

From H.P., a Blunder That Seems to Beat All - JumpCrisscross
http://www.nytimes.com/2012/12/01/business/hps-autonomy-blunder-might-be-one-for-the-record-books.html?pagewanted=1&nl=business&emc=edit_dlbkpm_20121130

======
YokoZar
"Hewlett-Packard’s acquisition last year of the British software maker
Autonomy for $11.1 billion “may be worse than Time Warner,” Toni Sacconaghi,
the respected technology analyst at Sanford C. Bernstein, told me, a view that
was echoed this week by several H.P. analysts, rivals and disgruntled
investors.

Last week, H.P. stunned investors still reeling from more than a year of
management upheavals, corporate blunders and disappointing earnings when it
said it was writing down $8.8 billion of its acquisition of Autonomy, in
effect admitting that it had overpaid by an astonishing 79 percent."

Doesn't that mean they overpaid by 482 percent? It is true that the
acquisition lost 79 percent of its value, but the editor seems to have gotten
the math wrong here.

~~~
ghshephard
Almost correct - actually 382 Percent overpayment. 0% overpayment would have
been 2.3 Billion. ($11.1 - $8.8).

Did you send in a correction to the Editor?

------
valuegram
"From H.P., a Blunder That Seems to Beat All"

"The dubious title of worst corporate deal ever had seemed to be held in
perpetuity by AOL’s acquisition of Time Warner in 2000"

No mention of Bank of America's acquisition of Merrill Lynch? Within 15 days
of the acquisition's close, Merrill recorded an operating loss of $21.5
billion... Leading to a market capitalization loss of $108 billion.

~~~
brianchu
The article makes a point of comparing the mergers to the broader economic
conditions at the time. HP acquired Autonomy and lost money at a time when the
computer industry was (and still is) growing.

On the other hand, AOL and Time Warner merged right before the bubble burst
and BoA acquired Merrill Lynch at the same time the economy was crashing.
Without the acquisition, Merrill would have gone bankrupt anyway and BoA's
market cap would have cratered anyway because the entire financial sector was
cratering at the same time. In fact, the US government heavily pressured
(threatened) BoA into acquiring Merrill ([http://www.washingtonpost.com/wp-
dyn/content/article/2009/04...](http://www.washingtonpost.com/wp-
dyn/content/article/2009/04/23/AR2009042302461.html)).

So no, they're much different cases.

~~~
valuegram
Of course they are "different cases" - there are always separate macroeconomic
conditions, and there was government intervention in the acquisition, but the
fact still remains on the "worst corporate deal ever" front, BAC acquired a
company that lost $20+ billion in the first post-acquisition quarter.

~~~
001sky
They are not comparable. Its good info and context, but you're overselling it
as a comp. "worst corporate deal ever" is shorthand for executive decision. ML
was too policy infected to be considered a "real deal" with other options on
the table. If you take the "choice" away from the transaction, you are no
longer takling about a "deal" in the common sense of the term, IMHO.

------
cynicalkane
_“We tried really hard to make this work,” the former Autonomy executive said.
“Instead of doing it the Autonomy way, which is to sweep problems out of the
way and move full steam ahead, we got bogged down in H.P. process.”_

I have no words.

~~~
roc
Having seen Autonomy's products and support in action, I can vouch for their
seemingly preternatural ability to brush off problems as if they didn't exist.

------
sami36
The Autonomy debacle aside, what has Meg Whitman accomplished since she took
over HP ? After a long tortured process that needn't take so long, she
enshrined WebOS's abandonment. And with her at the helm, HP continues to fail
to innovate in the consumer electronics space. No decent phones, No compelling
tablet, not even a laptop worth glossing over. Zilch.

When is she going move on from blaming her _failed_ predecessors for their
missteps & actually put an imprint of her own.

I don't know who's worse at H.P. The CEOs who effectively run the company to
the ground or the board that picks them.

~~~
shardling
I don't know what you're expecting. When Steve Jobs became CEO of Apple in
1997, it also took more than a year for any products he influenced to launch.
And presumably his predecessor hadn't gutted research and development of
hardware...

~~~
sami36
Not only did Jobs bring with him the trunk of what effectively would become
OSX. Within months of his return , Jobs had slimmed down Apple's product
portfolio to a handful of products then immediately started executing on that
vision. As flawed as he was as a human being, Jobs was decisive.

She took forever to make a decision about the fate of the PSG (personal
systems groups,) Agonized months over what to do with (granted, a fatally
wounded) WebOs. I'm not saying she wasn't dealt a tough hand. I couldn't agree
more. Her predecessors strategic blunders were atrocious, but she could have
acted with more urgency.

~~~
sliverstorm
It's actually kind of funny to hear you talk about this.

Meg Whitman "enshrined WebOS's abandonment", "After a long tortured process",
"Agonized for months".

Steve Jobs on the other hand "Within months [...] slimmed down Apple's product
portfolio to a handful of products".

