Dear Shareholder,
As you are aware, Hewlett Packard remains locked in dispute with a group of its own shareholders and with the former management team of Autonomy over its purchase of Autonomy. I write to you today to raise serious concerns about the way HP has conducted this affair, and to put forward a number of questions that HP management should answer. The evidence shows that HP is not just smearing us, but also misleading you, its shareholders. I ask you to help put things right.
On November 20th 2012, HP made a series of serious and damaging allegations about the management team of Autonomy. It couched alleged misdeeds in general, rather than specific terms. We emphatically denied all suggestions of wrongdoing.
In the 16 months that have followed, HP has not provided information or evidence to the Autonomy team to substantiate any allegation. Instead, it has selectively leaked documents and information to the international media, frequently using material taken out of context to create false impressions and smear our reputations.
Since the last HP shareholder meeting, reports in the media have demonstrated that HP has documents in its possession that show beyond doubt that statements it made on November 20th were misleading. Further, these reports have shown that senior people at HP knew these statements were misleading long before they were made.
On the basis of recent reports, there are a number of material questions HP needs to answer:
HP has repeatedly declined to show the Autonomy management team the allegations or evidence against them, on the grounds that the issue is “with the regulators”. Yet it has engaged in selective disclosure of these documents and emails to the media. How does HP justify that?
HP claimed Autonomy’s auditors had “missed” certain items and been misled. All the evidence in the public domain shows Autonomy was fully open and transparent with its auditors (Financial Times, 17th February 2014). If HP has any alternative evidence, why does it not reveal it?
HP claims to have been in the dark until a “whistleblower” stepped forward. Articles in the Financial Times have established that the most senior managers of HP fully understood Autonomy’s accounting methods from when they took over the company in October 2011. Does HP deny that senior managers had prior knowledge?
Does HP deny that it knew how Autonomy recognised hardware sales and that these sales were reported in full by its auditors, and that HP continued the same sales of Dell hardware after it took over Autonomy?
Does HP deny that it was aware of how Autonomy recognised reseller transactions? And that it sought to use the differences between IFRS and US GAAP applicable to reseller sales to its own advantage after the acquisition?
HP’s independent advisers carried out several valuation reports of Autonomy after the acquisition, which explicitly included Autonomy’s hardware sales and confirmed the value of the company at c$11Bn? Does HP management deny this? Will they disclose these reports to shareholders?
Why did HP’s management fail to disclose these valuations at the time? Why do they not release them now?
Why won’t HP release its calculation for the write down?
HP says it “eventually learned that a portion of Autonomy’s revenue were related to hardware sales”. Yet documents show that HP knew about Autonomy’s hardware sales from October 2011. Does HP still maintain it knew nothing before June 2012?
I urge you to continue to seek answers to these questions. Meg Whitman has made incendiary and defamatory accusations on behalf of her company. She should now present the detailed evidence that justifies those allegations and a $5.5bn write-down in the value of your company.
You and I have a shared ambition to see this situation resolved as soon as possible. I hope your questions today can bring us nearer to that resolution.
Yours respectfully,
Mike Lynch
