428997)

Well, that too, but it's a lot more complicated. There are several things going on:
  • Meg Whitman is doing something that competent CEO's do routinely, and HP hasn't done in decades, which is cleaning up the books and writing down the value of non-performing assets, like brand names that will never be used again, such as "Compaq", "EDS", "Palm" and now "Autonomy". There's still "3Com" left to go...
  • Whitman is also playing the CEO spin game, which is that when you have bad news about profitability, you pair the announcement with some other announcement to act as distracting red meat to all the short-attention-span tech journalists who can't follow more than one story at a time. If you're Apple, you just need to mumble about some innovative new interaction modality and everyone goes crazy, if your're HP's CEO, you can actually demo a slick new product and everyone ignores you. Unfortunately HP's heritage of selling sushi as "cold, dead fish" has not been purged from their DNA.
  • The actual Autonomy core software is an undeniably superior technology for doing multimedia search and unstructured text search, but it was never actually productized. Apparently every sale was a bespoke one-off, never to be reused or broken apart and recycled the way most complex software is handled. This means that the combinatorial growth of value to expanding customer bases that potentially existed in the software base turned out to be extremely difficult to realize. HP didn't discover this until the deal was closed and HP engineers had spent some time with the code.
  • Nevertheless, during the sales negotiations with HP, the future cash flow of Autonomy was apparently computed as if the future growth of revenue was assured to be as exponential as the combinatorial math of modular software recombination would predict. Autonomy founder Mike Lynch is brilliant enough to make such a prediction in just those terms, and it surely would have gone right over the heads of then-CEO Leo Apotheker and most of the HP board, maybe including Shane Robison, chief strategy officer at the time. Now, is a statement about the finances of a software company based on whether that company's code is an impenetrable rat's nest, or not, a legally actionable, material misrepresentation? Is it something that would be expected to be uncovered by the legions of high-priced accountants deployed by the big name accounting firms during the "due diligence" phase of negotiations? I'm not a forensic accountant or a securities regulator, so I wouldn't venture to guess.
  • There were numerous other red flags http://www.guardian.co.uk/commentisfree/2012/nov/21/hewlett-packard-red-flags-autonomy [guardian.co.uk] around Autonomy that led HP's CFO Cathie Lesjak to vote against her boss and all the rest of the board on the purchase, but she was overruled.
  • Finally, HP claims that while there were accounting irregularities having to do with the way future revenue streams for software support were booked all at once, right now. Lynch claims that this is allowed under European rules even if it may be illegal under US GAAP rules. How would that change when Autonomy becomes owned by a US company? Should those high-priced accountants have caught that? Even so, HP claims to have testimony from a former Autonomy executive that those numbers were not merely tweaked, but were completely wack. HP is saying "nyah, nyah, we're not giving out details, and we're not saying who it is" and Lynch must be furious that he doesn't have enough information to try the case in the press and prejudice any legal outcome. HP wants to get Lynch under oath, so a jury can decide who's lying and who's not.

The wheels of the law grind exceedingly slow, so this will take years to play out. Meanwhile, HP has some decent software to play with, and they are already doing innovative things, like building search into the printers themselves http://www.autonomy.com/content/News/Releases/2012/1030.en.html [autonomy.com] . I'm not sure that this makes sense, but it's the kind of innovation that everyone expects from HP, and that we haven't seen from them in ages.

Yay !! (0)

Anonymous Coward | about a year ago | (#42429401)

Search functionality into printers !! "Honey, could you please go to the printer and query for the cinema program this evening ? Your quick fingers can operate that three-button keyboard with ease !" "Also, I don't mind you wast 50 sheets of paper in the process as I did in the 1970 when I programmed against our Multics mainframe"

Carly-Style "invention", I guess.

Not news (1)

Anonymous Coward | about a year ago | (#42426749)

HP fucking things up and being scummy. And fucking up being scummy too.

Of course slashdotters can explain it... (1, Funny)

Press2ToContinue (2424598) | about a year ago | (#42426761)

they know everything about everything, don't you know?

Re:Of course slashdotters can explain it... (3, Funny)

Anonymous Coward | about a year ago | (#42427065)

they know everything about everything, don't you know?

Hm, close. That was definitely smug and/or snidely sarcastic enough, but that's not in the form of a car analogy.

Re:Of course slashdotters can explain it... (1)

VortexCortex (1117377) | about a year ago | (#42427087)

they know everything about everything, don't you know?

One would think that with a large enough user base making enough explanations that the correct explanation is indeed given. It is no fault of the ground that from the crowd upon it all you hear is cacophony.

