Vatican Dispute Sheds gentle on HP-Autonomy Case



The Vatican has become enmeshed in a struggle between Hewlett-Packard Co and Michael Lynch, the previous CEO of the up instrument firm Autonomy Corp offered with the aid of HP in 2011 in a deal that led to a big loss for the U.S. expertise giant.

An argument over the proposed use of Autonomy’s instrument to help digitize the Vatican’s library probably lends make stronger to HP’s accusation that Autonomy booked gross sales even when the intended end user had not determined to purchase the instrument.

Finally, the Vatican says it didn’t purchase the software for the library undertaking from Autonomy or from a reseller of Autonomy’s merchandise, Micro Technologies LLC. Nevertheless, Autonomy booked $eleven.55 million in income based on the sale to microtech of instrument that used to be earmarked for the proposed Vatican deal, in step with sources accustomed to HP’s investigation.

Autonomy’s booking of revenue tied to a Vatican deal that did not occur illustrates a method in which HP contends the device firm gave a distorted impression of how rapidly it used to be rising, these sources mentioned.

A supply accustomed to Autonomy’s trade on the time counters that its approach to booking revenue in such transactions with resellers used to be permissible below UK accounting standards and blessed with the aid of its auditor Deloitte.

HP took an $8.8 billion impairment charge in November 2012 for it’s $eleven.1 billion purchase of Autonomy. The size of the loss, and the rate with which it came about, marks the deal as probably the most disastrous completed with the aid of an important firm in latest years.

Requested to participate
A letter seen through Reuters presentations that Vienna, Virginia-based microtech, wrote to the Vatican library, Bibliotheca Apostolic Vatican (BAV), on April 23 this 12 months searching for payment for the $eleven.55 million of Autonomy device.

Microtech CEO and President Anthony Jimenez said in the letter that in March 2010 Autonomy had requested it buy the device in 2010 so that microtech might “take part as a reseller” in a venture between the library and Autonomy.

Jimenez stated microtech used to be stunned to peer an announcement from every other firm, Japan’s nttdata Corp, in March this yr. Stating that it had been chosen to behavior the Vatican library’s digitization undertaking. He requested the Vatican library if Autonomy device had been used in the NTT contract or some other such challenge, and, if that is so, when was cost made for that tool and who obtained it.

“We’re writing to you to verify your receipt and use of the software and to obtain fee for that use,” mentioned Jimenez in the letter.

In response, Vatican library prefect Monsignor Cesar Panini sent a letter to HP during which he stated microtech assumption that Autonomy software was getting used within the undertaking “is de facto false.” He stated the venture makes use of device from NTT data and others but no longer anything from Autonomy and microtech.

Panini brought that the Vatican library has “never dealt with microtech.”

HP declined to touch upon the way it spoke back to the Vatican letter.

Microtech general information Aaron Drabbing stated that Jimenez was once not to be had for remark.

Pursuing claims
HP mentioned late ultimate month it plans to pursue claims against Lynch and Autonomy’s former Chief monetary Officer Sushovan Husain. The right nature of such claims and when HP may file them might no longer be discovered.

Authorities, including the U.S. Justice department, the U.S. Securities and alternate commission and the united kingdom’s severe Fraud place of work, are additionally investigating HP’s accusations against Autonomy’s former prime administration.

An attorney for Husain did not reply to requests for comment.

The microtech claim to the Vatican for payment leaves key questions unanswered. It’s not clear why the reseller agreed to purchase the instrument for a mission that had not been awarded, and why the Vatican had by no means heard of microtech involvement.

Struck on the last day of the primary quarter of 2010, the microtech deal used to be an important in permitting Autonomy to fulfill market expectations for the quarter, with revenue – which used to be boosted by way of acquisitions – coming in at $194.2 million, up about 50 % from 12 months earlier. Analysts’ consensus forecast was for $193 million. It was once on the foundation of such increase that HP when it got Autonomy used to be ready to pay a 79 % top class to its inventory market value.

After all, HP wrote off $2.3 million on the sale to microtech because of non-payment to HP by way of the reseller. That is in step with an inside email, dated Oct. 12, 2011, from Autonomy’s debts department to counterparts in HP that has been reviewed by Reuters. Through that date, HP owned Autonomy.

Autonomy’s deal with microtech is amongst a series of transactions that are being puzzled by HP following its investigation, the sources acquainted with the probe stated.

HP declined to comment on the specifics of the Vatican deal but stated in a statement that more in most cases “former senior Autonomy management used numerous ways to misrepresent the reported monetary metrics of the company.” It stated that this incorporated Autonomy recognizing revenue on transactions that by no means closed and misidentifying classes of income to “create the appearance of a high-growth company.” the outcome was once that investors and HP have been misled, HP alleged.

Autonomy’s former management believes HP is misrepresenting the character of a few offers that don’t in any way add up to the amount of income that HP claims used to be questionable, in line with the sources acquainted with Autonomy’s trade on the time.

Beneath international monetary Reporting requirements, a couple of conditions have to be met ahead of an organization can book revenue from the sale of goods to a reseller. These embrace the situation that “significant dangers and rewards or ownership of the goods” has been transferred to the buyer, and the seller “retains neither persevering with managerial involvement to the stage frequently related to possession nor effective keep an eye on over the goods bought.”

Lynch believes that this was once naturally the case with the microtech sale, in keeping with the supply aware of Autonomy’s business at the time. Microtech made its own industrial determination to buy the instrument, and used to be therefore like another purchaser for Autonomy, the source said, including that whether or not that software ended up with the Vatican or now not was a topic for microtech and no longer Autonomy.

Lost interest
Imbroglio Piazzi, vice prefect of the Vatican library, instructed Reuters that it had worked with Autonomy on a feasibility study that lasted up to a year-and-a-half. But he mentioned around the summer time of 2011 – simply ahead of Autonomy’s acquisition by means of HP – Autonomy stopped displaying pastime in the mission, striking off appointments, although it didn’t formally withdraw.

Consistent with paperwork ready for Autonomy’s audit committee that have been seen with the aid of Reuters, Deloitte reviewed the deal and it was happy the sale to microtech had taken place and might be booked by way of Autonomy.

In a statement Deloitte said it “categorically denies that it had any data of any accounting improprieties or misrepresentations in Autonomy’s monetary statements.”