HP to 'seek redress' for alleged Autonomy accounting fraud

CEO Whitman lays responsibility for the Autonomy acquisition on predecessor Apotheker

By , IDG News Service |  Software

"The two people who should have been held responsible are gone," Whitman said, referring to Apotheker and HP's former chief strategy officer, Shane Robison. "That's the way I see it right now. I feel good about the stability of leadership."

"With regard to the board, most of us were here and voted for [the acquisition], and we feel terrible about it," Whitman added. But HP relied on Autonomy financial documents that had been audited by Deloitte. "In the end, you have to rely on audited financials, and we did."

However, HP has changed the way it conducts mergers and acquisitions, according to Whitman. "Due diligence now reports to the CFO," she said. "At the time, due diligence and M&A reported to strategy instead of the CFO. I've never seen that before and it's a change I made right away."

Apotheker, Robison and Lynch couldn't immediately be reached for comment. Lynch was reviewing HP's announcement on Tuesday and is planning to make a statement, according to one published report.

Autonomy was supposed to kick-start HP's push into enterprise software, which can be more profitable than servers, PCs and services. The company's software focuses on data management, search and archiving, with its core product being the IDOL (Intelligent Data Operating Layer) Server.

But HP's probe turned up a "mischaracterization of revenue from negative-margin, low-end hardware sales with little or no associated software content as 'IDOL product,' and the improper inclusion of such revenue as 'license revenue' for purposes of the organic and IDOL growth calculations," according to its statement. "This negative-margin, low-end hardware is estimated to have comprised 10-15% of Autonomy's revenue."

In addition, Autonomy allegedly used "licensing transactions with value-added resellers to inappropriately accelerate revenue recognition, or worse, create revenue where no end-user customer existed at the time of sale," HP said.

Chris Kanaracus covers enterprise software and general technology breaking news for The IDG News Service. Chris' email address is Chris_Kanaracus@idg.com

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