Furthermore, it is not incorrect to say that any one of us commenters is indeed capable of explaining things to the submitter. Note: they stated no requirement for the explanation to be correct. Perhaps their cacophilter is tuned to select the most likely of explanations such that they may assemble a plausible explanation from various insights of the crowd.

See also: Brain Storming under effect of extrapolating from the assumption that "Two heads are better than one." -or- That if you taught the monkeys English, and Theater, and also how to type first, then you wouldn't need nearly as many of them banging away at the keyboards to reproduce the works of William Shakespeare. In other words: Not all of us use this site in the same way as you.

Obligatory: Infinity? (1)

Press2ToContinue (2424598) | about a year ago | (#42427261)

I agree, provided that the user base is infinitely diverse. However, this is /., and so it is not. Hence my infinitely snarky sarcasm.

Seriously, I'm just weary of the infinity of speculation and judgmentalism that achieves the status of "information." This kind of post only serves that ilk, so I apologize if I felt moved to snark on it, but alas I must lower my expectations for the new and uber-gossipified /. since the passing of Rob Malda, who seriously must have passed away else he would not have let this become The New Geek Speculator.

Re:Of course slashdotters can explain it... (1)

rvw (755107) | about a year ago | (#42427097)

they know everything about everything, don't you know?

Except about dating.

I don't know (2)

Kupfernigk (1190345) | about a year ago | (#42427251)

I'm pretty sure I could start a flamewar with a suitably crafted post about date handling in Java. And at least start a discussion about the accuracy of dendrochronology when used in conjunction with C14 dating.

Or, and this has just occurred to me and might be a bit way out for Slashdot, are you thinking of the art of persuading another person to drop his or her underpants in an intimate setting?

Re:Of course slashdotters can explain it... (1)

EmperorOfCanada (1332175) | about a year ago | (#42427783)

Once in a blue moon someone might have the exactly relevant facts (which I still think might be a load of BS) but I come to the comments to see the interesting side comments where people might say things like, "HP makes a big load of crap except their Model X is a hidden gem at half the cost and twice the power of anything else" Or "I stopped buying HP servers because company X makes this brain dead simple blade server system with each server coming in at $199..."

Clown show (5, Interesting)

Anonymous Coward | about a year ago | (#42426783)

On the sell side, we have this. [oracle.com]

I'll let others comment on the buy side.

Re:Clown show (3, Interesting)

WrecklessSandwich (1000139) | about a year ago | (#42427865)

"We still have his powerpoint slides."

Normally I'm not a fan of Oracle (who is?), but good on them for shutting Lynch down with actual facts.

Re:Clown show (1)

AlecC (512609) | about a year ago | (#42428153)

Thanks for this. Remarkably frank and outspoken remarks for a corporate presentation. If I had mod points, you would have them.

Re:Clown show (1)

McGruber (1417641) | about a year ago | (#42429689)

On the sell side, we have this. [oracle.com]

Thank you for that reminder AC, but Larry and Oracle are hardly neutral sources on anything related to HP:

Former HP CEO Selected As Oracle Co-President (September 7, 2010) [slashdot.org]

HP Sues Hurd For Joining Oracle (September 7, 2010) [slashdot.org]

HP Spent Over $80M To Get Rid of Its CEOs (September 26, 2011) [slashdot.org]

Ex-HP CEO Hurd Pays $14 Million Oracle Pledge Fee (September 21, 2011) [slashdot.org]

Re:Clown show (0)

Anonymous Coward | about a year ago | (#42429847)

While HP isn't a paragon of a well-run company lately, all this push-back recently makes me wonder if this is some sort of campaign coordinated by Lynch and company. The fact that Oracle isn't best buddies with HP these days only lends greater weight to their claim that Mike Lynch is a proven serial liar.

Re:Clown show (0)

Anonymous Coward | about a year ago | (#42429873)

I think this one piece of evidence alone pretty much throws out Mike Lynch's credibility out the window. I wouldn't believe a single thing he says until this whole thing gets resolved in a court of law. It sounds to me more like he's engaged in serious damage control at this point, because he's at real risk of going to jail and losing his ill-gotten gains.

I'll take a stab at it... (4, Insightful)

garyisabusyguy (732330) | about a year ago | (#42426787)

HP wants to be what IBM used to be (and still struggles to be), the single source provider for their customer

Autonomy looked like a great opportunity, but just like inexpensive hardware has undercut high-end server sales, open source solutions and tens of thousands of developers using those tools have undercut their market and dimmed the rosy projections that made HP willing to lay down so much cash

I think that this is less about Autonomy's shrinking value and more about HP's willingness to pay any price to enter new markets and their failure to recognize an opportunity to drive down the selling price by being willing to walk away from the deal

On Autonomy's part, they 'enhanced shareholder value' and returned a greater profit to them by negotiating the highest selling price possible, Do we really expect corporations to behave differently?

