|By Maureen O'Gara||
|December 7, 2012 02:47 PM EST||
Before former HP CEO Leo Apotheker, who had no obvious qualifications to run HP but was hungry to transform it, went after Autonomy, he tried to buy Comverse Technology, Tibco and Amdocs despite the fact that most of HP's acquisitions have come to grief.
According to a Reuters source, HP backed off Comverse because it wasn't current with its published accounts and was previously involved in an options accounting scandal, which almost sounds laughable considering the mess HP claims it subsequently got into.
HP supposedly couldn't agree on a price with Tibco, and Amdocs snubbed it, saying the timing wasn't right.
And that's how Apotheker and former HP chief strategy officer Shane Robison, also credited with being the architect of HP's troubled EDS acquisition, came to have lunch with Autonomy founder Mike Lynch in Deauville on the Normandy coast in July of 2011.
They didn't agreed on a price - that took a few more weeks and the fine hand of Frank Quattrone's Qatalyst Partners - but when they got up they shook hands on what would become an $11.1 billion deal, Reuters said after talking to nearly a dozen people directly connected with the deal or the current accounting investigation.
It reckons Apotheker, who told the board "we have to do something," was frustrated and HP was "so desperate to plot a new course that it may have been far too accepting of Autonomy's published and audited accounts."
HP chairman Ray Lane encouraged the deal, but pushed the final decision off onto Apotheker and Robison, who pitched the deal internally and was reportedly instrumental in getting it finalized.
Ahead of the acquisition a due diligence team of hundreds of people, including HP staffers and external accountants, lawyers and bankers, went over Autonomy's books, examined its contracts and interviewed Autonomy's top executives. The process was reportedly seen as being pretty straightforward since Autonomy had filed its accounts publicly and they had been audited.
At the same time, HP reportedly quizzed Lynch and Autonomy CFO Sushovan Hussain about reports going back to at least 2009 that their accounting was dicey. Apparently they explained such rumors away.
Still famed short seller Jim Chanos had identified Autonomy as a shorting opportunity because its reported margins of around 50% didn't seem to translate into cash flow and its reported double-digit growth in software license revenue seemed odd when rivals were experiencing shrinking sales.
HP CFO Cathie Lesjak was apparently the only person to question HP's ability to pay all that money for Autonomy and wonder if the acquisition could actually be integrated.
After the deal went through, Lynch, who's got quite an ego, reportedly had a problem accepting his subordinate position and tried to keep HP and its red tape at bay.
Meg had had enough by May and fired him. He came back in June to talk about his severance only to be met with questions about Autonomy's accounting from HP house counsel John Schultz. Lynch reportedly said he either couldn't remember the specifics or that Deloitte, its auditor, signed off on various items, claims that are said to be "far-fetched" given Lynch's hold over the company.
Lynch's spokeswoman claimed that the allegations HP made last week "were not put to him in June."
HP last week threatened legal action against Autonomy managers without naming names
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