Autonomy CEO Mike Lynch Will Stay, Says HP Deal Wasn’t Explained Clearly

Autonomy Corp. Chief Executive Officer Mike Lynch said the logic behind his company’s $10.3 billion takeover by Hewlett-Packard Co. (HPQ) hadn’t been clearly communicated and he plans to stay in his current position for at least a couple of years.

Hewlett-Packard’s Chairman Ray Lane and new CEO Meg Whitman informed Lynch of plans to replace her predecessor Leo Apotheker “a couple of days before it became formal,” Lynch said today in an interview. HP, which ousted Apotheker this week after less than 11 months as CEO following three sales forecast cuts and strategy shifts, is prioritizing the completion of the Autonomy acquisition, he said.

“It was a shame that the rationale hadn’t been clearly communicated,” Lynch said of the takeover of the U.K.’s second- largest software company. “It’s not just another software acquisition.”

Pressure on Apotheker intensified on Aug. 18, when he announced an overhaul that included the acquisition of Autonomy and a possible spinoff of the personal-computer business. He also killed off the company’s WebOS tablets and smartphones. Apotheker was unaware that his position was being questioned until news broke on Sept. 21, according to a person close to the situation.

Lynch’s Strategy

Lynch, who founded Autonomy in 1996 and owns 8 percent of the software maker’s shares, will report directly to Whitman, he said. Whitman, the former CEO of EBay Inc., said yesterday she planned to continue with Apotheker’s strategy to avoid alienating shareholders unsettled by changes in course under the previous tenure.

Lynch “is closely associated with the success” of Autonomy, Milan Radia, a managing director of equities research at Jefferies International Ltd., said today in an interview on Bloomberg TV. “He’ll have had a meeting of minds with Leo, and suddenly Leo’s not there anymore.”

There’s a risk that Autonomy would “become an orphaned asset within HP if the strategy doesn’t come together,” Radia said.

Hewlett-Packard cares more about hardware than the software business, Hewlett-Packard’s Lane said today on CNBC.

Autonomy, based in Cambridge, England, will give Hewlett- Packard software that searches a broad range of information, known as unstructured data, including e-mails, music, video and posts on social networks such as Facebook Inc.

Hardware, Software

Lynch will also work with Lane, who takes on a full-time role as executive chairman, to focus on tying Autonomy’s software to Hewlett-Packard’s hardware, he said. “The real home run is hardware and software working together.”

Hewlett-Packard fell to its lowest price in more than six years today, declining 4.2 percent to $21.85 at 11:39 a.m. in New York. Autonomy rose 0.2 percent to 2,523 pence in London.

Lynch refuted comments by Oracle Corp. (ORCL) CEO Larry Ellison this week, who had said Autonomy had been “shopped” to Oracle. Autonomy’s management never offered the company to Oracle, preferring the fact that Hewlett-Packard “doesn’t have a legacy position it has to protect,” he said.

Ellison, speaking on an analyst call this week, showed he “was out of touch with what is the real problem,” Lynch said. Ellison “confused the ability to store data” with understanding and processing it, he said.

On the analyst call, Ellison, who called the Autonomy purchase price “absurdly high,” said he didn’t want to “have two separate databases, kind of an Autonomy-like unstructured database and an Oracle structured database.”

To contact the reporter on this story: Jonathan Browning in London jbrowning9@bloomberg.net.

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net

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