In the fight between Hewlett-Packard and the founder of its Autonomy unit, the gloves are well and truly off.
The former head of Autonomy, Mike Lynch, issued a public letter Tuesday that called on the board of H.P. to defend its claims of accounting fraud at the company. He argued that H.P. had instead mismanaged Autonomy since acquiring it last year.
Shortly afterward, H.P. defended its findings and said it looked forward to hearing Mr. Lynch testify about Autonomy’s accounting practices under oath. It also reiterated plans to seek legal remedies.
The battle ensures further controversy over Autonomy, the British software maker at the center of an $8.8 billion charge H.P. announced last week. Founded 16 years ago, Autonomy had grown into one of Britain’s biggest technology start-ups.
H.P. paid more than $10 billion for Autonomy in a deal many analysts criticized as overpriced. It now says that an internal investigation of Autonomy uncovered evidence of questionable sales and “outright misrepresentations” of its financial health.
Among the practices, H.P. says, were classifying hardware sales as software sales and booking revenue too early. It said in its response to Mr. Lynch that the matter was being investigated by the Justice Department, as well as by securities regulators in the United States and Britain.
But some analysts and accountants have questioned whether H.P. is overstating the effects of any accounting improprieties to write off as much of the acquisition as possible.
In his letter, Mr. Lynch reiterated his insistence that he knew of no wrongdoing at Autonomy, arguing that it followed British accounting guidelines and that auditors at Deloitte approved its financial statements. He has suggested that differences between British and American rules may have accounted for seemingly suspicious software transactions.
Mr. Lynch also sought to turn attention to what he said was H.P.’s mismanagement.
“Can H.P. really state that no part of the $5 billion write-down was, or should be, attributed to H.P.’s operational and financial mismanagement of Autonomy since the acquisition?” he wrote.
He argued that H.P.’s management oversaw Autonomy’s finances for more than a year and should have been able to detect any improprieties sooner. “Why did H.P. senior management apparently wait six months to inform its shareholders of the possibility of a material event related to Autonomy?” he asked.
An H.P. spokesman, Michael Thacker, wrote in an e-mailed statement that the company believed it had found “extensive evidence” pointing to an attempt to inflate Autonomy’s financial metrics. H.P. said last week that its inquiry, initiated by a senior financial official in the Autonomy division, took months to comb through years of financial data.
Mr. Thacker added, “We look forward to hearing Dr. Lynch and other former Autonomy employees answer questions under penalty of perjury.”
Open Letter to the Board of H.P.
DealBook: Autonomy's Ex-Chief Calls on H.P. to Defend Claims
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DealBook: Autonomy's Ex-Chief Calls on H.P. to Defend Claims
