Mike Lynch, the former CEO and co-founder of Autonomy, the software firm acquired by Hewlett-Packard Company (NYSE:HPQ) last year for $11.1 billion, denied the allegations that it had accounting irregularities in its books.
According to Lynch, the new owners of the Autonomy were to be blamed for the decline in the value of the software firm.
Hewlett-Packard Company (NYSE:HPQ) reported an $8.8 billion charge in its fourth quarter earnings report on Tuesday. According to the company, more than $5 billion of write-down is associated to its acquisition of Autonomy due to serious “accounting improprieties, misrepresentation, and disclosure failures” that was discovered after a whistle blower came forward.
In a phone interview with Reuters, Lynch said, he had not received any notification from Hewlett-Packard Company (NYSE:HPQ) or from the authorities regarding the allegation before the company announced it to the public. He is confident that he will be cleared from any wrongdoing.
Lynch said, "We are shocked. This is a big surprise. It's completely and utterly wrong, and we reject it completely. We have not heard anything from HP. They have not been in touch, and we don't know what they are on about. I fear that this is a bit of a distraction on the day when they produce their worse set of results in the 70-year history of the company."
He pointed out that it was impossible for Hewlett-Packard Company (NYSE:HPQ) to miss the accounting problems during its evaluation on the books of Autonomy before the acquisition, considering the size of the write-down. Lynch said, "Look at the size of the write-down. If you've done meticulous due diligence with 300 people, you can't get it that wrong."
Lynch further said, "There was a coup d'etat and you ended up with a lot of internal infighting - which there has been a long history of within HP - and Autonomy got caught in that, and it got buffeted to the point where it lost hundreds of its staff and ultimately its top management team. They've managed the assets since that point, and the results have gone down and down."
Moreover, Lynch said Autonomy was “poorly managed over the last year,” and he felt sad to see that so much value was destroyed. According to him, he needs to find out the evidence that led to the allegations of accounting problems.
Shaw Wu, analyst at Sternee Agee, commented that although HP’s write-down is non-cash, “it may call into question the credibility of its board of directors.”