|By Maureen O'Gara||
|November 21, 2012 08:00 AM EST||
HP Tuesday morning charged its Autonomy acquisition with massive fraud.
It claims it was the victim of accounting improprieties and disclosure failures made by the publicly held British company prior to its acquisition last year by HP and downright misrepresentations made to HP in connection with the ultimately $12 billion and something acquisition.
As a result HP will write off most of the inflated purchase price and take an $8.8 billion non-cash charge, worse than the $8 billion goodwill charge HP took this summer on its EDS acquisition.
HP has turned the case over to the SEC and the UK's Serious Fraud Office for civil and criminal prosecution. HP CEO Meg Whitman said the company would also press its own civil and criminal charges against certain unnamed individuals seeking redress for its benighted stockholders. She expects it all to take years.
HP said that after Autonomy founder Mike Lynch was fired earlier this year because the unit was significantly underperforming an unidentified senior member of Autonomy's staff blew the whistle on the company's inflated margins and phony growth rates, and the slight-of-hand that got it so overvalued.
A seven-month internal investigation ensued, leading HP to conclude that Autonomy was overvalued all along.
That investigation is still going on but it found that Autonomy misstated its financial performance, including its revenue, core growth rate and gross margins, and misrepresented its business mix.
Margins were inflated from 28% to 45% by passing low-end hardware sales off as IDOL software license sales; VAR license fees were paraded as revenue when no end customer existed at the time of the sale; VARs paid high up-front fees in exchange lower future fees; and revenues were pulled forward. The idea was to suggest better growth than existed.
"This appears to have been a willful effort on behalf of certain former Autonomy employees to inflate the underlying financial metrics of the company in order to mislead investors and potential buyers," HP said in a statement. "These misrepresentations and lack of disclosure severely impacted HP management's ability to fairly value Autonomy at the time of the deal."
Whitman said HP's board, which voted to make the Autonomy acquisition, "feels terribly" about all this but depended on financials audited by Deloitte and re-audited by KPMG before doing the deal. "You have to depend on audited results," she said, although neither accounting firm tumbled to what had been going on.
Apparently PricewaterhouseCoopers' forensics team finally caught it after in was brought in in May.
According to Meg, "blogs" at the time of the acquisition questioned Autonomy's revenue recognition and what it called a sale but Autonomy's management was allowed to run the reports to ground with the pair of original auditors and claimed there was nothing to them.
After listening to the HP conference call Tuesday morning Lynch "flatly rejected" HP's allegations, "which are false."
Meg blamed her predecessor Leo Apotheker and former head of R&D and strategy Shane Robison. Due diligence at HP no longer reports to M&A, as it was when Apotheker was therem but it's kind of late in the day to give it to the CFO.
Robison has yet to be heard from, but Apotheker, who orchestrated the Autonomy acquisition, issued a statement to the Wall Street Journal saying he was "stunned and disappointed" to learn of thr alleged accounting improprieties and defended HP's due diligence as "meticulous and thorough."
He pointed out that since Autonomy was a public company "much of the process relied on public financial reports - accounting statements approved, filed and backed by Autonomy's leadership, board and auditors" and offered to make himself available "to assist HP and the appropriate authorities to get to the bottom of this."
Autonomy's shenanigans account for $5.3 billion of the charge; the rest stems from HP's declining stock price, which has been in free fall since Apotheker said it was buying Autonomy and disposing of HP's PC unit in order to turn HP into a software company. The company quickly disposed on Mr. Apotheker, replacing him with Whitman, who went through with the Autonomy acquisition and decided to keep PCs. Most outsiders couldn't understand the Autonomy buy.
Although Autonomy's long-term financial performance is expected to be impacted by the mess, Whitman says the company is "100% committed to Autonomy" and expects it to play a "significant role" in HP's recovery.
The disclosure was part of Hewlett-Packard's quarterly report. It lost $6.85 billion, or $3.49 a share, compared to a profit of $239 million, or 12 cents a share, this time last year. Revenue was $29.96 billion, down 4%. Adjusted EPS was $1.16. Analysts were expecting adjusted earnings of $1.14 a share, on revenue of $30.44 billion.
HP said revenue from its PC unit was down 14% since commercial revenues dropped 13% and consumer revenue plunged 16%. Revenue in the enterprise, servers, storage and networking segment dropped about 9%. Printing sales fell about 5%. Services fell about 6%. Software revenue was up 14%.