Re:I'll take a stab at it... (1)

PolygamousRanchKid (1290638) | about a year ago | (#42427103)

During the acquisition process, the buying company goes through an extensive process of due diligence done by an army of professional accountants. They shove the financial books and records of the company they are buying under a scanning electron microscope, and take a big whiff to see if they smell anything fishy.

So, the real question, is, why did this alleged fraud just turn up now, and not during that process . . . ?

Re:I'll take a stab at it... (2)

Kupfernigk (1190345) | about a year ago | (#42427283)

I think the "army of professional accountants" is part of the problem, not the solution. Financial records are about what happened in the past (though the order book is about what should happen in the future, there is no guarantee that the future will be a continuation of the past).

Paradoxically, crowd sourcing an opinion through something like Slashdot might actually be more accurate - how often have you thought a proposed merger,flotation or acquisition stinks, and so it proved? Geeks often do have inside knowledge on technology trends, but they do not always recognise it and see how it fits the bigger picture. Accountants can tell you what happened, but once they move into futurology, they are at a disadvantage to someone who really knows, say, how a particular technology stacks up against the competition. And they won't know who to ask, because they don't talk to engineers.

Re:I'll take a stab at it... (0)

Anonymous Coward | about a year ago | (#42427417)

Paradoxically, crowd sourcing an opinion through something like Slashdot might actually be more accurate

Or at least, you'd get a few Monty Python jokes out of it.

Re:I'll take a stab at it... (1)

leathered (780018) | about a year ago | (#42427277)

All the best bits of HP were spun off by Carly into Agilent Technolgies, and to me they are the true Hewlett-Packard and not the faceless box-shifter that bears the HP name today.

I used to work in a lab a number of years ago, and almost all the instruments were made by HP. Whenever we were purchasing new equipment, we didn't even consider the competition because we knew we were getting the best. Also, whenever new instruments were purchased, they always came with HP workstations and printers.

I suppose their only redeeming feature is that HP servers are still pretty good, but their volumes and margins must be suffering since virtualization became popular.

fwiw, Agilent still loyal to HP (0)

Anonymous Coward | about a year ago | (#42427879)

If you buy Agilent equipment, it always comes with HP workstations. I've also observed during visits to their internal labs that the staff use nothing but HP laptops.

Re:I'll take a stab at it... (1)

AlecC (512609) | about a year ago | (#42428179)

Absolutely agree. Agilent is the heir to the HP I knew, respected and valued.

Mind you, their prices are just as high. Which, in a twisted way, is good. They have not descended to the lowest, unlike their erstwhile colleagues.

Re:I'll take a stab at it... (1)

chromatic (9471) | about a year ago | (#42428669)

All the best bits of HP were spun off by Carly into Agilent Technolgies...

The spinoff was well under way when Carly arrived. The idea happened under Platt.

Also Killed PA RISC (0)

Anonymous Coward | about a year ago | (#42429621)

Platt also decided it would be great to stop R&D on the PA RISC CPU and let Intel do that in the future. That was when PA RISC was the engine of rock-solid HPUX computers and regularly grinding the competition into the ground, performance-wise.

What Intel had going for them was massive sales numbers, Windows and economics. Platt essentially decided it would be a great idea to Raise The White Flag.

Re:I'll take a stab at it... (0)

Anonymous Coward | about a year ago | (#42430677)

It's my understanding, that Autonomy would account for all of their income as software sales, at a much higher percentage of profit, but what they were actually selling most of was hardware, which had practically no profit.

The fraud discovered is on an absolutely ginormous scale, and the fact that they are involving the DOJ in it directly, rather than filing civil suits directly, implies that they have a catastrophically sized illegal operation that they've discovered, not just a few glitches here and there.

the real fraud (3, Insightful)

frovingslosh (582462) | about a year ago | (#42426791)

Ever since HP bought Compaq (a deal that brought them nothing that they didn't already have) for more than the Chinese later paid for BM's PC division, they have been on a downhill spiral. And the cause of the decline seems to survive by telling the board "don't fire me now, you need to see this through". Meanwhile she keeps taking millions for an inability to run a once great company.

Re:the real fraud (2, Informative)

Anonymous Coward | about a year ago | (#42426889)

Meanwhile she keeps taking millions for an inability to run a once great company.

Hewlett Packard split into two pieces a long time back: one became HP, the other became Agilent. HP got the PC/inkjet/etc. part of the business. Agilent got the "cool" part of Hewlett Packard - you know, oscilloscopes, logic analyzers, etc., etc., etc.

