Analysts are expecting per-share earnings of 49 cents on sales of $12.2 billion. They’re also expecting Cisco to guide to 51 cents on $12.5 billion in the current quarter.

In a note to clients Monday, UBS analyst Amit Passi reiterated a “buy” rating, saying that checks with CIOs and resellers showed that Cisco might hang in there. “We think Cisco can meet or exceed consensus earnings estimates driven by improving business mix and efficiencies on the cost side,” he wrote. “Cisco’s diversified portfolio across end markets, customer types, and technologies should allow it to better weather the current storm of weak customer spending than some of its competitors.”

Even so, he’s cautious on the quarter ending in July. “We remain somewhat cautious heading into earnings this quarter in light of weaker spending trends across enterprise software, telecommunications and government customers, and recent negative data points in wireless [networks] during the month of April.”

Airware, a startup that is creating a software platform for commercial drones, said it had raised $10.7 million in a Series A funding round led by Andreessen Horowitz. Google Ventures also participated. As part of the deal, Andreessen Horowitz partner Chris Dixon will join Airware’s board.

The Newport Beach, Calif., company said it would use the money to expand staff for its universal development platform as the market for non-military drones expands.

Airware founder and CEO Jonathan Downey said that uses of drones will be increasing for a wide range of purposes, from checking infrastructure to monitoring mining operations to preventing poaching.

In an interview, Downey said that he expects to compete with a range of ex-military efforts, but that the most successful companies will be those that provide a platform to allow for the widest range of innovations.

“This is going to be about a lot more than we know or can guess,” he said. “The industry is at its very beginnings.”

Dixon agrees. “Hardware is the new software,” he said about the investment in Airware, which he said he discovered after attending conferences about the fast-moving drones business, noting that the overall field of robotics has “overpromised and underdelivered.”

Airware came out of both the Lemnos Labs and Y Combinator incubators and had raised seed financing from First Round Capital, Firelake Capital, RRE Ventures, Shasta Ventures, Promus Ventures and several Y Combinator partners.

The company has been quietly developing designs for a separate, simpler set-top device for streaming video and other entertainment options rather than sophisticated game software, people familiar with the matter say.

Read the rest of this post on the original site »

The Seattle e-commerce giant has recently been developing a wide-ranging lineup of gadgets — including two smartphones and an audio-only streaming device — to expand its reach beyond its Kindle Fire line of tablet computers, said people familiar with the company’s plans.

Read the rest of this post on the original site »

According to sources close to the situation, well-known tech exec Jon Rubinstein will be joining the board of Qualcomm, the San Diego-based chipmaker that has gotten a big boost of late for its role in the explosion of mobile devices.

Rubinstein is an interesting and logical choice for Qualcomm, having been a high-profile player for a long time in the mobile space, beginning with his work on the iPod while at Apple. After he left his last job at Hewlett-Packard last year, though, he has been very low-key.

(Update: Qualcomm confirmed the appointment in a press release.)

For Qualcomm, the selection of Rubinstein to join the board is something to watch, as he is the second exec from Silicon Valley to be tapped by the company recently. In March, Qualcomm hired tech investor Laurie Yoler as SVP of business development, making her “responsible for augmenting existing business relationships in Silicon Valley, as well as developing new strategic business opportunities for Qualcomm in the region.”

Rubinstein has even more experience here and is also familiar with a range of mobile efforts over the years, some of which were successful and others not so much, from his work at Apple, Palm and then HP. He is also a board member of Amazon.

Aside from CEO and Chairman Paul Jacobs, Rubinstein — who has degrees in electrical engineering and computer science — will be the most technically experienced director on the 11-person board.

Qualcomm declined to comment.

Here’s a nice primer on Rubinstein by Arik Hesseldahl, in a report on his leaving HP early last year:

Best known for his work on Apple’s iconic iPod music player, Rubinstein left Apple in 2006 and joined Roger McNamee as a partner in the private equity firm Elevation Partners, following its 2007 investments in Palm.

In 2009 he replaced longtime Palm executive Ed Colligan as its CEO, and oversaw a dramatic restructuring of the company’s products, including a significant rebuild of its smartphone operating system. Gone was the legacy PalmOS that had been used in so many popular devices like the Treo that for a time competed seriously against Research In Motion’s BlackBerry.

PalmOS was replaced by WebOS, which first appeared on the Pre smartphone, then later on the Pixi and Veer devices. After HP acquired Palm, WebOS was also used on the abandoned TouchPad tablet, and is now an open-source operating system overseen by HP.

Rubinstein’s departure is no big surprise. Sources said he hadn’t been seen at HP’s offices following the decision by former CEO Léo Apotheker to get out of the business of making WebOS-based hardware. His future plans have been the subject of speculation for some time.

After HP decided to exit the WebOS hardware business, Rubinstein was assigned to a vaguely described “product innovation role” within HP’s Personal Systems Group during a management shakeup last July. It was an unusual move and one made with little explanation at the time. But sources say it was a preface to Rubinstein’s departure, one intended to lessen its PR impact when he finally left. “That ‘innovation’ gig he was given in July was his first step toward the exit,” said one source, a former Palm exec with close ties to Rubinstein.

