Autonomy: When All Else Fails, Blame the Bankers
Rule No. 1 when you find yourself in a public relations hole: Stop digging. Mike Lynch, the CEO of Autonomy, the software company being acquired by Hewlett-Packard in an $11.7 billion deal, seems not to have learned this lesson, because the hole he’s in keeps getting deeper.
Always eager to clear up the record — just, well, you know, because — Oracle went on to publish the PowerPoint slides sent by investment banker Frank Quattrone of Qatalyst Partners to Mark Hurd in January. The slides may or may not have had anything to do with a meeting held by Lynch, Quattrone, Oracle President Mark Hurd and its head of M&A, Douglas Kehring, in April. Or not! You see, the stories vary.
But what about the email those slides arrived with originally? Well, a kindly source has sent it to us. Dated Jan. 26 — you can read it below — it was sent to Hurd by Quattrone (whose address I’ve deleted as a courtesy). Judge for yourself, but to me it sure reads like the windup to a sales pitch.
From: Frank Quattrone
Date: January 26, 2011 7:48:37 AM PST
Subject: Fw: Autonomy slides
It was great to catch up earlier this month. I wanted to follow up by sending the slides I promised on Autonomy. Given its strong position in managing unstructured data (such as video, voice and photos), “meaning based” contextual enterprise search, data protection, compliance, archiving and content/web management, I beleive it’s a very strategic asset that could alter the balance of power in the industry for whoever might acquire it. And despite its strong track record of growth and very high profitability (50 pct margins), it trades at less than 20x earnings and around 11x Ebitda, huge discounts to the other strategic software assets of scale. Please let me know if you would like me to follow up with you, Doug K or otherwise.
And it was! At least the email part. Quattrone weighed in on the whole kerfuffle via an email to Lynch, which Lynch then shared with the Financial Times Alphaville blog:
“The slides Oracle posted publicly were sent by me to Mark Hurd in January, were prepared by Qatalyst and were for the purpose of our independently pitching Autonomy as an idea to Oracle. These slides were not used in our April meeting with Mark and Doug.”
So what of the meeting in April? Well, apparently it wasn’t a sales pitch at all. No, really. As Autonomy said in a statement also sent to the FT:
“In April 2011, there was a meeting for approximately thirty or forty minutes between Autonomy and Mark Hurd, which was set up by Frank Quattrone as an introduction to Mark Hurd. Oracle is an Autonomy customer. It was made clear that Autonomy was not for sale and no sale process was under way. Mr. Quattrone’s company was not engaged by Autonomy at that time. There has been no other contact with Oracle since then. …
“Qatalyst have informed us that the slides Oracle has recently posted on its website were prepared and sent independently by Qatalyst to Oracle on 26 January (the content is clearly from January). This is the first time we have seen them. Autonomy was not involved in this nor was Qatalyst engaged by Autonomy until mid-year. Autonomy did not present these slides in the meeting.
“Oracle seems a little confused about the sequence of events and origins of the data it has received, something that would suggests it needs better management of and insight into the unstructured data on its internal systems. We would be delighted to help.”
Oh, snap! At least Lynch is learning the art of the snarky retort. So the slides were the work of eager bankers trying to get a deal cooking. And the meeting was just a friendly call by Autonomy’s CEO on a customer? With an investment banker and another company’s head of M&A — two people who have collectively done more Silicon Valley deals than any other people in the world — joining in just for kicks? Okay then.
While this tit-for-tat seems like a mildly entertaining tempest in a teapot, it’s a $12 billion teapot! One about which HP shareholders still seem to have a lot of questions, especially in light of the management change that has gone on there since the deal was announced. Time, however, is short: HP is said to be about ready to close on the deal Monday.
Why is it so important to Lynch that the world believe that Autonomy was not shopping itself, and not engaging in any discussions about selling itself? Because laws in the U.K. about corporate acquisitions are very strict, for one thing. And companies engaging in discussions about being acquired without disclosing that fact to shareholders quickly find themselves in hot water with regulators! That means CEOs in the U.K. get ticklish on this subject very easily.
Of course, the first official public disclosure about Autonomy being in discussions to sell itself to anyone crossed the wires at 1:32 pm New York time on Aug. 18, which, by my watch, is about two minutes after markets had closed in London. The disclosure, however, came about an hour and change after Bloomberg News reported that a deal was near. About 90 minutes after Autonomy’s disclosure in London — and with 52 minutes left before the close of markets in New York — came HP’s confirming statement that it was “in discussions.” Then, just after markets closed in New York, the deal was done. That leaves plenty of room for people on both sides of the Atlantic to ask all kinds of fun questions. Anyway.
And as we all know, Oracle — whether in January or April — passed on the opportunity to bid on Autonomy, primarily because the price was, as CEO Larry Ellison put it on a conference call last week, “shockingly high” at about $6 billion. And four months later — or eight, depending on when you start counting — on Aug. 18, Hewlett-Packard announced its plans to acquire Autonomy at nearly twice that price.
So what was the purpose of the April meeting in Oracle’s board room in Redwood Shores? Was it really a “lively discussion about databases,” as Lynch has previously claimed? Or an innocent customer call during which two masters of tech M&A just happened to be in the room? We don’t know exactly.
But we do know one thing: Having first characterized Ellison’s description of the matter as “just inaccurate,” then copping to a previously undisclosed meeting of some kind, Lynch does know how to change his story.