"HP" hasn't been a great company since Agilent was split off. Agilent, on the other hand, still makes great equipment for electrical engineers (and more.)

Re:the real fraud (0)

Anonymous Coward | about a year ago | (#42429997)

Agilent is fantastic company that makes cools stuff, not only for electrical engineers, but also for geneticists, biochemists, chemists... It may actually be a good thing that they were split from the ink pushing MBAs.

Re:the real fraud (0)

Anonymous Coward | about a year ago | (#42426971)

Meanwhile she keeps taking millions for an inability to run a once great company.

Who is "she"?

Re:the real fraud (0)

Anonymous Coward | about a year ago | (#42427079)

Meg Whitman. Do you think she is a tranny or something?

Re:the real fraud (2, Informative)

Anonymous Coward | about a year ago | (#42427173)

Carly Fiorina was the CEO when HP bought Compaq. I've noticed a tendency for posters to conflate her with Meg Whitman, as if they're one person. Y'know, that chick...

Please, use names. FIORINA did this (Compaq merge). APOTHEKER did that (bought Autonomy). WHITMAN did another thing (allege fraud).

Re:the real fraud (3, Informative)

swalve (1980968) | about a year ago | (#42427319)

HP would be dead if they hadn't bought Compaq. The only good computers/servers they make are still from the Compaq pedigree.

Re:the real fraud (1)

Creepy (93888) | about a year ago | (#42427447)

Not quite so, as they had a robust server market for HP-UX on the high end with its lucrative services market. Yes, that has been dying to Linux recently, but it was a cash cow for a long time after the Compaq purchase. Compaq itself died from making the massive misstep of buying DEC, which had started making the transition to services (and incidentally part of the eventual appeal of HP buying them). HP has continued to move into services, acquiring EDS, which had dumped almost all of its non-services based, primarily, IMO, to keep its stock from going junk (despite saying it was to streamline... why else dump profitable divisions?). In fact, HP was attempting to get out of the PC market entirely fairly recently.

As an oddity, I've worked for every one of these companies at some point, and only one during transition (UGS back to EDS).

As an additional oddity, I currently work for an autonomy customer that had questioned autonomy's stability and direction before the merger and started supporting Solr in parallel. I don't know why they believed autonomy was in danger, but apparently our marketing folk are smarter than they look. In any case, the only way we dump autonomy is if they stop supporting it because we have customers giving us boatloads of money to support it.

Re:the real fraud (1)

garyisabusyguy (732330) | about a year ago | (#42428371)

Every time that I speak with an HP hardware rep they spend all of their time pushing the integrity/Itanium servers for about 10x the cost of the (formerly Compaq) proliant x86-64 line

They are wasting their breath, when we finally moved out the last of our DEC/Compaq Alpha servers we switched everything to proliant/operton servers running SUSE linux for our databases and blade servers (with lowest total cost per core) for vmware

I would have loved it HP had seen the looming failure of Itanium and Alpha was delivering its ev-12 generation, but that was not to be and HP should see its future in the path that it took Alpha down, obsolescence

WEIRD NOT WIERD (0)

Anonymous Coward | about a year ago | (#42426849)

You spell it "weird", not "wierd".

C'mon people.

Re:WEIRD NOT WIERD (1)

dpbsmith (263124) | about a year ago | (#42427183)

I before E, except after C
Or when sounded like "A"
As in "neighbor" and "weigh"
Except seize, inveigle, either,
Weird, leisure, neither.

(Also science, conscience, sheik, ancient, being, caffeine, feisty, forfeit, protein, species, and several dozen others, including "Einstein"--twice! The amazing thing about the rule is that it works at all. It seems as if it all the exceptions are words whose spelling is so familiar that you never stop to ask...)

Re:WEIRD NOT WIERD (1)

newcastlejon (1483695) | about a year ago | (#42427237)

I before E, except after C...

...The amazing thing about the rule is that it works at all...

It doesn't. I think there are probably more exceptions to that rule than words that actually follow it.

Re:WEIRD NOT WIERD (0)

Anonymous Coward | about a year ago | (#42430769)

I before E, except after C...

...The amazing thing about the rule is that it works at all...

It doesn't. I think there are probably more exceptions to that rule than words that actually follow it.

This ancient wisdom is inefficient and unscientific. Is this small sample sufficient?