Is it just me, or are you describing fundamentally the exact same actions? I
sense a spin doctor in the house.

~~~
sami36
No, I just remember listening to the investor calls over a couple quarters &
she was unable to give a straight answer on either issue ( WebOS, PSG)

~~~
001sky
The issues are totally different. Meg is an ex board-member doing triage after
a series of clusterfucks. She has to sort-out the politics and vision thing
that has been left over from the previously aborted pet projects of more than
one "administration". In that sense, its similar to the Yahoo situation with
Marissa Mayer. What you want to see is think-fast+move slow...not more
haphazard whiplash. That being said, she still may not be all that great. Time
will tell. The automony thing is a complete embarassment, and she was on the
board that approved it.

------
sk5t
Does anyone take HP seriously as a modern software company? Although I haven't
looked into their operations and financials, my impression is that they sell
plenty of servers (going on the Compaq legacy); a certain amount of ill-
regarded desktops, laptops, and peripherals; probably lots of scientific
equipment like oscilloscopes, gas chromatographs, etc.; and networking
hardware. Of course there are also printers, but their once-wonderful
reputation has dropped precipitously since the 1990s.

~~~
dmfdmf
HP desktops and networking hardware is good. I don't know about their laptops
but they were horrible 4 or 5 years ago. Their printer division has been
resting on its laurels for almost a decade and its not clear if the hardware
is any good because the software that ships with HP printers is SO bad its
impossible to say.

~~~
amorphid
I print a few pages a week, scan something occasionally, and almost never fax,
but I like to have the option to do these things. When I but a cheap-ish all-
in-one printer, I specifically avoid HP. My expectations for cheap-o printers
are low, but the last two HP printers felt way too flimsy, they installed too
much bloatware, and on the last one I could never get the scanner to work.
I've had much better luck with Brother and Epson products.

------
bambax
The article isn't perfect but the conclusion is:

> _Just as Autonomy was supposed to transform H.P. into a software powerhouse,
> AOL was meant to transform old-media Time Warner into an Internet darling.
> So-called transformative thinking by some board members and top management
> rendered traditional valuations irrelevant and silenced critics.

In both cases, that thinking proved delusional._

~~~
josh2600
The reminds me of when eBay bought Skype and sat on it for half a decade. Big
companies rarely get transformed as a result of acquiring a smaller company.

Would love counter-examples to this idea if anyone can think of any :).

------
adamnemecek
Why do they keep referring to the company as "H.P." when it's "HP".

~~~
aston
The New York Times style guide recommends periods after the letters if you
pronounce the letters individually. [1]

[http://en.wikipedia.org/wiki/Acronym#Pronunciation-
dependent...](http://en.wikipedia.org/wiki/Acronym#Pronunciation-
dependent_style)

~~~
wmf
And yet they write "AOL" in this article.

~~~
mbreese
That's because the company's name is AOL, Inc.[1], and not an abbreviation. It
doesn't have anything to do with the pronunciation. AOL used to be known as
America Online, but when it bought Time Warner, the new company was called
"AOL Time Warner"[2].

The Times also writes "I.B.M." instead of IBM, because it is officially
"International Business Machines". They also used to write "A.T.&T." for
"American Telephone and Telegraph" [3], but now write "AT&T" when AT&T changed
their name to the former acronym.

[1] <http://www.google.com/finance?q=AOL>

[2] [http://www.nytimes.com/2000/01/11/business/media-megadeal-
ov...](http://www.nytimes.com/2000/01/11/business/media-megadeal-overview-
america-online-agrees-buy-time-warner-for-165-billion.html)

[3] (google-cache)
[http://webcache.googleusercontent.com/search?q=cache:ByumNxy...](http://webcache.googleusercontent.com/search?q=cache:ByumNxycOjwJ:www.nytimes.com/1990/07/01/business/equipment-
drags-on-at-t.html%3Fpagewanted%3Dall%26src%3Dpm+&cd=1&hl=en&ct=clnk&gl=us)

~~~
sliverstorm
Don't you hate it when people pick standards, and then actually stick with
them?

------
wisty
> an eye-popping multiple of 12.6 times Autonomy’s 2010 revenue

Is 12.6 really "eye-popping"? It seems that similar companies (SAP, Oracle) go
for about 4 times sales (Microsoft is just 3 times sales, probably because
they are seen to be in decline). Expecting a growing company to quadruple
sales (presumably also quadrupling the number of salesmen) isn't really that
crazy, is it?

And it's a good way for HP to push their new sales + consulting strategy.

It sounds more like a perma-bear whinge about over-priced IT companies.
There's good arguments about why IT companies are often overpriced (they do
tend to be risky), but I can see where HP was coming from.

------
clintboxe
I don't know how much they paid, but it seems like the acquisition of Vertica
was a great move. I use it everyday and it is a fantastic product.

------
robryan
I assume that Autonomy probably does all its sales via sales people long
personalised processes, but I have to say their website isn't particularly
good at all. Given the money involved you would think they would have invested
in a more modern website, telling people who do happen to visit it in less
abstract terms exactly what they do and why people should care.

------
rbanffy
This is not a blunder.

~~~
anigbrowl
Be more specific, please?

