Arik Hesseldahl

Recent Posts by Arik Hesseldahl

Why Mike Lynch Is Playing PR Hardball With HP

Why is Mike Lynch being so publicly aggressive in defending himself against Hewlett-Packard?

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.”)

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