Re:WEIRD NOT WIERD (0)

Anonymous Coward | about a year ago | (#42427583)

I before E, except after C
Or when sounded like "A"
As in "neighbor" and "weigh"
Except for all those "weird" cases.

ftfy

HP used to be good (5, Insightful)

EmperorOfCanada (1332175) | about a year ago | (#42426859)

About 15 years ago I was buying an HP printer from Canada's equivalent to Best Buy and they were trying to do the usual crap warranty upsell. I told the guy, "For $10 off I'll take an HP product with no warranty." That was 15 years ago. I recently opened a cheap little HP inkjet and the included black cartridge had zero ink in it. I don't mean it had dried out but it had never contained ink as I cut it open and found no sign of ink. I didn't flip out or was even a tiny bit surprised. This is what I expect from HP products.

The same with HP laptops; I expect a mountain of bloated trialware that will be a huge pain to remove and a variety of other cheapnesses such as the whole split left shift key thing.

I also buy servers and with no experience at all with HP servers would simply not touch them with a bargepole due to my experiences with the rest of their product line. But back to their older products. I know people with older(10 years+) laserjets that just keep going and going; while I know others with newer colour laser jets where the red is fading due to dust buildup on a mirror buried deep inside the machine.

And don't get me going on the prices of toner and ink. So my guess is that HP is a company run by MBA types "proving" all kinds of "facts" using spreadsheets while leaving the basics such as loyal happy customers in the dust as those things don't spreadsheet very well. If you are wondering what I mean by the misuse of spreadsheets think about this scenario: You are HP and you have some new trialware product to add to your latest laptop. The product looks like it will make an average of $16.95 per machine. You expect to sell 300,000 units. Well that works out to 6 million dollars. Then you add another trialware column, and another, and another. Soon those machines are simply printing money. But how do you calculate the number of customers who will never buy another HP after realizing that they basically just bought the electronic equivalent to postal junk flyers? Not so easy to put that into a spreadsheet; you can but it tends to be built on more fuzzy information that can be tainted with optimism. My personal guess is that a goodly portion of high priced Apple's sales are built upon people seeing a machine that didn't come with Norton AV and its bloaty brethren. These technologically unsophisticated people then reason that it is worth double to not get this crap. I like Apple products so I am not casting aspersions and I also know that there are many other reasons people buy them both worthy and shallow but I know many people who have no inclination to waste one second fighting with their machine and value their time accordingly.

So when I hear that HP is squabbling over $11 billion that would potentially be detectable from the proper use of spreadsheets (accounting) I just laugh like a drain.

Re:HP used to be good (4, Interesting)

deadgoon42 (309575) | about a year ago | (#42427029)

You just hit the nail on the head of why customers and employees of once great companies now hate those companies. Their management knows little to nothing about the business itself, they only know how to look at a spreadsheet and run a trend chart. At my last job, we spent most of our time making charts go up and boxes turn green. These had little to no positive effect on our business and often just made things worse. If things got too bad, we'd just make up numbers or manipulate them in such a way as to make them what the managers wanted. Since the managers didn't know anything about the real world happenings, they were none the wiser. A terrible way to run a business, but it seems that's how most are run nowadays.

MBA WISDOM (1)

Anonymous Coward | about a year ago | (#42427509)

"You can only manage what you can measure !!!!"

Of course, "customers cursing on product already bought" cannot be measured, so the MBA crapper ignores that aspect and continues to implement some "money-saving" scam.
Three years later he MBA crapper is surprised his company has been "developed" into the economic crapbin.

But that rot started when Dave Packard forgot the purpose of his little company and accepted money as the sole determinant of success. In his book he praises the MBAs. Companies have a useful lifetime, and HP's useful lifetime was consumed by 1995. I still remember Lew Platt waxing about "we have to reduce inventory", when HP was a technology powerhouse with HP-UX, PA RISC, semiconductor test, chemical analysis, medical instruments, electronic instrument group and all that.

MBA - learned intellectual shallowness.

Not to forget (0)

Anonymous Coward | about a year ago | (#42427575)

..products such as MPE and Allbase/SQL, which could still be around and rake in billions, just like AS/400 (whatever they currently call it) and DB/2 still do.

But no, let's push the crap of Mr Larry and Mr Bill. Be THEIR sales force, betray your own product lines ! Betray your own engineers and scientists ! That's a good business plan, isn't it ??

Did I mention you can also kill your own, leading-edge, high-performance microprocessor architecture ? If you do that, it will reduce your management workload and capital expenditure. Plus it will rob your own company any competitive edge left, on the long run.

