Dr Mike Lynch has been acquitted of fraud in a California Court over the alleged misleading accounts of Autonomy. This has been a long running legal case after the acquisition of Autonomy by HP who alleged Mr Lynch and his co-defendants illegally inflating revenues by backdating some of Autonomy’s contracts, using “round trip” deals to compensate customers for making purchases, and hiding the fact that some of its high-margin software revenue was really coming from unprofitable hardware sales (software revenue is typically valued higher than hardware revenue).
I have made negative comments on Autonomy’s accounts in the past but it would not be appropriate to discuss why the jury reached the latest verdict. Without studying all the evidence presented in court it is very easy to jump to the wrong conclusions based on media reports.
But after 13 years that this saga has been running, it will certainly be the case that directors of software companies operating in the USA will be a lot more careful about their revenue recognition practices which is surely a good thing.
For more information on the background to this legal case see: https://www.ft.com/content/62b6af38-ff48-43a9-9403-2a18a1ddca3d?
Roger Lawson (Twitter: https://twitter.com/RogerWLawson )
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