HP Autonomy Case Explores Accounting for British Reseller Deal
Hewlett-Packard‘s (NYSE: HPQ) investigation into Autonomy accounting includes a $6.4 million deal with Tikit Group PLC, a British supplier of of accounting software, according to The Wall Street Journal. Autonomy recognized the total 2010 deal as up-front revenue but Tikit paid Autonomy only as it incrementally sold the software to customers, the Journal reported. So what’s the upshot here?
Basically, HP seems to be alleging that Autonomy had a habit of realizing revenue up-front even if a reseller or customer paid for the software over a series of months or years. Resellers such as Tikit are not under fire here — rather, it’s Autonomy’s accounting for certain reseller engagements that’s under the microscope.
The controversy went public last week, when HP announced an $8.8 billion write down charge — most of it related to the 2011 buyout of Autonomy. HP says Autonomy used misleading accounting practices to wrongfully boost the value of the M&A deal. Autonomy founder and former CEO Mike Lynch has dismissed HP’s claims as baseless.
HP CEO Meg Whitman says the company’s potential legal case against former Autonomy executives could take years to move through court systems. For HP and its channel partners that’s bad news: Regardless of the feud between HP and former Autonomy executives, it’s time for current HP management to leave the legal drama to lawyers.
Indeed, HP must shift the business conversation to Autonomy’s solutions for customers and partners — rather than publicly lamenting alleged Autonomy misdeeds before the M&A deal.