The move followed a 17 percent drop in first-quarter sales at the Systems and Technology Group, which handles the company’s semiconductor, server, storage and system software businesses and had about $18 billion in sales last year.

Read the rest of this post on the original site »

That’s the conclusion of Chris Whitmore, an analyst with Deutsche Bank Securities, in the wake of yesterday’s earnings report. “IBM hasn’t missed consensus earnings expectations for eight years which raises the specter of increased macro risk and substantially weaker IT hardware spending,” he wrote in a note to clients today.

IBM is better than most at managing sales that turn south in one part of its business, but still able to make its numbers, he writes. That it wasn’t able to do so this quarter “raises a red flag” for other tech companies, especially those that sell a lot of hardware, including Hewlett-Packard, Dell, NetApp and EMC. “The IBM miss is a decidedly negative read through for the entire IT hardware segment and we are incrementally more cautious on the sector,” Whitmore wrote.

Expect a lot of attention on IT spending trends in the coming weeks, as other large IT companies get ready to report their results. The next big indicator will be when EMC reports quarterly results next week. HP, Dell and NetApp all report results in mid-May.

Microsoft said CFO Peter Klein “will leave the company at the end of the current fiscal year, after nearly four years in role and 11 years at the company,” adding that the software giant will be naming a new leader from its internal finance team in the next several weeks.

In addition, reporting its third-quarter results, the software giant said its revenue was just under $20.5 billion on earnings of 72 cents. Wall Street analysts were expecting Microsoft to earn 68 cents on just over $20.5 billion in revenue, compared to 60 cents on $17.4 billion in the same period a year ago.

Strong results in its Business, Entertainment and its Servers & Tools units, and even its Online Services division, were bright spots, even as its flagship Windows business was flat when adjusted for upgrade offers.

But flat is not down. Many investors have been worried about the results, focusing especially on the negative impact of declines in PC sales on its flagship Windows software and the slower uptake of Windows Phone and Surface tablet devices that the company has introduced.

It seems as if Microsoft has calmed those critics, at least for now. Shares were up about two percent in after-hours trading to $29.36.

“The bold bets we made on cloud services are paying off as people increasingly choose Microsoft services including Office 365, Windows Azure, Xbox LIVE, and Skype,” said Microsoft CEO Steve Ballmer in a statement. “While there is still work to do, we are optimistic that the bets we’ve made on Windows devices position us well for the long-term.”

Here are Microsoft’s financial docs on Q3 — Klein will be part of its conference call with analysts on the results at 2:30 pm PT (which I cannot cover today, but I wish the CFO a fond farewell):

PressReleaseFY13Q3

FinancialStatementFY13Q3

While the tale of a print magazine embedded in a troubled media company makes for much better reading, everyone loves a listicle. So, Time has once again put out its annual countdown of the 100 “most influential people in the world, from artists and leaders to pioneers, titans and icons.”

And, as usual, global techies represent big-time on the list, including:

* Tesla and SpaceX’s Elon Musk — about whom Virgin Group’s Richard Branson wrote, “It’s a paradox that Elon is working to improve our planet at the same time he’s building spacecraft to help us leave it.”

* Instagram co-founder and CEO Kevin Systrom, who gets inexplicably feted by entertainment bon vivant Ryan Seacrest (we are down with this anyway).

* Netflix content chief Ted Sarandos (yay for Ted, who is Mr. Nice Guy, especially for Hollywood).

* Ren Zhengfei, CEO of China’s telecom giant Huawei.

* Oh-Hyun Kwon, Samsung CEO, about whom former Apple CEO John Sculley wrote, “As Samsung builds a campus in Silicon Valley, all eyes will be on Kwon to see if the CEO with a PhD from Stanford can be as successful with software as he has been with hardware.”

* Music manager and Internet talent discoverer Scooter Braun.

* Minecraft developers, Markus Persson and Jens Bergensten, whom my sons revere (and therefore are deserving of kudos!).

* OkCupid founder Sam Yagan, who is now CEO of Match.com.

* Microsoft and Apple irritant David Einhorn, who is the only hedge fund investor dude I like.

* Deservedly ubiquitous Facebook COO Sheryl Sandberg, whose “Lean In” is a bestseller.

* Apple design guru Jony Ive, about whom Bono noted, “Jony Ive is himself classic Apple. Brushed steel, polished glass hardware, complicated software honed to simplicity.”

* Coursera co-founders Andrew Ng and Daphne Koller, who are among many in tech trying to change education.

* Chinese tech investor Kai-Fu Lee.

* Google Ideas guy Jared Cohen.

* Afghanistan entrepreneur Roya Mahboob, who gets praise from Sandberg.

* Kickstarter CEO Perry Chen, about whom “Veronica Mars” star (and user of the fundraising tool) Kristen Bell said, “There’s something so smart and magical about that idea — connecting consumers with creators and letting them vote with their own money.”

* And listicle Olympian and Yahoo CEO Marissa Mayer, garnering a major feting from Google’s Eric Schmidt, who wrote: “Google was lucky to have her help us grow into what we became, and Yahoo is lucky to have her taking them someplace new.”

(Cover photo by Mark Seliger for Time)

Didn’t know about “OBD”? Neither did I, until I met a new startup called Automatic, and went for a ride with them to get a demo of their little dongle that plugs into the port and transmits driving information to an iPhone app.

