HP-Autonomy saga heats up as VARs dragged in
HP claims Autonomy made dodgy deals with resellers which Autonomy insists is based on a 'faulty foundation of false facts'
HP has dragged the channel into its legal battle with Autonomy, claiming the firm used its resellers to make "contrived transactions", which has prompted Autonomy to launch a scathing counter-attack on the tech giant.
In the latest twist in the HP-Autonomy saga, HP filed a document last night in which it claims "certain VARs were used [by Autonomy] to fabricate or accelerate what was then held out by Autonomy to be revenue and profits."
The Autonomy takeover has been a headache for HP since it took place in 2011. HP had to swallow an $8.8bn (£5.5bn) writedown relating to the buy after claiming the UK firm exaggerated its profits, and ever since, the duo has been locked in a war of words and legal proceedings.
In the filing, HP explained how it believes Autonomy used its channel partners for its own gain.
"For example, where an Autonomy group company had attempted to license an Autonomy product to a prospective end user, but had been unable to finalise a transaction by the end of a financial quarter, Lynch [Mike Lynch, former Autonomy chief executive] and Hussain [Sushovan Hussain, former Autonomy chief financial officer] caused the sale to a VAR of a licence to use that (or another) product, ostensibly for onward licensing to the end user, even though the VAR had had no prior involvement in the prospective transaction with the end user," HP said.
"In fact, the VAR did not bear commercial risk in relation to its ostensible liability to pay for the software licence, because it had been agreed and/or was understood between the Autonomy group company and the VAR that the VAR would not be required to pay for the software licence from its own resources. In the event the Autonomy group company either forgave this supposed liability or ensured that the VAR was put in funds to enable it to effect payment.
"The arrangement with the VAR was purely a pretext for the recognition of revenue."
HP further alleges that Autonomy paid off resellers under the guise of a "marketing assistance fee" to reward their involvement in the process "even though the VAR had provided no actual marketing assistance to the Autonomy group company, and had had no contact with the end user in relation to the proposed transaction".
Autonomy strongly denies the claims, and on the AutonomyAccounts website, the firm issued a statement countering HP's claims.
"We utterly refute the allegations made against us," it said. "HP has waged a three-year smear campaign riddled with half-truths and obfuscation. They have intentionally made the claims as complex and convoluted as possible.
"HP's (notably unparticular) Particulars [section in legal filing] make clear that HP has had very good reason for its two and a half years of stalling, misdirection, and evasion regarding the details of its allegations against our client and other members of Autonomy's former management. Simply put, after two and a half years of apparent investigation – no doubt at a cost of many tens of millions of dollars to the shareholders of HP – it is clear on the face of HP's own filings that its claims are baseless.
"HP's patchwork tale of alleged misconduct rests on a faulty foundation of false facts, unsupported inferences, and a misunderstanding and misapplication of the relevant legal and accounting standards. Nearly two and a half years after HP announced its writedown, it is clearer than ever before that HP's claims are merely a tactic to obscure the true source of HP's and Autonomy's losses: the wrongdoing and ineptitude of HP's own directors and officers."