HP knew of Autonomy's accounting practices before takeover, according to newly released documents

Questions over Autonomy's accounts dismissed by HP as 'negative tactics' by Oracle

New documents released by HP indicate that its management were aware of Autonomy's accounting practices before the acquisition, but that the then CEO Leo Apotheker had dismissed questions over some of Autonomy's practices raised by "sell-side analysts" as "negative tactics by [Mark] Hurd/Oracle".

Hurd was Apotheker's predecessor, who had been booted out over allegations of sexual harassment. He was recruited by Oracle straight after and is now co-CEO of Oracle alongside Safra Catz.

The analyst questioned by KPMG also suggested that Autonomy had "reported a suspiciously consistent number of quarterly OEM signings".

The slew of documents released on Friday suggest that HP was aware that Autonomy sold hardware and software bundled together, and that KPMG's due diligence had explained how Autonomy's reseller deals worked and had warned that Autonomy's growth rate would be adversely affected when it adapted to HP's accounting practices, post-takeover.

The documents have come to light after they were filed as exhibits in the ongoing shareholder litigation brought against HP for its handling of the acquisition of Autonomy, according to Brunswick, the public relations firm that has been retained by former Autonomy CEO Mike Lynch (pictured).

The documents also indicate that former HP chairman Ray Lane opposed the deal and tried to scupper it after reading some of the reports provided by KPMG.

"I don't think it's the panacea we think it is. I read the analysis you [Apotheker] provided me of their organic growth and I still see them as a 'roll-up'. I don't think the board thought that (at least I don't remember that discussion) this was largely a roll-up when we contemplated the price," he emailed to HP's then CEO Leo Apotheker at the beginning of September - a month after the deal had been announced.

However, Apotheker vigorously refuted criticism of the deal made by Ray Lane and others, and denied that Autonomy had grown largely via "rolling up" various acquisitions.

"I disagree that Autonomy is a roll-up in the 'classical' sense. They did a few acquisitions, less than many other software companies of similar size, and integrated them all into their platform IDOL. By doing so at 40 per cent margin they have demonstrated the power of the platform, as well as the capability of the management team," Apotheker responded to Lane.

He added that the Autonomy acquisition would enable HP to boost its software revenues to between eight and nine per cent of its revenues.

The documents also indicate that HP planned to conduct a series of share buybacks in a bid to "offset the premium on Autonomy", and suggest an acceptance by HP that the takeover would be conducted under UK jurisdiction, which may undermine HP's plans to sue Autonomy founder Mike Lynch and chief financial officer Sushovan Hussain for $5.1bn in the US.