From H.P., a Blunder That Seems to Beat All

http://www.nytimes.com/2012/12/01/business/hps-autonomy-blunder-might-be-one-for-the-record-books.html?pagewanted=1&nl=business&emc=edit_dlbkpm_20121130

by JumpCrisscross • 14 years ago

57 53 14 years ago

nytimes.com

cynicalkane• 14 years ago

“We tried really hard to make this work,” the former Autonomy executive said. “Instead of doing it the Autonomy way, which is to sweep problems out of the way and move full steam ahead, we got bogged down in H.P. process.”

I have no words.

roc2• 14 years ago

Having seen Autonomy's products and support in action, I can vouch for their seemingly preternatural ability to brush off problems as if they didn't exist.

adamnemecek• 14 years ago

Why do they keep referring to the company as "H.P." when it's "HP".

aston• 14 years ago

The New York Times style guide recommends periods after the letters if you pronounce the letters individually. [1]

http://en.wikipedia.org/wiki/Acronym#Pronunciation-dependent...

wmf• 14 years ago

And yet they write "AOL" in this article.

tokenadult• 14 years ago

And that's why the New York Times writes "I.Q." when the whole world of psychology writes "IQ" without any periods.

rbanffy• 14 years ago

This is not a blunder.

anigbrowl2• 14 years ago

Be more specific, please?

valuegram4• 14 years ago

"From H.P., a Blunder That Seems to Beat All"

"The dubious title of worst corporate deal ever had seemed to be held in perpetuity by AOL’s acquisition of Time Warner in 2000"

No mention of Bank of America's acquisition of Merrill Lynch? Within 15 days of the acquisition's close, Merrill recorded an operating loss of $21.5 billion... Leading to a market capitalization loss of $108 billion.

brianchu• 14 years ago

The article makes a point of comparing the mergers to the broader economic conditions at the time. HP acquired Autonomy and lost money at a time when the computer industry was (and still is) growing.

On the other hand, AOL and Time Warner merged right before the bubble burst and BoA acquired Merrill Lynch at the same time the economy was crashing. Without the acquisition, Merrill would have gone bankrupt anyway and BoA's market cap would have cratered anyway because the entire financial sector was cratering at the same time. In fact, the US government heavily pressured (threatened) BoA into acquiring Merrill (http://www.washingtonpost.com/wp-dyn/content/article/2009/04...).

So no, they're much different cases.

valuegram4• 14 years ago

Of course they are "different cases" - there are always separate macroeconomic conditions, and there was government intervention in the acquisition, but the fact still remains on the "worst corporate deal ever" front, BAC acquired a company that lost $20+ billion in the first post-acquisition quarter.

anigbrowl2• 14 years ago

True, but everyone else on Wall Street was having similar problems around that time :-)

valuegram4• 14 years ago

Yeah, I should have left out the market capitalization delta. There were definitely other factors involved besides the acquisition. The quarterly loss by Merrill was pretty astounding though. Definitely large enough to be involved in any "worst corporate deal" discussion.

patrickgzill• 14 years ago

IT is a good point, but HP does not have the Fed to backstop their losses, nor to loan them money at almost no cost.

roc2• 14 years ago

BoA got 20B in TARP funds specifically to offset that loss. It's hard to know how much of their further 118B of Federal guarantees against losses and Geithner-knows how much free money from the discount window and Fed purchases of terrible securities can be attributed to their agreeing to buy Merrill.

But I think it's fair to say BoA didn't lose anything close to even 8B by the time the deal was done.

fauigerzigerk2• 14 years ago

The TARP money wasn't a gift, nor is the money borrowed from the Fed.

It's not easy to know how much BofA actually lost on the deal because much of the reported losses at the time result from marking down assets according to market prices. I have no idea what they are worth now.

YokoZar• 14 years ago

"Hewlett-Packard’s acquisition last year of the British software maker Autonomy for $11.1 billion “may be worse than Time Warner,” Toni Sacconaghi, the respected technology analyst at Sanford C. Bernstein, told me, a view that was echoed this week by several H.P. analysts, rivals and disgruntled investors.

Last week, H.P. stunned investors still reeling from more than a year of management upheavals, corporate blunders and disappointing earnings when it said it was writing down $8.8 billion of its acquisition of Autonomy, in effect admitting that it had overpaid by an astonishing 79 percent."

Doesn't that mean they overpaid by 482 percent? It is true that the acquisition lost 79 percent of its value, but the editor seems to have gotten the math wrong here.

ghshephard• 14 years ago

Almost correct - actually 382 Percent overpayment. 0% overpayment would have been 2.3 Billion. ($11.1 - $8.8).

Did you send in a correction to the Editor?

alexandros• 14 years ago

What the article should say to keep the 79% number in place is that '79% of the price was overpayment'. What you are saying is that 'they paid 482% of what they should have'. If they want to keep the structure of what they have written, I think ghshephard's formulation is right. They overpaid by 382%. Aren't percentages fun?

bartl• 14 years ago

It depends on how you calculate the percentages. "Percents" are only useful as a tool for small numbers, say less than 10%: 90% is not far from 1/110%, so no matter how you calculate 10% loss or gain, you'll get numbers that don't stray too far apart.

Probably the author means that 79% of the money they paid (8.8/11.1) was thrown away, thus it was only worth 21% of what they paid.

