[Info-vax] HPE going after Mike Lynch's estate

[Arne Vajhøj]

On 9/18/2024 8:40 AM, Simon Clubley wrote:
> On 2024-09-17, Arne Vajhøj <arne at vajhoej.dk> wrote:
>> Lynch, who was on Friday waiting to find out if he could be extradited
>> to the US to face a separate criminal trial, was found to have defrauded
>> HP by manipulating Autonomy?s accounts to inflate the value of the
>> company. He has always denied the accusation and said on Friday that he
>> would appeal.
> 
> This is the same legal system that said hundreds of innocent people were
> ripping off the Post Office and then proceeded to destroy their lives.
> Since the details of that became fully public, my opinion of our legal
> system in related matters has taken a massive nosedive.

Maybe.

But you should expect the judges to have a much better understanding
of century old principles for buying and selling goods than of
how poor quality software can be.


>> ?Claimants have substantially succeeded in their claims in this
>> proceeding,? said Mr Justice Hildyard, after a 93-day trial during which
>> 28,000 documents were considered as evidence..
>>
>> He said the damages were likely to be significantly less than the $5bn
>> claimed by Hewlett-Packard (HP) and successor companies, while he also
>> cast doubt on the reliability of some of the US firm?s witnesses.
>>
>> However, he ruled that HP had been induced into overpaying for the
>> takeover, due to fraud perpetrated by Lynch and Autonomy?s former
>> finance director, Sushovan Hussain, who is in jail in the US after being
>> found guilty of fraud relating to the same deal .
> 
> Annoying how the fact that HP never even completed the expected due
> diligence before purchase doesn't enter into this decision.

That is not relevant when there is fraud.

> Also, the numbers don't add up. From:
> 
> https://www.cio.com/article/304397/the-hp-autonomy-lawsuit-timeline-of-an-ma-disaster.html
> 
> the claim is that Autonomy overstated its revenue by US$700 million yet
> HP did a multi-billion USD writedown. HP massively overpaid for Autonomy
> and are trying to deflect blame away from their massive screwup in both
> overpaying and not even waiting for the due diligence to be completed.
> 
> How do you get from a $700 million fraud claim to a $5 billion+ writedown ?

HP write down was actually 8.8 B$ - and they claim 5 B$
(elsewhere it is stated as 4 B$, the judge could decide on a
significant lower amount). So HP is really saying that
they lost 5/4/X B$ due to fraud in the numbers they got and lost
3.8/4.8/8.8-X B$ due to overpaying even if the numbers had been correct.

But back to the main question.

The 700 M$ and 5 B$ is not the same type of number.

You need to distinguish between:

revenue = sale
profit = profit margin * revenue
value = accumulated expected profit from now to eternity discounted with 
interest rate

There is nothing surprising in that a delta value is bigger than
a delta revenue.

It would be surprising if it was not.

Arne