That device, the Automatic Link, can be preordered today for $69.95, for expected shipping in May.

You can think of it like a car version of the Nest thermostat, which plugs into existing heat and air-conditioning systems to help people better control and learn about their energy usage.

Beyond fuel efficiency, the Automatic Link also has safety and convenience features. It sends free crash alerts to emergency services and drivers’ contacts. It can identify and explain which of a variety of problems triggered the “check engine” light. And it also helps remember where a car is parked. An Android version is planned for this fall.

Automatic aims to help people drive better by giving them information and feedback. So, for instance, every time an Automatic driver turns on and off her car, the app compiles a trip report that shows where the car went on a map, how many miles it got per gallon, and how much that equaled in gas costs. The app displays weekly trends and timelines that she can view for her personal information or share with other people who drive the same car.

When drivers brake or accelerate too hard, or drive more than 70 miles per hour, the device chirps at them to try to curb that behavior.

“Making small changes in driving behavior can lead to big savings in gas,” Automatic co-founder and CEO Thejo Kote said. “We’re trying to improve the car ownership experience without upgrading the car.”

Most of what Automatic provides should not take too much work on the part of the user, Kote added. Activating the device is apparently just a two-step process of putting it in the port (often found below the steering wheel) and plugging in a PIN number on the phone app.

That automation theme extends throughout the product (and the company name, of course). For instance, Automatic calculates the price of filling a certain car’s tank by correlating phone GPS information to identify a gas station, matching it to a licensed database of current gas prices, and tying that to on-board diagnostics information about the tank level.

Automatic first started in 2010, and was part of the Y Combinator program as a mobile app company. Since adding the diagnostics hardware angle, the company has raised what Kote called a “bunch” of money from investors including Andreessen Horowitz and Founders Fund.

The stores would likely sell Google-branded hardware, these people said. But it isn’t clear when or where any stores would open, and one of the people said the Internet giant might not move forward with the plan this year.

Read the rest of this post on the original site »

Chris Whitmore of Deutsche Bank Securities expects the quarter’s results to be in line with those expectations, but not without headwinds. Hardware sales should be solid, and should grow about 1 percent year on year, he wrote in a note to clients issued this morning, primarily on the strength of a recent refresh in mainframe machines, Power7 servers and IBM’s newer Pure Systems line.

Software sales should be a mixed bag. With a “choppy” macroeconomic picture as a backdrop, sales of new software licenses may be uncertain. However, IBM’s main software business units, including Tivoli group, WebSphere and storage management software, are all likely to report healthy growth. He expects software sales overall to show growth of 4.5 percent.

The biggest worry about IBM going into today’s earnings report will be around services. The company announced only two large deals during the quarter, fewer than in recent quarters, and none of them had values announced along with them. “IBM’s services bookings figure remains a wildcard this quarter,” Whitmore wrote. He pegs revenue from services at $21 billion.

Another worry will be the currency effect. IBM does business all over the world, and when it gets paid in non-U.S. currencies, the strong U.S. dollar erodes the value of some of those payments.

IBM’s gross margins, a key metric indicating profitability, will be an important number to watch. Whitmore expects a gross margin of 51.4 percent, up from 50.2 percent a year ago, and operating margins of 26 percent, up from 24.5 percent in the year-ago period. Efforts by IBM to reduce its costs, and shifts toward new hardware and software products, will help keep margins growing.

The other long-term item to watch is any indication that IBM may miss its goal to report $20 billion in new revenue and $20 in annual per-share earnings by 2015. Whitmore says Big Blue is still on track and will demonstrate that in its guidance. He expects IBM to project sales growth of about 10 percent, which would imply annual earnings this year in the range of $16.60 to $16.65 per share.

Now, Microsoft is working on enhancing the visual experiences, too.

A Microsoft Research project, called IllumiRoom, was unveiled this week at CES, which uses projectors to overlay images from the TV screen to all of the walls in the room.

Microsoft is clear about calling this a proof of concept, but with a new Xbox on the horizon, it’s fun to think about the kinds of innovations that it could bring to market with new hardware.

Geekwire dug up the video of Eric Rudder, Microsoft’s chief technical strategy officer, who introduced the project onstage during a Samsung press conference.

In a video, animated snowflakes appear on the walls when it is snowing, stars float around the room when traveling through space and the walls ripple to imitate the reverberation or echo of a gunshot in a first-person shooter.

To get it to work, Microsoft is using a Kinect for Windows camera and a projector, so potentially the biggest hurdle to getting this to market will be the price of the equipment. Rudder said the technology could be used to enhance a TV show or movie, a flight simulator or educational experiences.

Here’s a video of IllumiRoom in action. As Microsoft notes, no special effects were added in the production of the video. In other words, this is real, folks.

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Nvidia, the company responsible for much of the guts inside modern smartphones, tablets and desktop PCs, unveiled “Project Shield” at International CES in Las Vegas on Sunday evening, a prototype portable gaming system built atop the Android platform.

It’s something of a multimedia mish-mash. Imagine tossing an Xbox controller, a five5-inch 720p display, the guts of a powerful quad-core tablet and a wireless speaker box into a blender, then cranking it up to “frappe.” The result is Nvidia’s foray into creating an out-of-the-box consumer-facing product, Project Shield.

