US Firm Sues HP Over Autonomy Transactions

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A small US reseller has sued HP over transactions that play a central role in HP’s $5bn Autonomy lawsuit

MicroTech, a small US reseller, on Monday sued HP over some of the transactions that played an important role in HP’s $5bn (£3.2bn) improper accounting lawsuit against the former management of Autonomy, the data analytics firm it bought for more than $11bn in 2011.

HP alleges that Autonomy engaged in “contrived” transactions with resellers, misrepresenting its “rate of organic growth and the nature and quality of its revenues”, justifying a $5.5bn writedown related to the Autonomy purchase. Several of the transactions in question were with MicroTech, a small Washington DC-area business that acts as a systems integrator for the federal government, and which had previously completed sales of Autonomy software to customers including Honeywell and Morgan Stanley.

Autonomy-Landscape

MicroTech sued HP’s Autonomy unit for $16.5m, the amount of two purchases of software from Autonomy. MicroTech said it has not received a software key from HP enabling it to use the software it purchased.

The purchases include one from 2010 in which MicroTech planned to act as a reseller of Autonomy’s software to the Vatican for use with the digitisation of its library, a sale which was never completed. The second transaction, in 2011, was for Autonomy software to be sold to HP itself, before the acquisition of Autonomy was completed.

HP alleges the transactions were made in order to create an illusion of strong growth, alleging that Autonomy also made large payments to MicroTech for which it received no appreciable benefit. These include a 2011 payment of $8.2m for a platform that was to showcase Autonomy’s software for the US federal government, and a 2010 payment of $9.6m for a three-year licence in relation to the Vatican deal, made the same day that Autonomy received a payment of $6.3m from MicroTech as part of the same agreement.

During a conference call with journalists, MicroTech attorney Lanny Davis said the transactions were “in good faith” and said the lawsuit would be unnecessary if HP would agree to provide the software that was paid for. Apart from the accounting issues, HP’s Autonomy unit continues to play an important role in the company’s overall business strategy.

HP declined to comment on the matter.

‘Incompetence’

The company sued Autonomy founder Mike Lynch and former chief financial officer Sushovan Hussain over the alleged accounting improprieties, while Lynch accused HP of fabricating the claims in order to cover up its own “incompetence”.

HP was criticised at the time over the high price it paid for Autonomy, which was seen by some industry observers as an effort to quickly refocus the company on a new, high-growth area.

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