HP's big problem isn't Autonomy: It's HP

With Hewlett-Packard's cash cows drying up and its mobile strategy in ruins, CEO Meg Whitman has a huge rebuilding job on her hands

It may seem crazy to talk about $8.8 billion as a sideshow, but in the case of the alleged fraud perpetrated against Hewlett-Packard by Autonomy, that's exactly what it is. No matter how this plays out in court, which is where it's certainly headed, HP will be the same troubled company.

Like the red, swollen surface of an abscess that covers a pocket of infectious pus (apologies for the metaphor), the Autonomy debacle is a symptom of underlying rot in both HP and Wall Street -- more precisely, the nexus of accounting firms and investment banks that call the plays when technology firms engage in M&A.

[ At the time, HP's Autonomy purchase looked smart to InfoWorld's Eric Knorr. | Bill Snyder on why HP CEO Meg Whitman may be steering HP into the rocks. | Get a digest of the key stories each day in the InfoWorld Daily newsletter. ]

HP: A crisis on every front
Let's make one thing clear. I've been critical of HP CEO Meg Whitman in the past, but this one isn't on her. It's the last remnant (one hopes) of the miserable reign of her fired predecessor, Léo Apotheker, truly the gift that keeps on giving.

Whitman has a huge job ahead of her, not the least of which is making sure that Autonomy continues to function within HP and that the technology for which HP paid more than $10 billion in 2011 is not wasted. Whitman's spokesman, Michael Thacker agrees, telling me, "We are 100 percent committed to Autonomy; we're going full-steam ahead with our plans for it."

Autonomy aside, consider the mess Whitman inherited that has nothing to do with Autonomy:

Autonomy: World's most expensive turkey?
When I said Autonomy is a sideshow, I meant the accounting issue. The Autonomy unit itself is not. It was meant by Apotheker to be a cornerstone of a software strategy, and it's unclear if HP can make that strategy work. Indeed, there's an argument to be made that Apotheker may have purchased the world's most expensive turkey.

Before HP bought it, Autonomy was facing challenges after years of fast growth but poor customer relations, says Leslie Owens, an analyst at Forrester Research. "They didn't invest in R&D. They didn't have regular software releases. They weren't transparent with a road map of where they were going. They didn't seek customer feedback," she said. "Customers complained, but the promise of managing all their information and making better decisions was so attractive. So they bought more."

Soon after the HP acquisition 18 months ago, Owens said Autonomy announced a new version of its core product: "We asked for a demo; we're still waiting." In a blog post at the time she said, "But far from the integrated and complete EIM [enterprise information management] solution that HP laid out for investors, Autonomy represents a pile of technology that HP will need to make sense of." She also noted that Autonomy's IDOL (Intelligent Data Operating Layer) technology "is stagnant. There hasn't been a major release of IDOL in over five years."

Trip Chowdhry, principal analyst of Global Equities Research, is even harsher, saying when HP purchased Autonomy, "it was buying old, obsolete technology at an exorbitant price."

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