HP and Autonomy: A Clash of Cultures

 

If you cut Mike Lynch, the ousted CEO of Autonomy, the U.K.’s largest software company, he would probably bleed numbers. He studied engineering at Cambridge University and obtained a PhD in mathematical computing. He is a fellow of the Royal Academy of Engineering, the author of a number of academic papers on the subject of Pattern Recognition and Signal Processing. The man replacing him, Bill Veghte, has of Bachelor of Arts in East Asian studies. Between graduating from Harvard and now he included two decades at Microsoft, where he was Senior Vice President for the Windows business, and was responsible for the business strategy, sales and marketing across Windows. News that Mr. Lynch is to leave the company that he founded in 2005 and sold to Hewlett Packard in 2011 for $10.2 billion has shocked some, but even the most cursory glance at HP’s past shows it isn’t a company famous for the longevity of its CEOs. They are the high-tech embodiment of Lady Bracknell. “To lose one CEO may be regarded as a misfortune. To lose six looks like carelessness,” as she might have said. Indeed, HP CEO Meg Whitman (CEO #6 since 2005) said at the analyst call where Mr. Lynch’s departure was announced, said, “This is a movie I have seen before.” The obvious question is, what movie? Dawn of the Living Dead? If you look at the four of its last five acquisitions, including Autonomy, the incumbent CEO hasn’t lasted very long. HP acquired Fortify, a security software company in September 2010. On Apr. 4, 2012, AlienVault, another security company, announced the appointment of “Former President and CEO of HP Fortify” John M. Jack to its board. In May 2011 HP bought Printelligent. Rob Wellman, who was CEO from January 2008, left in October 2011. Vertica, a real-time analytics platform, was bought by HP on Feb. 14 2011. CEO Chris Lynch left in March 2102. HP’s most recent acquisition, the Aachen-based Hiflex, was run by Stefan Reichhart. He now runs the marketing department. Famously, HP also bought Palm for $1.2 billion in April 2010.  In December 2011 it effectively shuttered the company, putting Palm’s operating system, WebOS, into the open source community and triggering a fire sale when it sold off Palm’s $300 tablet for as low as $99. “It’s very common and very natural for entrepreneurs to move on following an acquisition, particularly when the day to day operations of the business become a bigger factor.,” an HP spokesman said. So what made Mr. Lynch think it was going to be any different? In an exclusive interview with The Wall Street Journal Europe at the time of the acquisition, Mr. Lynch said that the reason he allowed the company he co-founded to be acquired by HP was because of “an alignment of values” between him and the then CEO of HP (CEO #5 since 2005) Leo Apotheker, the former CEO of Germany’s SAP. “Autonomy is a highly profitable and globally respected software company, with a well-regarded management team and talented, dedicated employees,” Mr. Apotheker said at the time of the acquisition. After his 11-month tenure, how did Mr. Apotheker’s replacement, Ms. Whitman view that team? It is hard to know, but it isn’t too hard to guess what that team thought of their new boss. Sushovan Hussein (President), Steve Chamberlain (CFO), Pete Menell (CTO), Nicole Eagan (CMO), Andy Kanter (COO) and Martina King (head of Aurasma) all left the company. According to people familiar with the matter, “there was a clash of cultures. Mike was not acquired by Meg [Whitman]. The panorama for them was very different. The premise was to ring-fence autonomy. It was only when HP’s mastodon processes came into play it became increasingly harder and harder to maneuver.” A spokesman for HP wouldn’t comment on the resignations nor on whether Mr. Lynch was offered any other position within HP, nor would he comment on the lack of a valedictory message from Ms. Whitman. What next for Mike Lynch and Autonomy? It is alleged—he wouldn’t confirm it— that his personal take on the acquisition was around $800 million, so he isn’t going to be signing on at the unemployment office. The HP spokesman said that Autonomy was a key part of HP’s future strategy. “We are very bullish about Autonomy,” he said. He wasn’t able to say if the personnel cull that was taking place across HP (27,000 employees, or 8% of its workforce) would also affect Autonomy. At heart there are two problems. The first, that all-too-familiar story of a large company buying a much smaller one and then finding it hard to keep the entrepreneurial flame alive; and secondly, HP’s struggle to find a role. According to John Madden, principal analyst at Ovum: “So as of now we’ve seen the major pieces of Meg Whitman’s restructuring and operations plan – the key missing piece is her long-term company vision and strategy, which hopefully will be revealed to an anxious customer base soon. “Even with this restructuring, the question still remains: Just what kind of company does HP want to be next year, three years, five years from now?”