HP's battered shares were down 12.48% to $11.64 in pre-market trades on the news, dropped further as the market woke up and then recouped slightly to $11.87, down 10.68%. Its stock has lost over 48% this year and the company had $21.8 billion in long-term debt at the end of its fiscal fourth quarter
Discussions about cloud computing are evolving into discussions about enterprise IT in general. As enterprises increasingly migrate toward their own unique clouds, new issues such as the use of containers and microservices emerge to keep things interesting. In this Power Panel at 16th Cloud Expo, moderated by Conference Chair Roger Strukhoff, panelists addressed the state of cloud computing today, and what enterprise IT professionals need to know about how the latest topics and trends affect t...
Jul. 3, 2015 12:30 PM EDT Reads: 1,332
Explosive growth in connected devices. Enormous amounts of data for collection and analysis. Critical use of data for split-second decision making and actionable information. All three are factors in making the Internet of Things a reality. Yet, any one factor would have an IT organization pondering its infrastructure strategy. How should your organization enhance its IT framework to enable an Internet of Things implementation? In his session at @ThingsExpo, James Kirkland, Red Hat's Chief Arch...
Jul. 3, 2015 11:15 AM EDT Reads: 941
Containers have changed the mind of IT in DevOps. They enable developers to work with dev, test, stage and production environments identically. Containers provide the right abstraction for microservices and many cloud platforms have integrated them into deployment pipelines. DevOps and Containers together help companies to achieve their business goals faster and more effectively. In his session at DevOps Summit, Ruslan Synytsky, CEO and Co-founder of Jelastic, reviewed the current landscape of...
Jul. 3, 2015 11:15 AM EDT Reads: 2,366
Overgrown applications have given way to modular applications, driven by the need to break larger problems into smaller problems. Similarly large monolithic development processes have been forced to be broken into smaller agile development cycles. Looking at trends in software development, microservices architectures meet the same demands. Additional benefits of microservices architectures are compartmentalization and a limited impact of service failure versus a complete software malfunction. ...
Jul. 2, 2015 04:15 PM EDT Reads: 1,074
Manufacturing has widely adopted standardized and automated processes to create designs, build them, and maintain them through their life cycle. However, many modern manufacturing systems go beyond mechanized workflows to introduce empowered workers, flexible collaboration, and rapid iteration. Such behaviors also characterize open source software development and are at the heart of DevOps culture, processes, and tooling.
Jul. 2, 2015 02:15 PM EDT Reads: 961
SYS-CON Events announced today that JFrog, maker of Artifactory, the popular Binary Repository Manager, will exhibit at SYS-CON's @DevOpsSummit Silicon Valley, which will take place on November 3–5, 2015, at the Santa Clara Convention Center in Santa Clara, CA. Based in California, Israel and France, founded by longtime field-experts, JFrog, creator of Artifactory and Bintray, has provided the market with the first Binary Repository solution and a software distribution social platform.
Jul. 2, 2015 01:00 PM EDT Reads: 1,314
Conferences agendas. Event navigation. Specific tasks, like buying a house or getting a car loan. If you've installed an app for any of these things you've installed what's known as a "disposable mobile app" or DMA. Apps designed for a single use-case and with the expectation they'll be "thrown away" like brochures. Deleted until needed again. These apps are necessarily small, agile and highly volatile. Sometimes existing only for a short time - say to support an event like an election, the Wor...
Jul. 2, 2015 11:00 AM EDT Reads: 1,792
The cloud has transformed how we think about software quality. Instead of preventing failures, we must focus on automatic recovery from failure. In other words, resilience trumps traditional quality measures. Continuous delivery models further squeeze traditional notions of quality. Remember the venerable project management Iron Triangle? Among time, scope, and cost, you can only fix two or quality will suffer. Only in today's DevOps world, continuous testing, integration, and deployment upend...
Jul. 2, 2015 11:00 AM EDT Reads: 2,179
Sharding has become a popular means of achieving scalability in application architectures in which read/write data separation is not only possible, but desirable to achieve new heights of concurrency. The premise is that by splitting up read and write duties, it is possible to get better overall performance at the cost of a slight delay in consistency. That is, it takes a bit of time to replicate changes initiated by a "write" to the read-only master database. It's eventually consistent, and it'...
Jul. 2, 2015 10:15 AM EDT Reads: 1,785
The most often asked question post-DevOps introduction is: “How do I get started?” There’s plenty of information on why DevOps is valid and important, but many managers still struggle with simple basics for how to initiate a DevOps program in their business. They struggle with issues related to current organizational inertia, the lack of experience on Continuous Integration/Delivery, understanding where DevOps will affect revenue and budget, etc. In their session at DevOps Summit, JP Morgenthal...