The device casts a wide net. It runs media like HD movies and music, while also running apps like Hulu, Netflix and Internet radio services. It can play PC games. It will run any Android games in the Google Play store.

In other words, it’s competing with smartphones, tablets, handheld systems like the Wii U — everyone.

Consider this: It’s hard enough for an industry player to do well in just one of these spaces. Apple and Samsung are duking it out for smartphone dominance, while Apple continues to clean up in the tablet arena. Consoles and dedicated gaming hardware is still a battlefield split among giants like Nintendo, Microsoft and Sony, yet console sales are declining in recent years, and the dominant players are beginning to experiment to fight for share.

So where does Project Shield fit in? Does Nvidia focus on marketing it toward one of these verticals, or all of them? Or is this something new entirely?

For now, at least, Nvidia can focus on one thing: Finishing it. After all, it’s still a just a prototype.

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Autonomy founder Mike Lynch is still not backing down in his ongoing battle with Hewlett-Packard.

“Simply put, these allegations are false, and in the absence of further detail we cannot understand what HP believes to be the basis for them,” he said in a statement, as well as aiming at $5 billion in writedowns the company has taken related to the controversial deal. “We continue to reject these allegations in the strongest possible terms.”

Lynch’s latest volley was prompted by a regulatory filing HP made earlier today, noting that the U.S. Department of Justice was indeed investigating its acquisition of British software company, for which it is trying to write down about $5 billion in expenses due to alleged “serious accounting improprieties.”

HP had taken the case to U.S. federal authorities in the first place, but now it’s official.

This caused Lynch, who has been vociferously battling the Silicon Valley tech giant over the allegations and rejecting HP’s claims of fraud in the $12 billion acquisition, to respond again.

In his statement, he presented a laundry list of arguments about how HP is trying to fool investors by pointing the finger at him.

Here’s his whole thing, so you can read for yourself:

It is extremely disappointing that HP has again failed to provide a detailed calculation of its $5 billion write-down of Autonomy, or publish any explanation of the serious allegations it has made against the former management team, in its annual report filing today.

Furthermore, it is now less clear how much of the $5 billion write-down is in fact being attributed to the alleged accounting issues, and how much to other changes in business performance and earnings projections. This appears to be a material change in HP’s allegations.

Simply put, these allegations are false, and in the absence of further detail we cannot understand what HP believes to be the basis for them.

We also do not understand why HP is raising these issues now given that Autonomy reported into the HP Finance team from the day the acquisition completed in October 2011, there was an extensive due diligence process and Autonomy was audited as a public company for many years.

We would particularly make the following points:

* HP’s CFO Cathie Lesjak and her team, plus a number of outside advisors, had access to all Autonomy accounts and documents from October 2011 onwards, and raised no issues.

* Beginning in November 2011, HP and KPMG reviewed Autonomy’s closing balance sheet in detail, and Ernst & Young reviewed Deloitte’s audit work papers.

* Beginning in October 2011, HP studied in detail Autonomy’s tax structure and transfer pricing as well as its revenue recognition practices (led by Paul Curtis, HP’s worldwide head of revenue recognition).

* An independent, third-party valuation of Autonomy’s assets was carried out in January 2012.

* Quarterly business reviews were held with Autonomy management, Meg Whitman and Cathie Lesjak to discuss Autonomy’s financial performance.

* HP has continued to sell and account for hardware alongside Autonomy software in the same way that Autonomy did for the year since the acquisition completed.

* Regarding differences between IFRS and US GAAP accounting standards, which appear to have a role in some of the allegations HP has made, Autonomy’s accounting policies were made clear in Autonomy’s 2010 annual report.

We also note the statement in HP’s annual report that it received confirmation from the US Department of Justice on 21 November 2012 (the day after HP’s first public statement), that the Department had opened an investigation. We can confirm that we have as yet had no contact from any regulatory authority. We will co-operate with any investigation and look forward to the opportunity to explain our position.

We continue to reject these allegations in the strongest possible terms. Autonomy’s financial accounts were properly maintained in accordance with applicable regulations, fully audited by Deloitte, and available to HP during the due diligence process.

We remain deeply concerned about how this process has been conducted, and believe it is in everyone’s interest for it to be resolved as soon as possible.

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Read the rest of this post on the original site

… hardware start-ups are looking like the software start-ups of the previous digital age.

– One of Joi Ito’s Trends to Watch in 2013

Earnings on a per-share basis were 64 cents, three cents above the consensus of 61 cents. Sales were $9.11 billion, beating the consensus estimate of $9.03 billion.

Oracle shares finished the day up by more than 1 percent, closing at $32.86. After hours, the shares rose by more than 2 percent to $33.72 by 1:05 pm PT. The shares are up more than 26 percent this year.

The key number is new software license sales, which rose by 17 percent to reach $2.4 billion. License updates grew 7 percent to $4.3 billion. Hardware revenue was $734 million.

In the release, CEO Larry Ellison said that Sun Microsystems, the hardware company Oracle acquired a few years ago, has become profitable. He said that: “Sun has proven to be one of the most strategic and profitable acquisitions we have ever made,” and that Sun’s technology “… enabled Oracle to become a leader in the highly profitable engineered system segment of the hardware business.”

