"Ernst & Young, the auditor hired by HP, had not signed off Autonomy's restated accounts."
Which basically makes this a non-story. If the independent auditor you hired isn't willing to stand behind your view you probably shouldn't announce it.
I'm not sure I fully understand your comment. My understanding of this is that even after the revised accounts the auditor was still unwilling to put his name on the line. The implication in my eyes is that the books are still in pretty bad shape and could be worse.
Is there some reading of this that I'm not getting?
The one time I dealt with Autonomy was sitting in on some of the sales process to a large non-profit. I hadn't really heard of them or seen their products anywhere at all, yet they were apparently doing well. I think this was around the time they bought Verity so there was a lot of buzz in the air that Autonomy could be the next Google and it'd be good to get in with them.
During their 20 allotted minutes, the Autonomy sales guy provided an hour long virtuoso demonstration of a decidedly uninteresting basic search appliance with an enormous price tag that would have bought them six times as much if the non-profit just hired a staff to build it all from scratch from the ground up.
The non-profit was looking for big-data analytics and got a demo of some very uninteresting, very basic, text analytics tools, and a half-hour dog and pony show about how they could build whatever more sophisticated analytic tools they needed, and oh yeah, there would be a very long and very expensive enterprise integration period.
The sales guy then made sure to mention that the next day he wouldn't be able to do any follow up since he took a position in another sales office in a different state, so follow up with some other guy who wasn't present at the demo.
Of course having run well over their allotted time-budget (always a great way to see if a company respects contractual budgets), the CEO didn't have time to ask questions like "presumably you've built more interesting text analytics tools before, we can't be the only ones asking for these pretty basic things, why would we pay more for you to 'develop' them again?" and similar.
Fast forward a week, meeting with the other guy to finish feeling things out (there were some integration pieces they were still interested in). The non-profit was basically told that his business wasn't worth the time of this very junior sales guy because his other clients were talking about bigger engagements. And that to get more of his effort, they'd have to consider a larger package with more included services (on-site consultants). He left halfway through the meeting to go joke and throw a football with some of his buddies down the hall for a few minutes, in full view of our group, while the CEO of the non-profit sat his mouth agape, came back and asked if we'd decided to move on or go with the bigger deal so we could get his full attention.
It was pretty much this experience that put them into the "corrupt as fuck snake oil peddlers" category for me and none of this news surprises me in the least.
I have experience with the CMS platform (TeamSite) that they purchased a while back and it seems to be a perfect cultural fit. Insanely priced software that has fewer features than WordPress despite a manual longer than the Oxford Bible.
We evaluated Autonomy vs Google Search Appliance at an ex-employer. The GSA worked out of the box, the Autonomy Search needed a consultant in every week to try and tune it as the results were crap.
I was also very unimpressed with their stock technology. And it was obvious they were trying to attach as many consulting hours to the sale as possible.
It felt like a very old, late 90s era search engine, one of the ones with lots of banner ads, with a few of the internals exposed so you could get various metrics off of it.
> needed a consultant in every week to try and tune it
This also feels familiar to me, something about constantly massaging the system till it started giving optimal results or something. I think "tending the garden till it bears fruit" was the phrase used (it was almost 10 years ago now!)
Mike Lynch gave a talk at Cambridge Uni last night. The synopsis:
> The session will look at how the vision needs to meet with reality. The entrepreneur needs to be true and wedded to their beliefs and vision for the business venture, but also, to be open to learning and taking feedback. It is important to be flexible with business models in the early days. This session demonstrates the importance of entrepreneurial self-awareness for learning and reflection purposes as well as the need for personal direction, drive, persuasion and persistence. Participants will learn about strategy and developing business models to achieve the vision. It will look at the influence of early customers and sales and the role of mentors, company directors, etc. in shaping business models.
"So what's Lynch up to now? He, together with some former Autonomy bosses, have started technology investment firm Invoke Capital, which has a $1bn fund to play with.
Its first investment was in Darktrace, which calls itself "the world's first Behavioural Cyber Defence platform" "
Yep. The Brits (I'm one, but have spent most of my career elsewhere) do a special line in cowboy technology types, and Autonomy just blagged their way into a monster deal.
It's a shame because at the same time there are genuinely great companies, but the more pure sales culture led outfits have been so slimy it's frightening, and make life much harder for the people doing great work.
And that's ignoring the defence industry, which takes it to a whole new level.
It's a mixed up metaphor - they actually have a better term for it being "wide boy". The tech industry there has (in my experience) a higher proportion of people that are essentially street market traders in suits trying to score enterprise deals than elsewhere. This isn't to say the US doesn't have them, but they're not quite as pervasive, or as misleading.
Some people of this type get wildly successful, such as Alan Sugar, who thinks he's the sort of British Donald Trump.
Hustler: 1825, "thief" (especially one who roughs up his victims), from hustle (v.) + -er (1). Sense of "energetic worker" (especially, but not originally, a salesman) is from 1884; sense of "prostitute" dates from 1924.
Who spends $7b on a company that claims $870m anyway? ... That's way to high unless you knew that future business was on it's way. On the other hand, HP seems to be really good at buying dying businesses, or buying businesses that have potential and killing them off.
10x revenue is not irrational in a high-margin software business. It's high, but there's a lot of acquisitions, especially by big companies like IBM, HP, etc. that are at that multiple.
True ... but they weren't really high margin as it was a "solution sale". In this case, 2X-3X would be more the norm since you have a much harder time scaling this type of company.
I'd disagree. Software that is heavy on consulting is still considered high margin as long as the consulting is revenue neutral (not a cost center). So if you write software that requires lots of consulting that the customer pays for, it still can be high margin.
The other consideration is whether the customer considers the software critical to their business operations or a core differentiator for them vs. a commodity solution. I would argue that, truth notwithstanding, the message of autonomy was that they were a high value software - data consolidation and search.
Welcome to the modern word of business "optimizations" and uncontrolled leverage.)
Russian "businessmen" would really appreciate this because cheating, finding a greater fool is the default strategy nowadays and doing this uncaught considered to be very very clever.)
And yet auditors, investment bankers, accountants, and consultants still get their fee for this disaster. And that is before we start talking about tall the HP people involved in diligence and the acquisition. Finally, shareholders are last in this arrangement, yet in every CEOs discussion they are always first.
Mike Lynch got really rich. I worked for Autonomy after they purchased my employer, Interwoven. They were horrible people to work for. We always thought they were cooking the books. Their products were shit. I quit that job because I had fuck you money.
Which basically makes this a non-story. If the independent auditor you hired isn't willing to stand behind your view you probably shouldn't announce it.