Re:Not to forget (2)

garyisabusyguy (732330) | about a year ago | (#42428433)

yeah, damn the MBA's... oh wait I am one, but then I had already been working in software development for over a decade before I chose to learn about the dark side

The business education was painful and enlightening. It was both maddening in how companies rate investment against perceived roi (no business person would ever fund pure research with no clear return on investment over what they could make just shutting down research in favor of a stock portfolio) and troubling (how business 'ethics' has been transformed into an all-out race for short term profits to meet shareholder expectations regardless of long-term outcomes)

If left to the business people, this entire country would be reduced to a backwater selling buggy whips in MLM schemes that maximize profits at the top and the rest of the world would be scrambling to leave us in the dust. I think that the most dangerous thing for a technology company to do is to allow their fate to fall into the hands of a business person with no technical background that only cares about the next quarters returns and ignores the need to plan ahead 5, 10 and 20 years into the future

Re:Not to forget (0)

Anonymous Coward | about a year ago | (#42431561)

Yeah, I'm a developer with 30 years of code under my belt and an MBA. I'm guessing the people who slag off MBAs now are those who used to slag off black, gay, disabled, immigrants etc. All top management need to understand their business. All of it including the tech. I've met enough MBA/Engineers like myself to know their are plenty out their who understand both tech and business. I challenge the tech-only guys here (who may be the ones with the biggest anti-MBA thing going) to learn what's going on in the non-tech world.

Re:HP used to be good (0)

Anonymous Coward | about a year ago | (#42430089)

The solution to the HP consumer systems is simple enough: uninstall the crapware first before installing any applications to make the system as clean as possible. Stuff like Wild Tangent games, for example, uninstalls quickly and deleting Wild Tangent registry entries is as straightforward as using Regedit and deleting Wild Tangent keys.

As far as HP's printing devices that might ship with lower capacity starter ink supplies/cartridges: I recently priced their competitors Epson, Canon, and Lexmark and while the printer price was comparable, all of their inks are HIGHER in price than HP. So HP isn't the only one selling the ink for significantly higher than the printer (add the costs of both the black ink and any necessary color inks)! Given that HP print quality is still reliable and hasn't gone to crap, I'll continue to stick with HP printing devices until a competitor has both cheaper printing devices and cheaper inks with also a comparably competitive print quality.

I have no experience with HP server equipment--one of those paradoxes where one needs server experience to work on servers but unless they got server experience at one workplace or another, they don't have server experience.

Get Your Creditcard ready (0)

Anonymous Coward | about a year ago | (#42431677)

..and obtain some AWS-based "server experience". Then set up some project and write about that in glowing words in your project list/CV.

Classic case of Occam's razor (3, Interesting)

Anonymous Coward | about a year ago | (#42426899)

HP paid $11bn for Autonomy, despite Autonomy showing only $3.5bn of total assets (as of June 2011). HP recorded nearly $7bn of Goodwill (difference between the price HP thought it was worth and what the rest of the market thought it was worth) and surprise, surprise the market knew better than HP.

HP's story simply does not stack up - it would mean Autonomy were fiddling their books to the tune of $5bn on a $3.5bn balance sheet. Much more likely is that HP vastly overpaid and are now trying to shift the blame, I'd expect these charges to get even more diluted in the near future.

Re:Classic case of Occam's razor (1)

Creepy (93888) | about a year ago | (#42427515)

From what I understand, they were counting service contracts as sales for that year instead of splitting it up over the service life of the contract. Apparently in US bookkeeping these need to be handled like depreciating assets and accounted for over a period of time (or that's how I understood it). Since Autonomy makes a good chunk of its money on contracts, that could add up fast.

Re:Classic case of Occam's razor (1)

nanoflower (1077145) | about a year ago | (#42428121)

But that is accepted practice in the UK. In any case HP had two accounting firms involved in auditing Autonomy plus their own management team. If they didn't realize what Autonomy was doing and why then they can only blame themselves and their accounting firms. (Assuming they didn't see it and tell HP about it. Which isn't likely.)

Easy Answer (2)

agrisea (877522) | about a year ago | (#42426919)

Ignoring all the bad decisions HP has made over the past 20 years, HP simply doesn't want to pay too much in taxes. Other large corps, like Intel, have used the multi-billion dollar write-down to escape taxes, course the rest of us will end up paying more.

Re:Easy Answer (1)

jimicus (737525) | about a year ago | (#42428263)

The rate HP is going, they'll get their wish all right. You don't have to pay any corporate taxes at all when your company doesn't turn a profit - pretty soon you will never have to pay corporate taxes ever again.

The simple explanation-- (1)

sillivalley (411349) | about a year ago | (#42427299)

"Nobody with half a brain would have paid that much for this pile of shite; therefore, we must have been defrauded."

See? It's simple. Blame someone else.

Re:The simple explanation-- (0)

Anonymous Coward | about a year ago | (#42428195)

SCO used that explanation, worked OK for them for a while.

