HP Autonomy Fraud Claims

Published Nov 20, 2012 05:00 AM
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Massive fraud is revealed in a superstar analytics company -- a lesson that all of us in surveillance should take to heart.

This week, HP disclosed huge problems with their acquisition of UK mega analytics firm, Autonomy, the poster child for what analytics supposedly could do to transform business. HP took a nearly $7 billion loss and their stock dropped more than 10%.

The Analytic Claims

Autonomy made a significant run at the video surveillance / video analytics market in the mid 2000s, with their Virage line [link no longer available]. Needless to say it was not successful but the craziness of the claims and their arrogance of their approach was amazing. There was not a single, off the wall, video analytic trick or tactic that Automony's people did not brag they could do.

The Accounting Tricks

Yet now, the real tricks are being exposed. The NYTimes shares the following:

  • Autonomy resellers "reported sales to customers that didn’t actually exist"
  • "Autonomy was taking licensing revenue upfront, before receiving the money. That improper assignment of sales inflated the company’s gross profit margins."
  • "Hardware was sold at a 10 percent loss. But the loss was disguised as a marketing expense."
  • "Autonomy sold hardware like servers, but the company booked these as software sales in some instances, thus underplaying expenses and inflating the margins"

This is textbook tech company bad behavior and a risk in the surveillance market as well.

The Lesson

Anytime you see a company make crazy claims about things others cannot do, especially with wild growth projections, be very careful. Those that are fast and loose with technical truths tend to be so about their finances as well. The end result is often a bloodbath for the company, its investors and customers.

Update 2018

Ex-Autonomy CEO Michael Lynch Indicted for Fraud Tied to 2011 HP Deal

Update 2022

HP wins multibillion-dollar fraud case over Autonomy sale