Former Autonomy Corp. Chief Executive Officer Mike Lynch said the claim by Hewlett Packard Co. (HPQ) that more than $200 million in improperly recorded revenue led to a $5 billion writedown doesn’t make sense.
“After being ambushed by all this yesterday, I’ve had a chance to look at some of the things that they’re saying -- it just doesn’t add up,” Lynch said yesterday in an interview. “HP is looking for scapegoats, and I’m afraid I’m not going to be one of those.”
Hewlett-Packard said Nov. 20 that it was taking an $8.8 billion writedown, with more than $5 billion stemming from accounting irregularities at Autonomy, which it bought last year. More than $200 million of Autonomy’s revenue had been recorded improperly over a two-year period starting in 2009, according to Hewlett-Packard’s general counsel. The company said it has notified regulators in the U.K. and the U.S. and would consider civil litigation.
Lynch, who has denied allegations that his team mishandled the financial reports, said the $200 million couldn’t have led to a $5 billion decline in Autonomy’s value and distorted profit and sales. The 47-year-old, who left the combined company in May, said he has no plans to hire a lawyer and hasn’t been in contact with Hewlett-Packard beyond reading the Nov. 20 statement.
“The first thing is to find out what they’re saying. Let’s find out what they’re saying and who they’re talking about,” he said. “So far, they don’t actually define it.”
Lynch said that he relied on his financial team to handle earnings results and reporting and that the company referred deals to its accountant for review quarterly.
Autonomy’s former accountant, Deloitte LLC, said today that it didn’t find evidence of improper accounting methods or misrepresentations when it reviewed the company’s accounts for the year ended December 2010. The firm didn’t handle the financial reviews for Hewlett-Packard’s acquisition.
Hewlett-Packard Chief Executive Officer Meg Whitman said Nov. 20 that the company had relied on financial statements audited by Deloitte to make the decision to buy Autonomy for $10.3 billion last year.
Hewlett-Packard’s writedown follows the company’s August announcement that it would take a charge of $9.2 billion, largely related to its purchase of Electronic Data Systems Corp.
When companies make an acquisition, the difference between the value of the target’s hard assets and the purchase price is known as goodwill. That gets carried on the company’s balance sheet as an asset and is reviewed periodically by public companies.
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