HP's former CEO says he would have abandoned the calamitous $11 billion deal that put the firm in a tailspin

  • Former HP CEO Leo Apotheker has said he would have abandoned the firm’s disastrous acquisition of British software firm Autonomy if he had been aware of its alleged fraudulent dealings.
  • Apotheker was the prime architect of the Autonomy acquisition in 2011, but was booted out before the deal closed. HP subsequently wrote $US8.8 billion off Autonomy’s value.
  • Apotheker appeared as a witness for HP during its $US5 billion civil suit against former Autonomy CEO Mike Lynch and former CFO Sushovan Hussain.
  • He is considered to be one of the most disastrous CEOs in tech, and his rationale for pushing the deal through is under the microscope in court.

History has not been kind to Leo Apotheker.

The German-born tech executive is best known as the former CEO of Hewlett-Packard, and one of the shortest-tenured bosses in tech after being booted out after just 12 months.

His hasty departure came in 2012 after he and then-chief technology officer, Shane Robison, oversaw HP’s $US11 billion acquisition of British software company Autonomy in 2011.

The deal was considered overvalued and sent HP’s share price tanking. Overall HP’s share price dropped by roughly 50% under Apotheker’s leadership.

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Internal documents show how HP planned on killing bad press over a disastrous $US11 billion acquisition

He was out before the deal even closed – with a $US10 million severance package – and HP wrote $US8.8 billion off Autonomy’s value. It is now suing two of Autonomy’s former executives in a $US5 billion fraud trial in London’s High Court.

The Silicon Valley firm has accused Autonomy’s former CEO Mike Lynch and its former CFO Sushovan Hussain of cooking the books to make Autonomy seem healthier than it really was. The pair deny the allegations and Lynch has countersued HP.

Apotheker appeared as a witness for HP on Monday and, as the prime architect of the deal, his decision to acquire Autonomy was put under the microscope. In interviews since stepping down from HP, Apotheker has avoided talking about Autonomy at all.

Now aged 65, the grey-haired, bespectacled Apotheker gave his evidence in London’s High Court, formally dressed in a dark blue suit and tie. Although mostly speaking in soft, German-Belgian accented tones, he occasionally became fiery as he butted heads with Robert Miles QC, Lynch’s defence lawyer.

The former HP CEO attempted, both under cross-examination in court and in his witness statement, to avoid stating definitively whether he thought Autonomy was fraudulent. But, pressed by Lynch’s lawyer, he admitted he thought it was.

Asked how much he had thought about the deal since 2011, Apotheker responded: “I don’t think I discussed it with many people, it’s not a happy memory for me. Have I thought about it? I lived through it.”

In his witness statement, Apotheker carefully notes that he has been asked by HP to accept its interpretation of the facts: That Autonomy inflated its revenue.

He went on to suggest he would have dropped the deal if he’d known about Autonomy’s alleged accounting issues. “No such facts were known to me at the time of the acquisition. If they had come to my attention before the Autonomy transaction was closed, I would have been highly suspicious and demanded answers,” he said, according to his statement.

He added: “If such information had come to my attention prior to announcing the deal, I nevertheless think it possible that I would have given Autonomy and its leadership an opportunity to explain the discrepancies. If, as seems most likely, the explanation I heard was not satisfactory, l have no doubt that I would have recommended to HP’s Board that it should abandon the deal…”

Leo Apotheker witness statementHPLeo Apotheker’s witness statement

Apotheker denied that under his leadership, HP didn’t scrutinise Autonomy’s books properly

At the heart of HP’s case is the contention that Autonomy presented itself as a “pure” software company, but fudged where a chunk of its revenues actually came from. HP argues that Autonomy did this in several ways, such as by selling hardware such as laptops, keyboards, and mice, and by mischaracterizing some of its sales.

Lawyers for Lynch have fought the allegations, contending that HP rushed its due diligence and that Autonomy had been open about its hardware sales.

Apotheker denied this in his witness statement. “Far from cutting corners, I encouraged the team to pursue the due diligence we felt we needed,” he said.

In the witness box, Apotheker added that Lynch had specifically sold Autonomy as a software-focused company, rather than one that also relied on hardware sales to make money.

“[Lynch] said Autonomy was a pure-play software company, focused on software,” the former HP CEO told the court. “He briefly talked about the quality of the business model, at which point he did mention it was a very focused, pure-play software company.”

At one point Miles asked Apotheker why he hadn’t read Autonomy’s most recent financial results around the time of the deal, asking incredulously: “You didn’t have 30 minutes?” Apotheker responded: “I was running a $US125 billion company, sir, and minutes are pretty precious.”

The case continues.

You can catch up on our full coverage of the trial here.

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