Vatican dispute sheds light on HP case in troubled Autonomy deal

Vatican dispute sheds light on HP case in troubled Autonomy deal

The Vatican has become enmeshed in a struggle between Hewlett-Packard Co and Michael Lynch, the former CEO of the UK software company Autonomy Corp bought by HP in 2011 in a deal that led to a big loss for the US technology giant.

An argument over the proposed use of Autonomy's software to help digitize the Vatican's library potentially lends support to HP's accusation that Autonomy booked sales even when the intended end user had not decided to buy the software.

In the end, the Vatican says it did not purchase the software for the library project from Autonomy or from a reseller of Autonomy's products, MicroTechnologies LLC. Nevertheless, Autonomy booked US$11.55 million (S$14.33 million) in revenue based on the sale to MicroTech of software that was earmarked for the proposed Vatican deal, according to sources familiar with HP's investigation.

Autonomy's booking of revenue tied to a Vatican deal that didn't happen illustrates one way in which HP contends the software company gave a distorted impression of how rapidly it was growing, these sources said.

A source familiar with Autonomy's business at the time counters that its approach to booking revenue in such transactions with resellers was permissible under UK accounting standards and blessed by its auditor Deloitte.

HP took an US$8.8 billion impairment charge in November 2012 for its US$11.1 billion purchase of Autonomy. The size of the loss, and the speed with which it occurred, marks the deal as one of the most disastrous done by a major company in recent years.

ASKED TO PARTICIPATE

A letter seen by Reuters shows that Vienna, Virginia-based MicroTech, wrote to the Vatican library, Biblioteca Apostolica Vaticana (BAV), on April 23 this year seeking payment for the $11.55 million of Autonomy software.

MicroTech CEO and President Anthony Jimenez said in the letter that in March 2010 Autonomy had requested it buy the software in 2010 so that MicroTech could "participate as a reseller" in a project between the library and Autonomy.

Jimenez said MicroTech was surprised to see an announcement from another company, Japan's NTT Data Corp, in March this year stating that it had been selected to conduct the Vatican library's digitization project. He asked the Vatican library if Autonomy software had been used in the NTT contract or any other such project, and, if so, when was payment made for that software and who received it.

"We are writing to you to confirm your receipt and use of the software and to obtain payment for that use," said Jimenez in the letter.

In response, Vatican library prefect Monsignore Cesare Pasini sent a letter to HP in which he said MicroTech's assumption that Autonomy software was being used in the project "is absolutely false." He said the project uses software from NTT Data and others but not anything from Autonomy and MicroTech.

Pasini added that the Vatican library has "never dealt with MicroTech."

HP declined to comment on how it responded to the Vatican letter.

MicroTech General Counsel Aaron Drabkin said that Jimenez was not available for comment.

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