What Did Former Autonomy CEO Ask Hewlett-Packard?

On Tuesday, Autonomy’s founding Chief Executive Officer Mike Lynch asked Hewlett-Packard (NYSE:HPQ) a very pertinent question regarding the specifics and timing of the company’s recent accusations of fraud. In an open letter addressed to the hardware manufacturer’s board of directors he said:

In order to justify a $5 billion accounting write down, a significant amount of revenue must be involved. Please explain how such issues could possibly have gone undetected during the extensive acquisition due diligence process and HP’s financial oversight of Autonomy for a year from acquisition until October 2012.

Did H-P Conduct Due Diligence?

In what may be an ironic turn of events, the problems that are currently threatening H-P’s profitability are the very same problems that prompted the company to purchase Autonomy in the first place: the low-margins and declining sales of its computer hardware business.

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After speaking to almost a dozen people connected to the deal or the accounting investigation, Reuters reported that the “picture that emerges is of a company so desperate to plot a new course that it may have been far too accepting of Autonomy’s published and audited accounts.”

According to the publication’s research, Leo Apotheker, who became H-P’s chief executive less than a year before the deal with Autonomy was announced, was criticized ever since he joined the company from the much-smaller German corporate software maker SAP.