So HP finally admitted what a bunch of us were saying back in the fall of 2011: they way, way overpaid for Autonomy.
Quick recap if you weren't reading this blog back then (and if you weren't, where were you, this blog has been going since November of last year). HP bought a British enterprise software company called Autonomy in 2011 for $11.1 billion. I remember writing something skeptical about that price tag at the time, mostly because Autonomy's "meaning-based computing" pitch always sounded like something you'd hear from a guy at a conference open bar who's had two drinks too many. Search and analytics software, sure, useful stuff, but $11.1 billion useful? I didn't buy it then and I still don't.
Well, last week HP announced an $8.8 billion writedown on the deal, and about $5 billion of that they're blaming directly on what they're calling "serious accounting improprieties" at Autonomy before the acquisition closed. Basically HP is saying Autonomy's numbers were cooked, that revenue was inflated, that the company wasn't worth anywhere near what HP paid for it, and that this was deliberate. Mike Lynch, who founded Autonomy and ran it until HP pushed him out, is denying all of it and saying HP is just trying to cover for a bad decision and worse integration. HP's stock dropped something like 12% the day this came out, which for a company HP's size is not a small thing to lose in one afternoon.
I don't know who's lying here, honestly, and I'm not going to pretend I have inside knowledge of Autonomy's books. Could be fraud. Could also be that HP's board did approximately zero real diligence on a deal this size because they were in a panic to pivot away from being a hardware company, and now they need someone else to blame. Both of those things can be true at the same time, and my money is on both of those things being true at the same time.
What actually bugs me about this whole saga is a smaller thing, and it's this: HP's leadership during the original acquisition included Leo Apotheker, who got fired basically right after the deal closed, and Meg Whitman inherited this mess when she took over as CEO. So the people now cleaning it up aren't the people who signed off on it. That's not unusual in corporate America, I know, but it means nobody who actually made the call is going to face any real consequence for it. The shareholders eat the loss, some junior finance people at Autonomy probably get thrown under the bus, and the executives who approved an $11.1 billion purchase with apparently minimal scrutiny walk away fine. I complain about this same pattern every time one of these acquisitions goes sideways and it never stops annoying me.
Anyway. Meanwhile, completely unrelated, I spent about twenty minutes on Cyber Monday trying to get a Nexus 4 restocked on the Play Store and watched it sell out again in what felt like nine minutes flat. I don't even need a new phone. My Galaxy Nexus is fine. But there's something about a product being that hard to get that makes you want it more, which is exactly the psychology Google is either accidentally exploiting or very deliberately exploiting, and I genuinely can't tell which. Given how competent the rest of their operation is, I lean toward deliberate. A $299 unlocked phone with LTE missing and it still sells out instantly every single restock is either the worst inventory planning I've ever seen or the smartest.
Cyber Monday itself was apparently a record this year too, comScore had desktop spending north of $1.4 billion for the day, and that's before you even count whatever people bought on their phones standing in line somewhere. I did zero of my holiday shopping online this weekend, for the record, because I was too busy refreshing a Google Play Store product page like an idiot.
Back to Autonomy for one second because I want to note this for whenever I look back at this post in a year: I'd bet real money there's a lawsuit here that drags on for a while, probably multiple countries involved given Autonomy was British, and I'd bet HP never gets anywhere close to that $8.8 billion back even if they win. Writedowns like this one basically never get fully clawed back. Feels bad, but that's usually how it goes when a giant company panics its way into an acquisition.