Don’t blame the Hewlett-Packard board for signing off on buying a company that had allegedly cooked its books, CEO Meg Whitman told Wall Street analysts today.The board listened to reports from accountants when they okayed the $11 billion deal to buy Autonomy, she said.
Whitman was a member of the board at the time. So were all the other current board members save one, Ralph Whitworth, who joined about a month after the deal closed.
Whitman joined the board in January 2011. The Autonomy deal was announced in August of that year.
Now that HP has accused Autonomy executives of improper accounting that made the company look more profitable than it was, you have to wonder: Why didn’t the HP board question the purchase price in the first place?
That’s what Benjamin Reitzes, an analyst for Barclays Capital, asked on the call. Whitman’s answer: The board wasn’t responsible. The two people who were responsible, in her view, are now gone: her predecessor, Léo Apotheker and HP’s longtime strategy chief, Shane Robison, who retired in November 2011, shortly after the Autonomy deal went through.
She didn’t mention that Autonomy CEO Mike Lynch left in May, some eight months after Whitman became HP’s CEO.
HP says the company only discovered the problems after a whistleblower came forward after Lynch’s departure.
Whitman explained that while board members “feel terribly” that they voted for the deal, they trusted the due diligence by accountants from Deloitte. As well, Whitman said, “we hired KPMG to audit Deloitte, and neither of them saw what we now see.”
Lynch has denied wrongdoing by Autonomy. He also said that Barclays and Perella Weinberg looked into Autonomy’s financials before HP closed the deal.
Here’s the full transcript as transcribed by Seeking Alpha.
Benjamin A. Reitzes- Barclays Capital, Research Division: Meg, with regard to the Autonomy situation, we understand what you’re doing in terms of going after the folks that you feel misled you, but what about internally? What do you — who’s responsible internally for the acquisition? How are you analysing yourself internally? The board — I think everybody at the board was there when the Autonomy decision was made, except for Mr. Whitworth. So what’s the introspective? What are you doing internally to make sure that you have the right processes? And who are you holding accountable internally, if anyone, to make sure this doesn’t happen again and that maybe even there are some folks internally that need to be held responsible and we could see repercussions of this in the near future? How are you looking at it internally?
Margaret C. Whitman- Chief Executive Officer, President and Director: Yes, well, first of all, the CEO at the time and the head of strategy who led this deal are both gone, Léo and Shane Robison. With regard to the board, you’re right. Most of the board was here and voted for this deal, and we feel terribly about that. What I will say is the board relied on audited financials, audited by Deloitte, not brand x accounting firm but Deloitte. And by the way, during our very extensive due diligence process, we hired KPMG to audit Deloitte, and neither of them saw what we now see after someone came forward to point us in the right direction. That said, obviously, we have not done any big acquisitions, and we will review the acquisition process. What I will say is due diligence now reports to our Chief Financial Officer. At the time, when I came to the company, I was surprised to find that due diligence and M&A reported [to] strategy as opposed to the Chief Financial Officer. I’ve never seen that before in my career, and that’s a decision I made right away before I knew any of this. So I understand your point of view, and we have made a few changes in that regard. But in the end, you have to rely on audited financials and we did, and we will now carry on. And as you know, we’ve reported this to the SEC, as well as to the Serious Fraud Office, and we will take it from here.
Benjamin A. Reitzes: And in terms of internal personnel, though, based on what you see right now, the organisation is — can remain stable based on this occurrence?
Margaret C. Whitman: Yes, it can. I mean, really, the 2 people that should have been held responsible are gone, and that’s the way I see it right now. So I feel good about the sort of the stability of leadership.
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