The British founder of Autonomy (LSE: AU.L - news) , Mike Lynch, has claimed that Hewlett-Packard executives worked against his business and that the American giant is riven with “internecine wars” which damage its ability to operate.
In comments which will be highly worrying for investors, Mr Lynch said that working for HP was like being on a plane when the engines were already on fire.
When Autonomy was sold to HP for $11.1bn (£7bn) last year, the former Cambridge (BSE: CTE.BO - news) postgraduate had hoped to transform the PC-focused business into one based around software. However, joining HP was “like boarding a plane, realising the engine is on fire and then going up to the cockpit only to find that the pilots are having a fight”, he said.
Unnamed Autonomy executives have previously said HP’s internal red tape was so painful it felt like “being waterboarded”. Mr Lynch’s attack marks the first detailed public account.
Different divisions were constantly warring over the credit for bundled deals, he said, while some HP sales staff would promote Autonomy’s rivals over the Cambridge-based company’s software.
“You could only get commission if you sold an Autonomy competitor, but not if you sold Autonomy. Sales people are coin-operated, so you can imagine the results,” Mr Lynch said.
Internal warring among mid-ranking executives was fuelled by a stand-off between those in HP’s upper ranks, sources have claimed.
One source who previously worked for HP said that Bill Veghte, HP’s former software chief, who has since been named chief operating officer, had his “nose put out of joint” by Mr Lynch’s arrival. Mr Veghte expected to control the mammoth software company HP had just bought, but Mr Lynch believed he was in charge of Mr Veghte, the source said.
HP stunned investors last Tuesday when it accused Autonomy, which specialises in searching “unstructured” data such as voicemails, videos and texts, of using suspect accounting methods to wilfully misrepresent its business. It made the allegations as it wrote down the value of HP by $8.8bn, including $5.8bn on the value of Autonomy’s business.
However, Mr Lynch has strongly rejected any suggestion of wrongdoing and questioned how HP could justify the $5.8bn write-down, even if it were right about the alleged improprieties.
He claimed HP deliberately “kitchen-sinked” Autonomy by loading it with responsibility for several weaker businesses the US company had acquired.
“They’ve kitchen-sinked it. They’re desperately trying to put everything into this now, because it’s [already become] a disaster, so that they set themselves for an easier time going forward,” he said. At least one of the businesses folded into Autonomy was “a real negative-growth, low-margin dog of a business [which] brought in a lot of bureaucracy,” he added.
Sources claim that Autonomy as it stands today is between 30pc and 50pc bigger than the business HP bought last August, because of the other, weaker companies that have been put in with it. As a result, it is impossible to draw conclusions about its rate of decline since the sale.
However, Mr Lynch has been clear that Autonomy has been severely damaged by mismanagement.
“In a software business, if you lose your talent, you’re in trouble sales have fallen off a cliff,” he said.
HP declined to comment beyond its initial claims.