Here’s Oracle’s announcement.

Oracle Reports Q2 GAAP EPS Up 24% to 53 Cents;
Q2 Non-GAAP EPS Up 18% to 64 Cents

New Software Licenses and Cloud Subscriptions Up 17%; Trailing Twelve Month Operating Cash Flow of $13.5 Billion

REDWOOD SHORES, CA–(Marketwire – Dec 18, 2012) – Oracle Corporation ( NASDAQ : ORCL ) today announced that fiscal 2013 Q2 total revenues were up 3% to $9.1 billion. New software licenses and cloud software subscriptions revenues were up 17% to $2.4 billion. Software license updates and product support revenues were up 7% to $4.3 billion. Hardware systems products revenues were $734 million. GAAP operating income was up 12% to $3.5 billion, and GAAP operating margin was 38%. Non-GAAP operating income was up 9% to $4.3 billion, and non-GAAP operating margin was 47%. GAAP net income was up 18% to $2.6 billion, while non-GAAP net income was up 12% to $3.1 billion. GAAP earnings per share were $0.53, up 24% compared to last year while non-GAAP earnings per share were up 18% to $0.64. GAAP operating cash flow on a trailing twelve-month basis was $13.5 billion.
Without the impact of the US dollar strengthening compared to foreign currencies, Oracle’s reported Q2 GAAP earnings per share would have been $0.01 higher at $0.54, up 26%, and Q2 non-GAAP earnings per share would have been $0.01 higher at $0.65, up 19%. Total revenues also would have been up 5%, and new software licenses and cloud software subscriptions revenues would have been up 18%.
“New software license sales and cloud subscriptions grew 18% in constant currency,” said Oracle President and CFO, Safra Catz. “Strong organic growth in our software business coupled with a focus on the highly profitable engineered systems segment of our hardware business enabled a Q2 non-GAAP operating margin of 47%. During the last four quarters operating cash flow was more than $13.5 billion — $10.2 billion of which was returned to our shareholders as we repurchased nearly 350 million ORCL shares during that same twelve month period.”
“Q2 performance was strong and broad based as all geographies reported double-digit revenue growth in new software license and cloud subscriptions,” said Oracle President, Mark Hurd. “Applications, middleware and database all had double-digit growth in new software license and cloud subscriptions, with applications leading the pack with growth of over 30%. Our cloud offering of HCM, CRM and ERP applications plus the Oracle database and Java platform services is the strongest and most complete in the industry. Already approaching a one billion dollar run rate, our Cloud business will become much bigger over time.”
“Sun has proven to be one of the most strategic and profitable acquisitions we have ever made,” said Oracle CEO, Larry Ellison. “Sun technology enabled Oracle to become a leader in the highly profitable engineered system segment of the hardware business. I believe that products like Exadata and the SPARC SuperCluster will not only continue to drive improved profitability in our hardware business, by the end of this fiscal year, they will also drive growth in our hardware business.”
On December 3, 2012, the Board of Directors declared an accelerated second, third and fourth quarter cash dividend totaling $0.18 per share of outstanding common stock. This accelerated dividend is intended by the Board to be in lieu of quarterly dividends Oracle would have otherwise announced with its quarterly earnings results for the second, third and fourth quarters of fiscal year 2013, and that would have been paid in calendar year 2013. This accelerated dividend will be paid to stockholders of record as of the close of business on December 14, 2012, with a payment date of December 21, 2012.

As with previous rounds of predictions he has made — like for 2011 and 2012 — some of what he predicts already kind of makes sense if you’ve been paying attention to the way things are going, but will become more pronounced in the coming year. Others are a little more surprising.

1. “Carryalongs” Dominate Global Computer Markets
Anderson lumps notebooks, tablets and everything in between into a category he has labeled “carryalongs,” and he says they will take their place as the largest segment of computing devices. “Surface and slates and iPads and Kindle Fire and Nexus 10 and everything else that’s got a 7-inch screen plus or minus an inch or so, will be the biggest category of computing device.” Okay, then.

2. Intel: Long Live the King, the King Is Dead
Intel may still be the biggest supplier of chips to the world’s computing devices, but if you look at prediction number one, you know that Intel doesn’t yet play a significant role in the “carryalong” market outside of traditional notebooks. “Qualcomm and ARM are the new William and Kate,” Anderson says. Intel is primarily a supplier to the world’s server vendors. With CEO Paul Otellini retiring in May, the one way out of its current troubles will be to name a new CEO with what Anderson says are “real tech chops.” Otellini, he says, “marked the first time a marketing guy got the CEO job at Intel. Before that they were all engineers, except Craig Barrett who was an operating guy.” Intel, he says, “has lost the consumer stuff, the handheld stuff, the slate and tablet stuff. All it has left are servers. It has lost the mastery that it had.”

3. Net TV Dominates
A majority of U.S.-based homes will have Internet-connected TVs and related products like AppleTV, Roku boxes and so on. This will fundamentally change the production of content in new and interesting ways, and the result will be a lot more cheaper content. “This is going to become what TV is, and the result is that the cable and satellite companies are going to have a tough time. With the exception of sports, this is the end of cable as we know it.”

