There is an interesting article in today’s WSJ, Hurdling HP: Oracle Shows Way in M&A, which describes Oracle and HP’s different fortunes in M&A. Oracle has seen its free cash flow and market cap increase dramatically since going on a greater than $40 billion acquisition spree over the last 5 years. The Wall Street Journal credits ORCL’s price discipline and its expertise at doing company integrations for its success. HPQ, on the other hand, has had woeful results in acquisitions: Compaq, Palm, EDS, and now Autonomy.
When HP first announced its $8.8 billion dollar write down of Autonomy and asserted it had been defrauded and duped, my read of the news suggested that HP had some legitimate gripes. Categorizing hardware as marketing spend? Sounded as though there may have been some hinky business going on.
But the more I reflect on it, the more skeptical I become. Autonomy had a real audit firm behind it, posting real numbers. I’d expect that it submitted to a detailed and lengthy diligence process, as $10.3 billion is still a huge check to write.
At a certain level, irrespective of whether Autonomy defrauded HP, the damage is basically done. To an extent, the new management team needs to establish that there is a new boss in town at HP. They’ve been in a hole and they are going to stop digging. But what the HP-Autonomy episode shows, and the side-by-side comparison with Oracle is very telling, is that HP has been a circus for a while. It would be good, for all of our sakes, if the madness stopped. Here’s to hope.