The former boss of software firm, Autonomy, has a lot to lose if the multinational is proved right, writes Tom Lyons
IT'S been a rollercoaster of a week for Carrick-on-Suir- born software entrepreneur Mike Lynch. Dubbed Britain's Bill Gates, Lynch who grew up in England, was at the centre of a financial storm last week when Autonomy – the software company he founded and later sold to Hewlett Packard – led to the American multinational stunning the stock market on Tuesday by announcing an $8.8bn write down of its assets.
HP chief executive Meg Whitman accused Autonomy of causing the writedown by engaging in serious accounting improprieties and wilful misrepresentation of its performance. She was careful not to name anybody, but instead referred only to executives in her presentation to shell-shocked investors.
Lynch, who left his old company only in May, however, immediately went on the counterattack. He has a lot to lose if HP's allegations are proved as he personally made €627m from selling Autonomy to HP for $11bn in 2011. This propelled him overnight from the ranks of the merely very wealthy into one of Ireland's richest men.
In numerous interviews Lynch said he was being "scapegoated" by HP to distract from what he termed its "flip-flopping" strategy.
"HP came in with about 300 people, crawled over everything and you know what? They found nothing. And you know why? There was nothing to find," Lynch said in an angry TV interview. "What actually happened is that they mismanaged Autonomy and in doing that have destroyed a lot of shareholder value."
Lynch is an experienced scrapper when under pressure. He was perhaps Ireland's youngest ever paper billionaire when the value of his shares in Autonomy were worth €1bn back in 2000. Then the bubble burst and his stake in Cambridge-based Autonomy was suddenly only worth €50m. Steadily Lynch knuckled down and kept Autonomy growing.
His fortune – estimated at different points prior to Autonomy's sale at €100m to €500m – gave him the money to own a mansion in Suffolk complete with miniature steam engine and railway line running around his garden.
Autonomy's success was built on its ability to adapt. Its powerful software was capable of pulling out relevant information from massive amounts of data. This allowed its software be used for everything from helping detectives solve cold cases to helping lawyers profile millions of documents for a legal case.
Lynch described what his company did more simply as "selling shovels to people digging for gold". Now HP is describing his creation as being considerably smellier.
HP will have to prove its allegations or face being countersued by Lynch. Whether HP is right or wrong it raises massive questions about its ability to do due diligence and properly value a business. Writing off $8bn will also undoubtedly impact its ability to invest, which is not good news for Ireland where it employs hundreds of people.
The stakes are very high for everybody involved. Late last week it emerged that the FBI was among the various groups investigating HP's allegations. Heads will have to roll somewhere whether it is among Autonomy executives or at the top of HP. Investors are likely to sue HP no matter what for failing to stop the debacle.
Lynch, who is a self-described "odd guy in the corner", says his greatest influence in business is John Harrison, the 18th Century clockmaker who made a sea-going watch accurate enough to allow ships navigate around the world.
Having thought he could finally take some time-out after decades at the helm of Autonomy, Lynch will now find his time at a premium as he battles to defend himself.