Drugs (0)

Anonymous Coward | about a year ago | (#42427309)

Habitual usage of psychoactive narcotics can impair brain functions and lead to other physiological problems and ailments and even death.

Dying slowly (1)

elrick_the_brave (160509) | about a year ago | (#42427465)

Like most big companies, HP is running out of new CEOs to find 'problems' to correct to 'explain' lack of profit to shareholders. What is fundamentally wrong is that in any given market, costs are likely to go up over time. You cannot sell the same product for the same price over quarters or even years. Technically you get around this by either introducing 'new' products with 'new' features or you pad some aspects of your business from other aspects.

HP has been cutting employee benefits and salaries for going on a decade now. Every quarter they cut to make the profit for the shareholders. At some point this needs a reckoning. That is likely going to be in the near future. The company needs to be split into different divisions to slough off the unproductive components - e.g. IBM getting rid of its computers and laptops division.

You can't be everything to everyone. If you try, you end up disappointing everyone. A CEO can only do so much and good employees will only stay so long until they are forced to find an alternative to save their sanity.

Re:Dying slowly (0)

Anonymous Coward | about a year ago | (#42429531)

Apart from tactical errors, HP as a "vertical integrated company" was hit by "horizontal" specialists such as Intel, M$, Oracle, SAP and the like. IBM has similar issues and a near-death experience, but they still have very loyal customers in mainframes, Unix and minicomputers. And certainly top-notch hardware in these businesses. Plus they have strong software and consulting businesses and had the will to defend them against Larry and Bill.
Then there was Linux eating into HP's cashcows HPUX/HP9000 and MPE/HP3000.

But worst of all, they did not have a leader of the calibre of a Jobs or an Ellison. To top it off, they were infested with new-age political correctness crap while the other guys are steaming of testosterone. That's how they accidentally got rid of Hurd, who at least had serious enterprise-computing experience from NCR.

Doesn't seem that complicated... (1)

Sir_Sri (199544) | about a year ago | (#42427469)

This seems straightforward.

HP paid 11 billion dollars for something. They are now claiming it is actually worth 2.2, and that difference is accounted for by fraud on the part of the seller (essentially lying in their books to hide what it was actually worth). It's like going on a date with a girl and telling her you make 100k a year when actually you make 70. Or, as the case may be, telling her you make 110k when actually you make 22.

Now the thing is, some of the 'asset' they were buying was a brand name and other intangibles, so those are always of questionable value (AMD wrote off a few billion dollars in their ATI acquisition for this reason). If autonomy presented its brand and existing sales relationships as worth 8.8 billion dollars when they weren't, that's fraud. If HP is now claiming that they really aren't worth 8.8 billion dollars anymore (when they are) they're essentially defrauding the government, potentially quite legally as HP can kill the Autonomy brand and make it worth less. And if it's actually worth 8.8 billion dollars less, then they just wasted a bunch of shareholder money.

With all acquisitions you're trying to find something you can buy for less than it's actually worth, or will be worth in the future with enough investment on your part. Lots of people were warning that HP was paying too much, but the whole idea is that they figured (rightly or wrongly) that there was something there worth paying that much for. If you spend 180 bucks a share on apple stock on dec 31 2007, and looked at the price of 85 a share in march of 2009 you would have been thinking that was a really bad investment. Until it hit 700 bucks a share in september of this year and is now down in the 510 range.

Meg Whitman is trying to pass blame (1, Insightful)

WindBourne (631190) | about a year ago | (#42427633)

The fact is, that Whitman is a worthless MBA. She has left a trail of destruction, except at e-bay. Of course, e-bay had such a good thing going, that it was not surprising. But, HP is being brought down by her, similar to the way that IBM and others are going down.

Re:Meg Whitman is trying to pass blame (0)

Anonymous Coward | about a year ago | (#42428659)

The fact is, that Whitman is a worthless MBA. She has left a trail of destruction, except at e-bay.

I'm not a fan of Meg's either, but if you're going to make a charge like that then you need to explain some of the major mistakes she made. The Autonomy purchase was dialed up by her predecessor, Leo Apotheker.

Re:Meg Whitman is trying to pass blame (0)

Anonymous Coward | about a year ago | (#42429931)

The Autonomy purchase was dialed up by her predecessor, Leo Apotheker.

As a boardmember at the time, she had to approve the purchase. CEOs don't have carte blanch to expend company funds the way you seem to think they do.

Re:Meg Whitman is trying to pass blame (0)

Anonymous Coward | about a year ago | (#42430265)

Marc Andreesen, founding architect of Mozilla and Netscape and now one of the top VC's in Silicon Valley, was also on HP's board the entire time Apotheker was there (he is still on HP's board). Does that mean Andressen is an incompetent fool?