4. The LTE vs. Fiber Battle Creates Regional Revolutions in Broadband
In certain regions where the only broadband Internet option is a DSL line, LTE wireless devices and services will become the standard replacement, where LTE service is available. “In most cases you’ll be paying more, but you’ll also be getting more. This is a really interesting flip in some regions. It will be interesting to see this fight because it has a lot to do with what’s in the ground.” It will mark the start of a fight between LTE and fiber optic technology that will take a decade to resolve and what Anderson says is a “real revolution” in broadband pricing and provision.

5. Google Gets Its Mojo Back.
Google’s efforts in email, video, smartphones, maps and driverless cars have in Anderson’s opinion opened up new long-term paths for expansion at Google. Having killed off several products and services that weren’t seen as core to its operations, Google will in 2013 look a lot more focused and powerful when compared to Facebook, Apple and Microsoft, he says. “Google has turned an important corner where after all the experimentation, it has created a number of true businesses where they have a foothold and terrific products, and there are more to come.”

6. The Driverless Car Becomes a Serious and Competitive Global Project
And speaking of Google’s driverless car, that’s going to become a thing over the long term. Volvo plans to become a player. It’s not just a curiosity, it will in the future become a real market, he says.

7. eBooks Are the books
Total ebook sales in dollars will beat adult paperback sales in 2013, Anderson says, and will continue on a growth trajectory toward dominating the entire book-publishing business.

8. Enterprise IT Struggles to Achieve Very Modest Gains
“Big Data” may be a big marketing cry that keeps people talking about enterprise IT, but combined sales of hardware, software and other enterprise tech will collectively grow very little on a global basis. “The year-to-year spending increase will be very small, maybe only 1 to 2 percent, even though the companies doing the spending are sitting on trillions in cash.” One exception: Security.

9. Hacktivists Rule.
Hacktivists like Anonymous and those like them will take on an increasingly important and, Anderson argues, permanent role in forcing political entities to become more transparent. They’ll cease being annoying and actually become a longer-term part of the political and cultural landscape. The result? After struggling to keep their secrets, governments will be forced, in time, Anderson says, to become more open.

10. Supply Chain Security Becomes a Major Factor in Global Technology Purchases
“Maybe all that outsourcing wasn’t such a good idea after all” will be the thinking of many CEOs who’ve spent the last decade or more arguing that lower production costs brought about by inexpensive labor costs in China, Taiwan and other countries will cause a big re-think over security concerns. Academic researchers in the U.K. claim to have found what many people have only silently worried might be possible: An unpatchable backdoor on a military grade encryption chip built in a Taiwanese fab. Companies in what he calls “inventing nations,” exasperated by the constant theft of intellectual property that is often traced to China, will grow increasingly uneasy at their relationship with that country and look for ways to bring more production back to their own shores. A new phrase — “clean supply chains” — will gain currency in tech manufacturing circles and will amount to an admission across many industries, not just tech, that today’s supply chain arrangements are “virtually all compromised,” Anderson says. This will lead to talk of ways to relocate manufacturing operations back in the U.S. and other countries. It won’t be easy — China will retaliate against companies that say anything like this publicly. “You almost have to decide to do what Google did and all but leave the country.” Apple is already doing it. Others, he said, will follow.

The founding CEO of Autonomy today lashed out in an open letter to HP’s board of directors, demanding “immediate and specific allegations” concerning financial and accounting improprieties that HP said on Nov. 20 had artificially inflated the value of the British software company by about $5 billion. HP acquired it in 2011 for about $11 billion.

Lynch insisted that even after a week of public declarations by HP on the issue, he still hasn’t been officially contacted by HP about any of it, and so can’t properly answer allegations about improper accounting and other irregularities. He also reiterated points made in numerous interviews, including one with AllThingsD, that at least some of the problems HP chalks up to accounting malfeasance can be explained away, at least in part, by differences in accounting standards that companies in the U.S. and the U.K. follow, while other problems can be tracked, he says, to HP’s own mismanagement of Autonomy after the deal closed.

There have been other stories, including one in the New York Times on Monday, and one in The Wall Street Journal today, that have added some fascinating anecdotal detail to the inner workings of the relationship between Lynch and other executives, and include some examples of the kinds of transactions that have HP accountants all up in arms.

HP’s response to Lynch’s latest public salvo was pretty straightforward: “We look forward to hearing Dr. Lynch and other former Autonomy employees answer questions under penalty of perjury,” implying, of course, that Lynch will in time be subpoenaed either as a witness or a defendant in a criminal prosecution or civil lawsuit.

At this point, one has to wonder why Lynch is fighting these claims in the media so aggressively, and not taking the expected — and indeed customary — defensive crouch behind a platoon of highly paid lawyers.

He has gone — and remained — on the offensive because, right now, HP is vulnerable, or it is at least perceived to be in a weakened state. With its shares trading close to the lowest point seen in a decade or more, sales in nearly every major business unit on the decline, and plagued by strategic misfires brought on by a succession of CEOs, it is easy to argue in public that HP is the author of its own misfortune.

