HP's blockbuster $5.1 billion legal battle against Autonomy's former CEO Mike Lynch kicks off Monday (2024)
After nearly eight years of acrimony, HP and a founder of the software company Autonomy on Monday are finally heading for their $5.1 billion legal showdown.
In a court battle expected to last as long as nine months and include explosive testimony from key players who have said little or nothing publicly about the case, HP's 2011 $11 billion acquisition of Mike Lynch's enterprise software business Autonomy will undergo a forensic examination.
HP has accused Lynch and Sushovan Hussain, the former Autonomy chief financial officer, of fraud and overstating the company's value. Lynch and Sushovan deny the claims, with Lynch countersuing for $150 million.
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The original Silicon Valley company, HP was a giant of enterprise and computing software. But tech started to change, and by 2011 software was "eating the world," as the venture capitalist Marc Andreessen put it at the time.
Leo Apotheker, an executive from the German software maker SAP, was appointed to run HP in late 2010, and the Autonomy acquisition was the centerpiece of his strategy to turn HP into a software giant. It didn't pan out, and Apotheker was fired even as the deal closed.
Meg Whitman, the former eBay CEO, took over the top job in late 2011. A year later, HP's stock hovered at about $15 and the firm wrote off $8.8 billion worth of the Autonomy acquisition.
HP alleges that Lynch and Hussain conspired to cook Autonomy's books, resulting in HP overpaying for the firm by $5 billion. It claims the pair were "engaged in fraudulent activities while executives at Autonomy" and were responsible for "serious accounting improprieties, disclosure failures, and outright misrepresentations."
The US on Friday added new criminal charges to its indictment, one of which carries a maximum prison term of 25 years. Lynch did not immediately respond to the new charges, but the timing will only intensify the pressure Monday.
Autonomy
The US has also already found Hussain guilty of fraud, convicting him on 16 counts of wire and securities fraud. Hussain's sentencing has been postponed, and his bail conditions prevent him from leaving the US. Though it's a separate criminal trial, the guilty verdict could bolster HP's case as it heads to court.
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According to court filings from HP seen by Business Insider, Hussain intends to participate in the London trial. It isn't clear whether he may participate via video link. HP has argued that Hussain should give evidence earlier than planned, in case his sentence, when it comes, results in his imprisonment.
Another complication has been Christopher "Stouffer" Egan, the former CEO of Autonomy's US operations. Egan entered into an agreement with US prosecutors in 2017 that saw him become a cooperating witness and admitting to some wrongdoing.
Egan was to be HP's star witness in the London trial, but, The Register reported, he was not keen to give evidence after his US legal ordeal.
Business Insider now understands, however, that Egan could give evidence at the London trial. Lynch and other key personalities from HP's history are also expected to be called to give evidence. That includes Apotheker, the former HP CEO who oversaw the deal, and his successor Whitman.
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"HPE does not wish to comment on an ongoing legal matter at this time," a spokesman for HP said.
A spokesman for Lynch said: "Mike Lynch is pleased to finally have the opportunity to respond in court to HP's accusations. There was no fraud at Autonomy. Rather, this is a case that distills down to a dispute over differences between UK and US accounting systems and will focus on the appropriate exercise of business judgments made in a particular context and time with the full knowledge and approval of numerous financial and technical experts and advisers.
"The real story is that HP, after a history of failed acquisitions, botched the purchase of Autonomy and destroyed the company, seeking to blame others. Mike will not be a scapegoat for their failures."
Following one of the longest civil trials in English legal history, HP in 2022 substantially won its case, though a High Court judge said any damages would be significantly less than the $5 billion HP had claimed. HP's lawyers argued on Monday that its losses resulting from the fraud entitle it to about $4 billion.
At issue were Autonomy's sales of hardware and its sales of software licenses to value-added resellers rather than to end customers. January 2022: The UK's High Court rules on the HP civil suit, finding that Mike Lynch had fraudulently inflated Autonomy's value by misleading HP about its performance.
On 3 October 2011 HP closed the deal, announcing that it had acquired around 87.3% of the shares for around $10.2 billion, and valuing the company at around $11.7 billion in total. 10 January 2012: Legal entity Autonomy Corporation PLC was converted into private company Autonomy Corporation Limited.
Lynch, who was extradited to the US last year, is charged with 14 counts of wire fraud, one count of securities fraud and one count of conspiracy to commit wire fraud. The most serious charge carries a maximum 25-year prison term if he's convicted.
Autonomy was a UK-based pioneer of business data analysis using machine learning and what the PhD-holding CEO called “adaptive pattern recognition”. The innovative technology came to the attention of US-based tech services giant Hewlett-Packard (as was), which acquired the company for £7.1bn in 2011.
After over seven years of legal battles, a group of former HP employees who claim the venerable firm discriminated against older staff when culling jobs has won a $18 million settlement.
Warren Buffett's Berkshire Hathaway has pared its HP holdings by 57% since mid-September, slashing its ownership of the PC maker from over 12% to about 5%, and the value of its position from about $5 billion at its peak to around $1.6 billion today.
Warren Buffett's position in HP is currently worth $636 Million. That's 0.19% of their equity portfolio (26th largest holding). The investor owns 2.35% of the outstanding HP stock. The first HP trade was made in Q1 2022.
Still, we can make an educated guess about why Buffett's firm would own a stake in HP stock. First of all, Buffett appreciated a good value. HP looks reasonably valued, with a GAAP-measured trailing 12-month price-to-earnings ratio of 9.1x. That's much lower than the sector media P/E ratio of 26.85x.
Michael Lynch, FRHistS, FRSE, FSA Scot (born 15 June 1946) is a retired Scottish historian and a leading expert in the history of the Scottish Reformation and pre-modern urbanisation in the Scottish kingdom.
This stance was in line with that of his RMT union which encouraged its membership to vote for Brexit, providing several reasons including protection of workers rights.
A native of Roseville, Calif., Lynch returns West and will coach Nevada's running backs after spending the previous eight seasons (2016-23) at Syracuse, where he oversaw the same unit since 2018.
Finally, autonomy has been criticized as being a bad ideal, for promoting a pernicious model of human individuality that overlooks the importance of social relationships and dependency.
But HP uncovered evidence that Autonomy had been cooking the books to inflate its value after the takeover was completed, prompting Whitman to write off nearly $9 billion of the acquisition price. It would also spur accusations of criminal conduct, leading to the indictment of Lynch and Chamberlain in 2018.
HP Autonomy, is a global leader in software that processes human information, or unstructured data, including social media, email, video, audio, text and web pages, etc.
Hewlett-Packard lost $4bn over Autonomy acquisition, London court told. Hewlett-Packard lost more than $4bn (£3.2bn) over its acquisition of British software firm Autonomy because of an elaborate fraud masterminded by its co-founder Mike Lynch to inflate the company's value, its lawyers told a London court on Monday.
But HP uncovered evidence that Autonomy had been cooking the books to inflate its value after the takeover was completed, prompting Whitman to write off nearly $9 billion of the acquisition price. It would also spur accusations of criminal conduct, leading to the indictment of Lynch and Chamberlain in 2018.
Finally, autonomy has been criticized as being a bad ideal, for promoting a pernicious model of human individuality that overlooks the importance of social relationships and dependency.
The 7510 was HP's only attempt at the film recorder market. HP had been highly successful in color hardcopy with its pen plotters. HP hoped to gain entry into the market by introducing a high-resolution vector-based (HP-GL) film recorder. The 7510 failed because it was too expensive relative to the competition.
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