Mad King Leo pulled the wool over HP shareholders' eyes, ex-CEO Whitman tells court

Assured exec stumbles when probed over sales screwups

Apotheker
Thrown 'under a bus' ... Former HP CEO Leo Apotheker

Autonomy Trial Fresh from regretfully admitting she wanted to throw HP’s former CEO “under the bus,” Meg Whitman today told London's High Court Leo Apotheker said to shareholders he wouldn’t do a “transformative” acquisition – before doing that exact thing and buying Autonomy.

Responding to more questions this afternoon from barrister Robert Miles QC, who acts for former Autonomy chief exec Mike Lynch, Whitman told the court that after taking over HP, she discovered Apotheker had been telling stockholders one thing while doing another.

“The feedback we got from investors,” said the American exec from the witness box, “was Leo had never mentioned [the buyout] to them, in fact he said he would not do a large, transformative acquisition. They were shocked.”

Much of Whitman’s evidence to the High Court today was in response to Mike Lynch’s counterclaim against HPE. Lynch argues Autonomy failed because HP mismanaged it, post-buyout, before deciding to scapegoat him and CFO Sushovan Hussain by wrongly claiming the two committed fraud. Whitman has thus been grilled by Lynch’s barrister about things that happened after August 2011, when the Autonomy deal was announced.

Verbal jousting

Miles and Whitman continued their power struggle during his questioning of the American billionaire. While Whitman was canny enough to deflect questions about whether HP withheld top quality sales talent from Autonomy – by referring to “an email in the bundle” from Lynch to HPE managers thanking them for turning that around – the barrister and the former CEO soon found themselves in a stalemate.

Miles asked about Whitman’s strategy once she took over as HP’s CEO from Apotheker: “Were you, or were you not in the business of transforming [HP] into a software business?”

Answering him, Meg launched into one of the explanatory mini-speeches that characterised her courtroom answers during the day. Her refusal to be coaxed into the routine of giving short answers to rapid-fire questions – a routine that barristers use to throw knowledgeable witnesses off balance – was making it hard for Miles to trap her into an admission he could use to bolster Lynch’s case. So he asked again. And again. And again: “Why don’t you answer my question?”

Stepping carefully around the trap each time, and without turning a hair, Whitman replied: “There is context here you’re missing by asking me a yes-or-no question. And the context is entirely different in the fall of 2011 and the spring of 2012 than it was in, say, June of 2011. And I think that context is absolutely crucial.”

'Happy to throw Leo under the bus', Meg Whitman told HP after Autonomy buyout

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The irresistible force meeting the immovable object, Miles re-baited his hook and cast his line: “I don’t see that any of that context is necessary to answer my question. So your strategy was not to seek to transform HP into a software company?”

Cool as a cucumber, Whitman refused the bait: “Then I think we’re just going to disagree.” She had answered throughout that she was focused on both the emerging software business and in shoring up HP’s existing hardware business – as she put it, repairing the “damage” caused by Apotheker to the latter.

Whitman followed that up by hitting Miles’ next question (“Do you recall referring to Autonomy as an ‘unwanted stepchild’ during meetings?”) for six, suggesting that Lynch himself had called Autonomy HP’s “stepchild” and stating: “I never said ‘unwanted stepchild’… we [HP] really wanted Autonomy to succeed.”

Easier to sell Commvault than Autonomy

The court was shown an email from a senior HP salesman, sent eight months after the Autonomy acquisition. In it he claimed there was “no financial incentive to drive forward Autonomy deals in the pipeline,” instead of reselling Commvault software on HP hardware. With Commvault competing against Autonomy, this allegation potentially bolstered Lynch’s case that HP bungled its integration of the British software company into its operations.

For all her earlier verbal dancing around Miles, Whitman couldn’t quite dodge this one. “I’m certain this is an example of something that needed to be fixed,” she conceded.

Lynch’s barrister leaped on this. “No incentive to promote Autonomy product… a shocking failure of management, no?”

“I don’t agree this was a failure of management,” replied Whitman, who fell back on insisting that HP salespeople were still generating leads for Autonomy. As CEO, she said, that was the key performance indicators she was most interested in.

Mr Justice Hildyard, the judge, weighed in. “Do you think it was right or wrong that – that very, very few account managers were prepared to invest their time in pursuing these lack of incentives? It looks a systemic issue rather than an individual complaint issue.”

Whitman, still a little shaky, tried to take it in her stride by pointing out that while salesmen “may not be compensated” for selling Autonomy software at the time of the email, they had “an uber incentive” to get top-line products – implying Autonomy fell within that definition – “in front of the customer.”

Unfortunately for Miles, she went on to say that the sales problems were not “the reason Autonomy missed [its] Q1 [revenue target]… this was a much smaller, less profitable business than we were led to believe...”

“Nobody’s asked you about that,” snarled Lynch’s barrister, prompting subdued, mocking laughter from the ranks of HPE lawyers sitting on the other side of the courtroom.

“With all due respect,” Whitman urbanely replied, “I was responding to the judge.”

Meg Whitman continues giving evidence to the High Court tomorrow. The Register will, once again, be in Court 15 of the Rolls Building to report from the hearing. ®

Bootnote

During the lunchtime break, Whitman and Lynch greeted each other outside the courtroom, shook hands, and made polite small talk about their families and their startup investments.

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