Shame on you, Meg Whitman

Corporations, especially big American ones, file lawsuits all the time for many reasons. Often they sue to force others to comply with agreements or to punish non-compliance with the law. But sometimes they sue, well, just because they can. I suspect that is what’s happening in Hewlett Packard’s current fight over Autonomy, the UK software company HP bought two years ago for $11.1 billion. The HP board seems determined to demonize Autonomy founder Mike Lynch for being smarter than they are.

Given the smarts that HP board has shown in recent years, we may all be at risk of being sued by the company.

HP, business faltering with no mobile strategy to speak of and stock price dropping, has looked like stupid-on-a-stick for years now. A succession of bad CEO hires (starting I believe all the way back with Lew Platt) and bad acquisitions compounded by juvenile boardroom behavior (remember the illegal phone taps?) has rightly cost the company in both reputation and market cap.

Yes, HP overpaid for Autonomy. Anyone who looked at the deal at the time could see that -- anyone who wasn’t working at HP, that is. Oracle’s Larry Ellison certainly said it at the time -- the price was insane. Now HP wants to call it fraud when what actually happened was probably more along the lines of what they call in the UK fast business.

Mike Lynch didn’t extract that $11.1 billion from HP at gunpoint; the company asked to pay it.

And now, to avoid embarrassment it seems, HP revises history. Top brass was duped, their Wall Street advisers on the deal (15 firms!) were duped, too -- tens of millions in fees paid apparently for nothing. The numbers now make no sense so the books must have been cooked and heads will roll as a result, claims HP, explaining the $8.8 billion impairment charge they are taking this quarter, effectively saying the company threw away that much money.

Except we’re likely to find months or years from now that the books weren’t cooked at all. Larry Ellison saw through them. HP just paid too much. And though the deal was made by the hapless Leo Apotheker, it closed under current CEO Meg Whitman, who could have paid a breakup fee and walked away but didn’t. So Meg, who has a hefty ego investment in being seen as the company savior, had to have been deliberately duped, goes the new reality, hence the lawsuit.

Remember this was HP’s second $8+ billion impairment charge in a row, following by a quarter the write-off of most of HP’s huge investment in EDS, another bad purchase I’ll cover at some length aother time.

Fool me once, shame on you; fool me twice shame on me.

Shame on you, Meg.

Reprinted with permission

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