The CEO bears primary blame for this kind of disaster. The board members messed up, but remember they serve part time and did not instigate the acquisition.

Re:Meg Whitman is trying to pass blame (3, Interesting)

Anubis IV (1279820) | about a year ago | (#42429781)

She's the one cleaning up the mess, not the one that made it (though how well she's doing is certainly open to debate). That credit goes to Leo Apotheker, who, as the summary pointed out, was ousted largely due to the whole Autonomy buyout that he oversaw, but that was far from the only mess he made; he was also the one who announced plans to shut down HP's PC business. Whitman is just trying to put as much distance between the company and that deal as she can at this point, that way they can move on.

As for eBay, she started there when it only had 30 employees, so it's not like she came in when it was the massive (though garish) success it is now and just kept it running. And what destruction has she left behind elsewhere? Last I checked, after she left eBay, she more or less took a break for a few years, serving on the boards at a few different companies that seemed to do rather well with her helping them (e.g. Dreamworks). And since coming on as CEO at HP, she's been systematically undoing the damage her predecessor did before he floated away on a golden parachute. Whether or not she's succeeding is not something I want to argue, since I don't think I'm well-informed on that subject, but it looks to me like the blame lies elsewhere, and that she's just trying to get them out of it.

I'm not a fan of Whitman either, but let's at least be fair in our treatment and rely on actual facts, rather than generalizations that don't seem to line up with reality.

Re:Meg Whitman is trying to pass blame (2)

BitZtream (692029) | about a year ago | (#42430485)

She as a member of HPs board of directors voted for buying Autonomy at the ridiculous price they paid. She most certainly IS responsible for it.

Maybe HP and Autonomy deserve each other. (0)

Anonymous Coward | about a year ago | (#42427649)

I would suspect fraud here, I find it hard to believe there has been this level of incompetence. I still have little respect for HP after the whole "pretexting" scandal a few years ago. I'd think there's a culture in the boardroom at HP that few would want to be part of. Two companies that have lost their way with no real leadership or innovation to bring them back to past glory.

Clever way to justify a huge writeoff? (0)

Anonymous Coward | about a year ago | (#42427679)

This could just be synthetic accounting, shadow puppets included. Sounds like there's more to investigate here ...

Not sure why anyone believes Mike Lynch... (0)

Anonymous Coward | about a year ago | (#42428025)

it's not like he's going to admit wrongdoing if there was any. Why would he?
When HP first announced this, a bunch of analysts and bloggers highlighted things that HP's due diligence should have warning flagged.
So, despite our distaste for Meg Whitman, it seems premature to exonerate Lynch.

Watering Down? (0)

Anonymous Coward | about a year ago | (#42428201)

Dan Sabbagh, author of the original article, "Autonomy former chief: Hewlett-Packard is watering down accusations," at guardian.co.uk, does not seem to understand what "watering down" means. If HP were watering down the accusations against Autonomy's former chief, then the reality would be much worse than the accusations. What the former Autonomy chief was saying was that HP was bolstering the accusations, essentially meaning that the reality is much better than the accusations.

Mr. Sabbagh should either take some journalism, English, and logic courses, or else stop making a fool of himself and find some other line of work.

Re:Watering Down? (1)

FrangoAssado (561740) | about a year ago | (#42429351)

Yes, I found that extremely confusing.

I think he's using the term "watered-down" to mean something like "with increased volume", but of course the usual meaning (what you find in the dictionary [thefreedictionary.com] ) is exactly the opposite: "diminished in force or effect".

Where was "due diligence"? (2)

AlecC (512609) | about a year ago | (#42428231)

HP are complaining that they were defrauded of between 80 and 90% of what they paid for Autonomy. On a ten digit deal, surely they employed all the best accountants and lawyers around to check it out? I mean, $100 million on advisers is still only 1% of the deal. If they did, why are they not suing these advisers (possibly as well, but certainly first)? If they did not, they they really have only themselves to blame and all concerned (not just the top man) should be ejected without parachutes.

Weird (0)

Anonymous Coward | about a year ago | (#42429921)

It's spelt weird.

Muffy is scummy - what a surprise! (0)

Anonymous Coward | about a year ago | (#42430637)

Muffy can't seem to buy the California governor's office and couldn't lead a thirsty mule to a lake, much less a profitable and reputable business. Bye, bye bimbo. Take your stolen riches and sneak away down to La Jolla with your buddy Mit - why you even look alike :) She'll be out within six months - dollars to donuts.

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