Stating they paid almost five times too much is much clearer.

sami364• 14 years ago

The Autonomy debacle aside, what has Meg Whitman accomplished since she took over HP ? After a long tortured process that needn't take so long, she enshrined WebOS's abandonment. And with her at the helm, HP continues to fail to innovate in the consumer electronics space. No decent phones, No compelling tablet, not even a laptop worth glossing over. Zilch.

When is she going move on from blaming her failed predecessors for their missteps & actually put an imprint of her own.

I don't know who's worse at H.P. The CEOs who effectively run the company to the ground or the board that picks them.

yuhong• 14 years ago

They did try to open source WebOS. And yea cleaning up that mess takes time. I think Meg said that before.

aaront• 14 years ago

And they succeeded. Enyo is a nice, stable cross platform JS framework, and Open webOS has a decent sized hacker community around it (webOS Ports).

shardling2• 14 years ago

I don't know what you're expecting. When Steve Jobs became CEO of Apple in 1997, it also took more than a year for any products he influenced to launch. And presumably his predecessor hadn't gutted research and development of hardware...

sami364• 14 years ago

Not only did Jobs bring with him the trunk of what effectively would become OSX. Within months of his return , Jobs had slimmed down Apple's product portfolio to a handful of products then immediately started executing on that vision. As flawed as he was as a human being, Jobs was decisive.

She took forever to make a decision about the fate of the PSG (personal systems groups,) Agonized months over what to do with (granted, a fatally wounded) WebOs. I'm not saying she wasn't dealt a tough hand. I couldn't agree more. Her predecessors strategic blunders were atrocious, but she could have acted with more urgency.

alberthartman• 14 years ago

Jobs also demanded and got the full resignation of all but 2 of the prior BODs after he came back. Dump the past troublemakers. That won't work here since Meg is one of those previous bad HP BODs members.

valuegram4• 14 years ago

Reminds me of the "3 envelopes" story.

clintboxe• 14 years ago

I don't know how much they paid, but it seems like the acquisition of Vertica was a great move. I use it everyday and it is a fantastic product.

sk5t• 14 years ago

Does anyone take HP seriously as a modern software company? Although I haven't looked into their operations and financials, my impression is that they sell plenty of servers (going on the Compaq legacy); a certain amount of ill-regarded desktops, laptops, and peripherals; probably lots of scientific equipment like oscilloscopes, gas chromatographs, etc.; and networking hardware. Of course there are also printers, but their once-wonderful reputation has dropped precipitously since the 1990s.

rglovejoy• 14 years ago

The scientific equipment business was spun off into a new company, Agilent, in 1999. Some argue that Agilent is the 'real' HP.

csours• 14 years ago

Nope, and I work there (for now, briefly).

dmfdmf• 14 years ago

HP desktops and networking hardware is good. I don't know about their laptops but they were horrible 4 or 5 years ago. Their printer division has been resting on its laurels for almost a decade and its not clear if the hardware is any good because the software that ships with HP printers is SO bad its impossible to say.

amorphid• 14 years ago

I print a few pages a week, scan something occasionally, and almost never fax, but I like to have the option to do these things. When I but a cheap-ish all-in-one printer, I specifically avoid HP. My expectations for cheap-o printers are low, but the last two HP printers felt way too flimsy, they installed too much bloatware, and on the last one I could never get the scanner to work. I've had much better luck with Brother and Epson products.

ScottBurson2• 14 years ago

HP's software division is actually doing pretty well except for Autonomy. Of their other recent acquisitions, Vertica is doing great, ArcSight is doing pretty well, Fortify (where I work) is doing pretty well.

But HP Software accounts for only 3% or 4% of HP's revenue.

TY• 14 years ago

Vertica is a great product, probably the only thing I like about HP at the moment.

dagw• 14 years ago

ill-regarded desktops, laptops

While their consumer and low end stuff is pretty crap, Their top end line of workstations (Z-series) and laptops (Mobile Workstation) are pretty good. We use them at work and they are certainly no worse than anybody else and better than most.

robryan• 14 years ago

I assume that Autonomy probably does all its sales via sales people long personalised processes, but I have to say their website isn't particularly good at all. Given the money involved you would think they would have invested in a more modern website, telling people who do happen to visit it in less abstract terms exactly what they do and why people should care.

bambax• 14 years ago

The article isn't perfect but the conclusion is:

> Just as Autonomy was supposed to transform H.P. into a software powerhouse, AOL was meant to transform old-media Time Warner into an Internet darling. So-called transformative thinking by some board members and top management rendered traditional valuations irrelevant and silenced critics.

In both cases, that thinking proved delusional.

josh2600• 14 years ago

The reminds me of when eBay bought Skype and sat on it for half a decade. Big companies rarely get transformed as a result of acquiring a smaller company.

Would love counter-examples to this idea if anyone can think of any :).

wisty• 14 years ago

> an eye-popping multiple of 12.6 times Autonomy’s 2010 revenue

Is 12.6 really "eye-popping"? It seems that similar companies (SAP, Oracle) go for about 4 times sales (Microsoft is just 3 times sales, probably because they are seen to be in decline). Expecting a growing company to quadruple sales (presumably also quadrupling the number of salesmen) isn't really that crazy, is it?

And it's a good way for HP to push their new sales + consulting strategy.

It sounds more like a perma-bear whinge about over-priced IT companies. There's good arguments about why IT companies are often overpriced (they do tend to be risky), but I can see where HP was coming from.

From H.P., a Blunder That Seems to Beat All

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