Also, it doesn’t hurt Lynch that the deal for Autonomy was completed under the messy 11-month stint of former CEO Léo Apotheker, who was ultimately deemed by HP’s board to be unprepared for the task of running the world’s largest technology company. This same board — including current CEO Meg Whitman — simultaneously endorsed much of Apotheker’s vision at the same moment it decided he lacked the competence to carry it out.

Lynch’s PR strategy is simple: Muddy the waters. Charges of mismanagement coupled with anecdotal tales of jaw-dropping corporate and bureaucratic stupidity, poor business choices and differences in accounting standards may not logically add up to a $5 billion explanation. But given HP’s current state, the court of public opinion can’t help but wonder if HP isn’t trying to heap as much blame as it can for its current woes on Lynch and an overvalued Autonomy.

But imagine for a second if, in this drama, HP was replaced by IBM. Perhaps I’m wrong, but somehow I doubt Lynch would be quite so willing to fight so aggressively or so publicly without first having lawyered up. But then it wouldn’t be as interesting to write about.

(Image taken from the English children’s book and animated cartoon “Mr. Chatterbox.”)

It turns out there were, and a few smart short-sellers — the most obvious one is Jim Chanos of Kynikos Associates, who in the last 24 hours has been hailed as a bit of a god of short-selling wisdom on CNBC — who read the situation correctly and made money.

There are others who saw troubles at Autonomy that should have occurred to HP’s due diligence team. One is John Hempton, of Australia’s Bronte Capital. In a blog post this morning he sums it up this way: Good software companies tend to have low receivables and higher unearned income on their profit/loss and balance sheets. At Autonomy, it was the reverse.

Here’s a little Accounting 101: A receivable is a debt a company is owed and expects to be paid. If you buy a car from your neighbor and pay him half now and half next month, he’s counting on the fact that he’s going to be paid that other half next month. This is a receivable, and on a corporate balance sheet it goes in the assets column. This is how it tends to work for durable and tangible goods, which software is not.

Software is usually sold for cash up front, and then any further payments tend to come from either service and support on an ongoing basis or, as in the case of companies like Workday or Salesforce.com, as subscription revenue. In either case, the company selling it can’t report the ongoing payments as income because it hasn’t been paid yet, and since there are no tangible goods involved, the risk of not being paid is higher. The customer could go out of business or cancel the subscription or simply stop paying. As such, the expected future payments can’t be counted as assets, and in fact have to be accounted for as a liability, essentially money that might be lost. Sometimes they’re called “deferred revenue” or “unearned income.” Still, these numbers can and often do provide a strong indication of future revenue, which is why cloud software companies like Salesforce, Netsuite and Workday report them regularly.

So here’s how Hempton describes what he says was the most glaring problem that should have been obvious to the team at HP conducting due diligence on Autonomy:

Sales were $870 million.

Receivables were $330 million — which is four and a half months of receivables.

Deferred revenue is $177 million — just over half of receivables.

This is really perverse for a software company. Software companies sell stuff that is barely tangible — they sell it up front and for cash. They have very few receivables.

They do however have an obligation to service that software for a long time after they sell it — so the unearned income is relatively large (usually a multiple of receivables).

Autonomy was booking as income lots of cash it had not received (which is why the receivables were large) and not booking any obligation to provide future services for that income.

This is prima-facie suspect (and you could tell simply by looking at the balance sheet). All it required was basic applied accounting.

Here’s another warning sign. I’ve talked to a few people familiar with traditional ways of valuing software companies, and they tell me that Autonomy’s operating margins, which grew from 15 percent in 2005 and surpassed 50 percent by early 2010, were too high to make sense.

Autonomy, they say, hadn’t grown to sufficient scale — at sales just shy of $1 billion with a relatively small base of customers — to make margins in the upper 40 percent range realistic or likely. Software companies increase their margins by boosting the number of customers they sell to. The more customers you have, the better to amortize your research and development costs, which are essentially the only real costs associated with creating software.

The thing is, once you make a sale, R&D costs don’t recur. The sale to the second, third, fourth and fifth customers are, aside from any marketing and costs incurred to make the sale itself, essentially pure profit. With a larger customer base, each customer accounts for a smaller and smaller sliver of the R&D cost. And once you incur the R&D cost, it’s over with. Thus, margin and revenue move together.

As one executive of a software company who didn’t want to named observed to me today: “Autonomy didn’t have the scale to achieve the margins they claimed. Once you understand that, it’s impossible to see how what HP paid made sense.” Hm.

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Calling from the U.K., Lynch said that he had been “ambushed” by HP’s accusations, and that he hasn’t been contacted in any official capacity by HP, its lawyers or anyone else; the first he heard about the accusations against Autonomy management was via the press release.

He went on to accuse HP of mismanaging Autonomy and essentially sabotaging its performance after the $11.7 billion acquisition closed. He said that once Autonomy was in the HP tent, HP managers arbitrarily added a 30 percent markup on Autonomy software, which had the effect of driving some longtime customers away. In other cases, Lynch said, HP salespeople were paid commissions to sell third-party products that competed with Autonomy, but no commissions to sell Autonomy products.

Below is a transcript of our conversation:

AllThingsD: Mike, thanks for the call. I presume you have a different view of events concerning the accusations leveled by HP against your former company, Autonomy.

