Mike Lynch should try to buy Autonomy back

May 24, 2012

By Chris Hughes

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Mike Lynch should try to buy Autonomy back. The software entrepreneur sealed a superb deal for shareholders when he sold the Cambridge-based firm to U.S. tech giant Hewlett Packard Co in October. But the marriage isn’t happy. Lynch was meant to be leading HP’s efforts to scale up the business. Instead, he’s leaving to do acquisitions of his own. It would make sense if Autonomy was on his list of targets.

Last summer, HP may have looked like a suitable parent for Autonomy. Lynch himself had taken the business from nothing to annualised revenue of $1 billion in the second quarter of 2011. Scalability wasn’t in doubt. HP’s new chief executive, Léo Apotheker, was a software guy who wanted to move away from the challenged core business of computer hardware. The 64 percent premium on offer showed a commitment to turbo-charging Autonomy’s performance.

But the new family has turned out rather dysfunctional. HP shareholders blew a big raspberry at the overpriced deal. The board replaced Apotheker. Autonomy staff left too. That was to be expected given the cash deal had provided a decent exit on their stock. But HP’s big-company bureaucracy and “hardware culture” was another factor, according to a person familiar with the situation.

Meg Whitman, Apotheker’s successor, has backed the strategic logic of buying Autonomy. But she will need to work very hard now to bring harmony, let alone satisfactory returns on the investment. Licensing revenue has proved very disappointing lately, HP says. Mass defections by Autonomy staff would see the debilitating loss of institutional know-how, albeit with the clarity of HP’s culture becoming dominant.

The best thing for all concerned may be for HP to dispose of the business. HP’s stock has already taken a hit. The cultural mismatch may never be resolved. Big gaps are appearing in Autonomy’s development expertise. HP seems to have other priorities.

Lynch would be the obvious buyer, probably in partnership with private equity. It would be a cheeky move; HP would have to swallow hard. But Autonomy may be better off on its own.

Comments

You guys have no idea what is going on at Autonomy. Autonomy could have been a much more profitable organization. The sales operations at Autonomy is a complete joke. I can safely bet 100% of the sales force was DELIGHTED to hear HP acquiring Autonomy! Reason? We get to use Salesforce.com rather than Mr. Lynchs HORRIBLE home grown CRM system called SMS. From a sales perceptive, there was no ability to understand if a company targeting is a customer or not. Its embarrassing sometimes. Secondly, SMS was geared to foster in-house competition. In other words, no rep trusted any other rep, because many people like to steel deals. Happened all the time. We were required to update SMS everyday and it took about 3 hours per day to do it, if you don’t, you get fired.

Another reason, Autonomy’s management was so cocky and outright ruthless. I was on two separate sales calls at different times, (SMS Calls) when a sales rep gets fired over the phone. Got to understand, there are about 20 to 30 people on the phone. Unreal…

I talked to recruiters all day and most of them say, “No need to tell me why you want to leave Autonomy, I just talked to 10 of you guys.” Sad…

I am feeling sorry for the Microsoft guy. He is going to have a rude awakening of the reality over at Autonomy. No transparency with numbers forecasted, unqualified reps selling solutions out of their comfort zone (maybe because they can’t keep anybody or recruit people because of their past), and guess what…

The software does NOT work. Guys lets be honest. Amgen returned $4 million of Autonomy’s software because it was oversold. I had four deals over $1 million, all POCs fell flat. There is no bench to support Autonomy and its technology. The references listed are customers that DO NOT have “Meaning Based” anything. Autonomy’s IDOL platform does not make up their “happy” customers. The happy customers are not using IDOL. IDOL has a great message, but, it doesn’t work. IDOL is not integrated with their Data Protection platform and other parts of their disorganized three pillar go to market strategy. Sad, because, I loved the message and it was brilliant.

Autonomy’s wheels finally came off. The reps are stoked the “Glass Box” is now shattered. Unfortunately, a company like HP will now have full control of a software strategy. it will be interesting.

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