Autonomy ex-boss Lynch tells of poisonous life within HP in High Court showdown
Mike claims merger was sabotaged from Day One
Analysis Former Autonomy CEO Mike Lynch has stepped up his rhetoric against HP in his latest lawsuit against the firm, having characterized HP as a snake pit of backbiting and internecine squabbling where execs "generally fought amongst themselves like cats in a sack."
In papers [PDF] filed with the UK High Court on Thursday, Lynch once again pointed the finger at HP's own mismanagement of its 2011 acquisition of Autonomy as the reason for the deal's breakdown, which ultimately cost HP $8.8bn in impairment and other charges.
Yet rather than take responsibility for the boondoggle, Lynch claims HP has instead chosen to deflect blame by accusing Lynch and other ex-Autonomy execs of accounting irregularities, which Lynch says amounts to a "public smear campaign" against him. He's seeking more than $150m (£100m) in damages.
Lynch's claim against HP pulls no punches. Among other assertions, he paints HP as a company rife with political infighting, where other HP divisions would actively sabotage Autonomy after the merger and were even incentivized to do so by the HP's policies.
HP was 'incompetent'
"While in the hands of a competent acquirer, the synergies on which HP based its valuation of Autonomy may have been achievable," Lynch's filing states, "HP, which had been beset by a series of disruptive boardroom scandals, management shake-ups, and failed mergers, was not competent to incorporate the business of Autonomy into its own."
As he has claimed in the past, Lynch's filing said the real problems with the merger began when HP's board chose to fire the company's then-CEO Léo Apotheker and pushed out its former CTO and chief strategy officer, Shane Robison.
"As a result, HP and Autonomy lost the two key individuals who had conceived the strategy to acquire Autonomy, and who understood and were committed to the planned integration process designed to achieve the synergies on which the acquisition was predicated," Lynch's claim states.
Left without its top advocates within HP, Autonomy was forced to fend for itself against a tide of office politics and misguided policies that seemed to undercut the merger's chances of success at every turn, Lynch has claimed.
Autonomy 'viewed negatively' within HP
The suit asserts that many parties within HP "viewed Autonomy negatively," including HP CFO Cathie Lesjak, who had never liked how the merger looked on paper; HP's then-software boss Bill Veghte, who hadn't played a role in the acquisition and reportedly felt snubbed; and the bosses of HP's hardware division, who viewed Apotheker's software-centric strategy as a threat.
Even where there was no direct animosity at play, other HP divisions were given perverse incentives to undermine Autonomy, Lynch claimed.
"In Autonomy's case, other HP business units did not receive 'quota credit' or commissions for sales of Autonomy products," the suit reads. "As a result, HP business units were incentivized to market and sell competing third-party products rather than Autonomy software."
When HP did sell Autonomy to its customers, the suit alleges, it often did so at deep discounts, without Autonomy's knowledge. In other cases, HP sales teams would jack up Autonomy's price tag to boost their own bottom line, which had the result of making competing software look like a better bargain.
Similarly, sales of HP hardware to Autonomy didn't count toward the hardware division's sales quota. Thus, Lynch's suit alleges, the hardware group refused to certify Autonomy on its machines. Dealings with the hardware group were so fraught, the suit adds, that even obtaining HP hardware on which to demo Autonomy proved impossible, and the demo machines were ultimately sourced from competitors, such as Oracle.
Integrating Autonomy within HP proved difficult even at the staffing level, Lynch's suit claims. When Autonomy requested employees be reassigned to it from other HP divisions, HP allegedly made those assignments from the bottom of the barrel, including employees on long-term sick leave or who "lived in unsuitable locations."
At the same time, Lynch alleges, Autonomy employees were treated as outsiders even though Autonomy was a unit of HP. Autonomy employees were physically barred from entering HP facilities, and Autonomy was forced to go through the tedious process of becoming certified as a "partner" before it could work with other HP divisions, exactly as it would if it was a third-party company.
Autonomy was even excluded from certain of HP's marketing events, Lynch's lawsuit claims, and was denied access to critical marketing information, even as it was forbidden from executing an independent marketing strategy of its own.
Lynch claims he raised all of these issues with CEO Meg Whitman and that on several occasions she said she would take steps to address them, but never did.
In short, Lynch's suit describes an environment in which Autonomy was not only not given the tools and resources it needed to thrive within HP, but was more or less smothered by the relationship. All of HP's statements about Autonomy and himself since the collapse of the merger – eleven of which he specifically refutes in his filing – are just a smokescreen, he has alleged.
Lynch is suing HP for breaches of duty that resulted in "significant reputational damage," allegedly leaving him unable to pursue other business opportunities.
Cool story, bro
HP, naturally, says it's all bollocks, and that it's pressing ahead with the $5bn lawsuit it has filed against Lynch and former Autonomy CFO Shushovan Hussain.
In a statement to The Reg on Thursday, the company said: "Mike Lynch's lawsuit is a laughable and desperate attempt to divert attention from the $5 billion lawsuit HP has filed and the ongoing criminal investigation. HP anxiously looks forward to the day Lynch and Hussain will be forced to answer for their actions in court." ®
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