Autonomy's problem? Leadership were out of their league, according to HP CEO Whitman

'I'll be back', says Autonomy's Mike Lynch

When HP offered $11bn (£7bn) to buy Autonomy, pretty much everyone said it was overpaying. And when Leo Apotheker, the HP CEO who initiated the purchase, was tossed overboard and replaced by former eBay CEO Meg Whitman, she had every opportunity to call a halt to proceedings, but didn't.

Today, Mike Lynch, the co-founder and CEO of Autonomy who is now being 'let go' by HP, may well be wishing that she had. Certainly, he won't walk away empty-handed. HP's willingness to pay a 64 per cent premium for the company meant that both he and co-founder Richard Gaunt were each credited with about £566m into their respective current accounts when the takeover was completed.

Lynch had quickly become frustrated at the bureaucracy of HP – not simply the level of bureaucracy, but the way in which it was exercised. Indeed, members of staff who beat Lynch to the exit say that working with HP was like being water-boarded on a daily basis, according to the Financial Times.

But Lynch is among the last, rather than the first, of Autonomy's senior executives to leave following the acquisition. Sushovan Hussein (president), Steve Chamberlain (chief financial officer), Pete Menell (chief technology officer), Nicole Eagan (chief marketing officer), Andy Kanter (chief operating officer) and Martina King (head of Aurasma) are all among the senior staff that left the company following the HP takeover.

According to reports, as many as one-third of employees have left since the HP takeover. Such a loss of staff in a knowledge-led company does not bode well.

The spotlight was thrown on Autonomy after a disappointing set of second quarter results, which were released on Wednesday. While HP's revenues declined by $939m (£599m) to $30.69bn (£19.6bn) – a fall of three per cent – the focus was very much on Autonomy, and the growing problems there.

While Autonomy's revenues were not separated out from HP Software's, the figures indicate a significant shortfall in revenues. HP Software posted revenues of $970m (£619m), but in the same quarter a year earlier – before the Autonomy acquisition – they weighed in at $797m (£508.6m). In other words, Autonomy added around $170m (£108.5m), at best, in revenues when prior to HP's acquisition it had been achieving quarterly revenues of about $250m (£159.5m).

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Autonomy's problem? Leadership were out of their league, according to HP CEO Whitman

'I'll be back', says Autonomy's Mike Lynch

In the earnings conference call, Whitman pinned the blame on Autonomy's struggle to grow up from being an entrepreneurial start-up with a charismatic leader into a proper enterprise software vendor.

"In my view, this is not the product. Autonomy is a terrific product. It's not the market. There is an enormous demand for Autonomy. It's not the competition. I was wondering, is there a competitor that we didn't see, and the answer to that is no. This [is an example of] classic entrepreneurial company scaling challenges," she said.

In order to ‘professionalise' the company, Whitman is parachuting in Bill Veghte, HP's chief strategy officer, also the executive vice-president of HP Software, "to help improve Autonomy's performance". Lynch will be off just as soon as the "transition period" is up.

She added: "I have seen this movie before. When you try to go from $40m to $400m to $1bn to $2bn, boy, it's a whole different ball game. We need to put in some sales processes.

"We need to put a better interface into HP in terms of how Autonomy interfaces with our services business, as well as our server, storage and networking business, and we need a new organisational structure to support a $1bn-plus company."

While the remaining staff at Autonomy now have that re-organisation to look forward to, HP's staff across the world are facing redundancies – 27,000 out of a total of 349,600 the company employed at the end of 2011. Whitman's redundancies will include some 1,600 in the UK.

As a result, unions representing HP staff are far from happy. "The position at the moment is that both Unite and PCS members think it's time to draw the line in the sand. Everyone is tired of watching their jobs being exported. It appears that HP's biggest problems are on its [Asia-based] manufacturing, rather than IT side, but HP has stated that its position is to hit all regions equally, and that means, in effect, that more UK jobs will be offshored," said Kevin O'Gallagher, Unite's national officer for the IT sector.

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Autonomy's problem? Leadership were out of their league, according to HP CEO Whitman

'I'll be back', says Autonomy's Mike Lynch

Indeed, according to HP chief financial officer Cathie Lesjak the company expects to cut 9,000 staff in the current fiscal year, with an emphasis on redundancies in the US and Europe, while hiring employees in lower-cost regions.

According to HP though, Autonomy jobs in Cambridge are currently safe, although O'Gallagher said that he would take such assurances with a "pinch of salt". He added: "They [HP] have given the Cambridge press more information than they've given the trade unions."

On the record, Whitman remains confident about Autonomy's future.

"It may take us a couple of quarters to work through some of the growing pains of the organisation. But I think this was a very smart acquisition. I feel great about the product. We have absolutely hit one of the themes that is changing most in the technology business. The opportunity around big data and analytics is fantastic, and it can flow right across all of our businesses," said Whitman.

Lynch, meanwhile, will no doubt be planning his next move – and that could be in big data, too. Lynch will have little incentive to sign a non-compete clause in exchange for a large wedge of cash – having been given more than enough by HP last autumn.

His "friends", meanwhile, speaking to the press have implied that he won't be going home to feed his Koi carp and spend the rest of his life playing with his model trains. "He's not going away. He still has entrepreneurial ambitions," one told The Guardian.

Indeed, Autonomy was not Lynch's first company start-up and it will almost certainly not be his last.