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HP Autonomy Case Explores Accounting for British Reseller Deal

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http://www.thevarguy.com – Hewlett-Packard‘s (NYSE: HPQ) investigation into Autonomy accounting includes a $6.4 million deal with Tikit Group PLC, a British supplier of of accounting software, according to The Wall Street Journal. Autonomy recognized the total 2010 deal as up-front revenue but Tikit paid Autonomy only as it incrementally sold the software to customers, the Journal reported. So what’s the upshot here? Basically, HP seems to be alleging that Autonomy had a habit of realizing revenue up-front even if a reseller or customer paid for the software over a series of months or years. Resellers such (IT news)

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Submitted by lodage on 11/27/2012

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The accounting feud between Hewlett-Packard (NYSE: HPQ) and former Autonomy executives threatens to undermine HP Autonomy’s future business and channel partner engagements. So how can HP march forward with Autonomy, even as the hardware giant explores potential legal action against former Autonomy executives?

Hewlett-Packard (NYSE: HPQ) alleges Autonomy used misleading accounting amid the HP-Autonomy M&A negotiations in mid-2011.

Autonomy founder and former CEO Mike Lynch has pushed back hard against Hewlett-Packard’s (NYSE: HPQ) claim that Autonomy used misleading accounting to boost its valuation, according to a published report. Lynch’s point is that $200 million worth of revenue fudges, even if it did occur, could not have triggered a $5 billion slide in Autonomy’s value.

Autonomy, the software business Hewlett-Packard (NYSE: HPQ) acquired last year, “still requires a great deal of attention, and we’ve been aggressively working on that business,” according to CEO Meg Whitman. Those statements, delivered during an HP Q3 2012 earnings call this evening, show that HP’s most prized software portfolio still isn’t firing on all cylinders.

Amid HP layoffs totaling 27,000 employees, there’s troubling news in Hewlett-Packard’s Autonomy software business. Indeed, “Autonomy saw a significant decline in license revenue” during Q2, prompting HP Chief Strategy Officer Bill Veghte (pictured) to take over that software business. Autonomy founder Mike Lynch will exit the company after a transition period.

HP has confirmed in its annual report that the U.S. Department of Justice has launched an investigation stemming from the Palo Alto company’s allegations that it uncovered widespread accounting fraud at Autonomy, the British software maker it acquired for $11 billion last year. HP confirmed the investigation in its Thursday  filing with the U.S.

Hewlett-Packard (NYSE: HPQ) named Robert Youngjohns, an IT veteran with 30-plus years of experience sporting some big names in his background including Microsoft (NASDAQ: MSFT), Sun Microsystems and IBM (NYSE: IBM), as senior vice president and general manager of its troubled Autonomy and Information Management business unit. Youngjohns, who also had a 30-month stint as Callidus Software president

Hewlett-Packard's purchase of Autonomy is under investigation by the U.K. Serious Fraud Office, the company said in a regulatory filing ahead of its annual meeting where there are expected to be challenges to the re-election of Chairman Ray Lane and two board members.

HP’s earnings for Q4 ending on October 31 show a gloomy quarter. Revenue is down 7 percent to $30 billion compared to Q4 2011. But the real problem comes from GAAP net income, with a net loss of $6.9 billion, or $3.49 per share, compared to a slim net profit of $0.2 billion for Q4 2011. Non-GAAP diluted earnings per share is at $1.16 compared to $1.17 year-over-year.