MIKE LYNCH STATEMENT IN RESPONSE TO HP’S FILING
(The following is a reformatted version of a statement issued by Mike Lynch on behalf of the former management team of Autonomy. The statement was confirmed.)
“HP is backtracking.
In a message posted on this website a week ago today, we urged Meg Whitman to use HP’s annual 10-K filing to provide a full explanation of the allegations of accounting impropriety at Autonomy which she made on November 20. Unfortunately, she did not do so. HP finally filed its 10-K yesterday, more than a week later than usual, but again failed to provide any detailed information on the alleged accounting impropriety, or how this could possibly have resulted in such a substantial write down.
HP’s failure to provide us and its own shareholders with clarity on these crucial issues does not come as much of a surprise. Ever since putting out those very serious but non-specific allegations last month, HP has refused to disclose either the substance of its allegations or any supporting evidence.
In fact, HP’s 10-K filing appears to raise many more questions than it answers. Having had further time to study HP’s filing since it was released near midnight last night (UK time), it is apparent that a number of the statements contained within the filing are materially different from HP’s previous commentary on these issues. It also appears that the company is back-tracking on a number of key points that under-pinned its original allegations:
1. How much of the Autonomy write down is actually being blamed on accounting improprieties?
In its November 20 statement, HP stated that “The majority of [the Autonomy] impairment charge, more than $5 billion, is linked to serious accounting improprieties, misrepresentation and disclosure failures” committed by “former members of Autonomy’s management team”. However, HP’s 10-K filing refers much more equivocally to a $5.7 billion goodwill impairment charge that “incorporates” the alleged accounting improprieties at Autonomy. So, how much of the $5.7 billion is being directly attributed by HP to accounting improprieties, and how much should in fact be attributed to other changes in business performance, earnings projections and discount rate?
2. Does HP have facts or beliefs?
In its November 20 statement, HP was definitive in accusing “former members of Autonomy’s management team” of “serious accounting improprieties, misrepresentation and disclosure failures”, stating these matters as fact. However, HP’s 10-K filing is materially weaker, referring to its interpretation of accounting improprieties which it “believes” to have taken place at Autonomy. Why did it make such definitive assertions before any independent assessment of the matter, and why is it less confident now than it was a month ago?
3. Why does the 10-K contain less detail than its last statement?
HP’s November 20 statement clearly leveled the accusations at “former members of Autonomy’s management team”. However, HP’s 10-K filing does not repeat - let alone expand upon - this specific detail, or indicate who it is accusing of wrongdoing. Every time we ask for more information, we get less.
Today we renew the call for HP to release the PwC report on which its allegations are based, along with any other relevant supporting evidence that was behind the statements of November 20, and explain the material differences between those statements and the 10-K.
It is time for Meg Whitman to stop making allegations and to start offering explanations.”
Darren McDermott Director