Lynch: Basically, we reject completely the assertion of HP. It’s completely wrong. The reality of the situation is that when HP bought Autonomy it had hundreds of people involved in due diligence, which was described at the time as “meticulous.” And KPMG, Barclays and Perello were all involved there. And they’ve actually run it for a year. To somehow admit a $9 billion elephant in the room just beggars belief, frankly.

What do you think of the specifics of the allegations? There were hardware sales, sales of software to value-added resellers, and some concerning some subscription revenue that was booked incorrectly. Can you address any of the specifics?

I don’t know any of the specifics because no one has been in touch with us. We’ve not heard anything from any partner other than what’s been in the press release. It’s been a bit of an ambush. I don’t know what she’s referring to or why. Obviously, there are differences between IFRS [International Financial Reporting Standards] accounting and the U.S. GAAP system, but the fact is that all our financial information was given to Deloitte, which, unlike most European accounting firms, audited us every quarter. And consequently we’re confident in the numbers being right.

Do you anticipate being sued personally by HP, or investigated criminally in this matter? Have you retained counsel?

As I said, I’ve heard nothing from anyone, not even from HP. You’re the first person that has mentioned these to me. I completely and absolutely reject the suggestions. So let’s see some evidence and we’ll explain it from there. All we’ve done is gotten a press release. There haven’t been any of the lawyer letters that one might expect in a matter such as this.

The sad thing about this is that it’s a distraction. Having been on HP’s Executive Council, I walked into a company that was riddled with internecine warfare, and obviously Léo Apotheker and Shane Robison [HP's former chief strategy officer] had a strategy, which was about taking down certain parts of the business and divesting them. And obviously there was another one of those Hewlett-Packard coup d’etats. And Léo and Shane were out, and the other divisions became more powerful, and we obviously had a very hard time inside HP.

What you saw was a situation where hundreds of the Autonomy staff left — remember, it was a pretty small company with a small staff — they all left, and the senior management team left. There was significant mismanagement of the asset. So the quarter when the numbers at Autonomy went south was the quarter that HP took over and took over the sales process.

They did things like, if the customer had an enterprise sales agreement with Autonomy, they could no longer buy through Autonomy, they had to buy through HP’s Enterprise Services Group. And ES insisted on putting a 30 percent markup on the software. So, suddenly, established customers had to pay 30 percent more for that software. And that is just one of a long list of examples.

If an HP salesperson sold a competitive product, they got a commission. If they sold Autonomy, they didn’t. These are the kinds of internal issues that went on and greatly damaged the Autonomy business and led to a great number of the Autonomy staff leaving. Since the management team has left, it’s sad to see that the company’s prospects have deteriorated. And I guess that is what is behind this write-off.

It sounds like much of this goes back to the fundamental question of Léo Apotheker’s strategy. He wanted to move HP toward high-margin businesses like software and get out of low-margin hardware like PCs and printers.

There was a strategy which the board of directors had authorized Léo and Shane to carry out, and acquiring Autonomy was a key part of that decision. When they were ousted, the decision to divest the hardware business was reversed, and you had a very messy strategic situation.

Then it really comes down to questions of accounting, and you think it can all be properly explained.

If we are given the chance to explain it, it can all be properly explained. You will see that all the information was given to our auditors, who made the correct decisions under IFRS, I have no doubt.

Meg was on CNBC and on conference calls today, laying much of this at your door, if not directly, then by inference, reminding people that she let you go after Autonomy failed to make its numbers, and so forth. We’ve never heard the other side of that conversation. Can you give any insight into it?

Sadly, when these things happen one gets gagged. The reason why those numbers were low in that quarter was because of the switchover to HP managing the sales process. As I said, arbitrary markups were added on, and commissions were given to people to sell against Autonomy. And Autonomy deals were wrapped up into packages, which means that the normal course of selling software at the end of the quarter was defeated. So this is just an example of what went on, and what we’re really talking about is a company not understanding the software business. And not understanding an acquisition. I’m afraid it’s an ongoing situation. You saw it with Palm and with EDS. And the important thing about Autonomy is that it has a great history. Obviously, for the first two quarters the business was fine within HP until these management changes were put in place. There were silly things like divisions of HP refusing to sell Autonomy because it hadn’t been certified by them. This kind of internal bureaucracy and infighting going on there led to the staff leaving. Autonomy is the kind of company where the staff is really vital, and there were hundreds lost during that spring period. And then most of the senior management team left. By then, the company was so damaged, to the point where the numbers are not going to continue on the line that you would like them to.

HP says it was a member of your senior management team who came forward with these allegations. Do you know who that is, and can you name them?

No. Again, I have no idea what they’re talking about. I don’t believe any of the senior people are still there. So I’m afraid I’m in the dark.

Is it possible, then, from your point of view, that HP is trying to take a big charge, recalibrate its financial position and simply lay as much of the blame as possible on Autonomy?

I think the reality is that the business has not been managed in the last year. It’s not inconceivable that the business has gone down in value. The question here is about the amount. I suspect that every spare cent has been thrown into this write-down. Meg has spent the day talking about this, more than she has about delivering the worst results in HP’s 70-year history. HP needs to think more about the fundamental problems of its business. I hope they can rebuild what was once a great Silicon Valley company.

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