Jul. 2, 2015 10:00 AM EDT Reads: 844
"Plutora provides release and testing environment capabilities to the enterprise," explained Dalibor Siroky, Director and Co-founder of Plutora, in this SYS-CON.tv interview at @DevOpsSummit, held June 9-11, 2015, at the Javits Center in New York City.
Jul. 2, 2015 10:00 AM EDT Reads: 1,171
Data center models are changing. A variety of technical trends and business demands are forcing that change, most of them centered on the explosive growth of applications. That means, in turn, that the requirements for application delivery are changing. Certainly application delivery needs to be agile, not waterfall. It needs to deliver services in hours, not weeks or months. It needs to be more cost efficient. And more than anything else, it needs to be really, dc infra axisreally, super focus...
Jul. 2, 2015 09:15 AM EDT Reads: 2,048
DevOps tends to focus on the relationship between Dev and Ops, putting an emphasis on the ops and application infrastructure. But that’s changing with microservices architectures. In her session at DevOps Summit, Lori MacVittie, Evangelist for F5 Networks, will focus on how microservices are changing the underlying architectures needed to scale, secure and deliver applications based on highly distributed (micro) services and why that means an expansion into “the network” for DevOps.
Jul. 2, 2015 07:45 AM EDT Reads: 2,670
Containers are changing the security landscape for software development and deployment. As with any security solutions, security approaches that work for developers, operations personnel and security professionals is a requirement. In his session at DevOps Summit, Kevin Gilpin, CTO and Co-Founder of Conjur, will discuss various security considerations for container-based infrastructure and related DevOps workflows.
Jul. 2, 2015 07:30 AM EDT Reads: 1,182
Summer is finally here and it’s time for a DevOps summer vacation. From San Francisco to New York City, our top summer conferences list is going to continuously deliver you to the summer destinations of your dreams. These DevOps parties are hitting all the hottest summer trends with Microservices, Agile, Continuous Delivery, DevSecOps, and even Continuous Testing. Move over Kanye. These are the top 5 Summer DevOps Conferences of 2015.
Jul. 1, 2015 01:00 PM EDT Reads: 1,159
Cloud Migration Management (CMM) refers to the best practices for planning and managing migration of IT systems from a legacy platform to a Cloud Provider through a combination professional services consulting and software tools. A Cloud migration project can be a relatively simple exercise, where applications are migrated ‘as is’, to gain benefits such as elastic capacity and utility pricing, but without making any changes to the application architecture, software development methods or busine...
Jul. 1, 2015 10:00 AM EDT Reads: 1,956
Many people recognize DevOps as an enormous benefit – faster application deployment, automated toolchains, support of more granular updates, better cooperation across groups. However, less appreciated is the journey enterprise IT groups need to make to achieve this outcome. The plain fact is that established IT processes reflect a very different set of goals: stability, infrequent change, hands-on administration, and alignment with ITIL. So how does an enterprise IT organization implement change...
Jun. 29, 2015 12:45 PM EDT Reads: 2,862
While DevOps most critically and famously fosters collaboration, communication, and integration through cultural change, culture is more of an output than an input. In order to actively drive cultural evolution, organizations must make substantial organizational and process changes, and adopt new technologies, to encourage a DevOps culture. Moderated by Andi Mann, panelists discussed how to balance these three pillars of DevOps, where to focus attention (and resources), where organizations migh...
Jun. 28, 2015 05:00 PM EDT Reads: 2,067
At DevOps Summit NY there’s been a whole lot of talk about not just DevOps, but containers, IoT, and microservices. Sessions focused not just on the cultural shift needed to grow at scale with a DevOps approach, but also made sure to include the network ”plumbing” needed to ensure success as applications decompose into the microservice architectures enabling rapid growth and support for the Internet of (Every)Things.
Jun. 28, 2015 01:00 PM EDT Reads: 1,942
Mashape is bringing real-time analytics to microservices with the release of Mashape Analytics. First built internally to analyze the performance of more than 13,000 APIs served by the mashape.com marketplace, this new tool provides developers with robust visibility into their APIs and how they function within microservices. A purpose-built, open analytics platform designed specifically for APIs and microservices architectures, Mashape Analytics also lets developers and DevOps teams understand w...
Jun. 27, 2015 11:00 AM EDT Reads: 1,975