HP's £5.5 billion writedown of Autonomy and the shock fraud allegations that claim it misled HP prior to it being acquired for £6.5 billion in 2011 has resulted in the IT industry pointing the finger of blame in all possible directions.
What do we know for certain? HP said on Tuesday (see Chris Kanarcus' story here) that an internal investigation had found that Autonomy was substantially overvalued at the time of acquisition due to the misstatement of Autonomy's financial performance, including its revenue, core growth rate and gross margins, and the misrepresentation of its business mix.
HP said there had been a "wilful effort to mislead investors and potential buyers". Both the US Securities and Exchange Commission and the UK's Serious Fraud Office have been alerted to the claims.
HP CEO Meg Whitman kicked off the blame-game by saying: "The two people who should have been held responsible are gone," referring to previous CEO Leo Apotheker and former chief strategy officer, Shane Robinson.
She added: "This will take a long time to work through, but we're committed to seeking redress. I'm expecting this is going to be a multi-year journey through the courts."
Autonomy's founder and CEO, Mike Lynch, who left HP in April of this year, true to form came out fighting and strongly denied the allegations. He said in an interview with the Wall Street Journal that he wasn't aware of the claims before they were publicly announced, and said that he had effectively been 'ambushed'.
Lynch completely denied the claims and instantly reverted the blame back to HP, Whitman and the auditors that were involved with the acquisition, Deloitte.
He said: "I can't understand how you can write down £5.5 billion of value and say somehow this was all caused by something you didn't notice when you did due diligence with 300 people. It would be kind of a big elephant to have missed."
"I think it calls into question the credibility of today's announcement. You are being asked to believe that an elephant that big was missed by all these firms and 300 people and it only came to light a year later."
Deloitte did not have comment at the time of publication.
Lynch also suggested that HP is trying to divert attention away from the fact that it is suffering huge losses (£4.3 billion in the fourth quarter).
Lynch continued: "The only concept I have of it is that it does seem to be coincident with them releasing the worst set of results in their 70-year company history. I think what has happened here is that they have got themselves in a mess.
"They did the acquisition of EDS, they had to write that one down. They had to write Palm down. When Autonomy was acquired it was done by a CEO who wanted to get rid of various divisions of that business and lead with software."
He added: "There was a series of mismanagement steps. They lost hundreds of the talented people at Autonomy. Sadly they are left with the results of having destroyed all that value. Now they are trying to cover it up with this big write off."
Victor Basta, managing director of Magister Advisors, a company that advises on IPOs for technology companies, supported the view that the blame should lie with HP, as it wrongly looked for a 'quick-fix' with Autonomy.
"HP's pursuit of a 'buy software to get out of hardware' strategy has failed. Autonomy was always an off piste deal. Many large businesses will do a series of bread and butter mid-sized deals, but in HP's case they went for broke," said Basta.
"HP is clearly on a mission to change but it was essential they worked first to fix the culture and revamp the business before making a game-changing acquisition. HP's leadership made a huge mistake by attempting to 'fix by buying'."
Basta also said that Autonomy's business is based on a one-time software licence model, as opposed to a subscription model, and at the time of acquisition it was growing very fast. He believes that the combination of the one-off sales model and the speed of growth meant that Autonomy was a very difficult business to value.
He added: "HP would have been far better off targeting, like IBM and Dell, a range of smaller acquisitions, with more predictable revenue, and which they could gradually build around. It takes a decade, not a year, to achieve this kind of change.
"HP's culture has however made it impossible. Transitioning from a hardware business to a software business requires a fundamental shift in corporate culture - and that is something that you simply can't buy."
Finally, Richard Holway, chairman of analyst firm TechMarketView commented on the news by saying that he 'cries for all of them'. Holway has said that he considers Lynch a friend, and has also previously held shares in both HP and Autonomy.
HP has added more detail to the accusations made yesterday, which include claims that Autonomy booked IDOL licence revenue sales to VARs rather than to end users and that its revenues from hardware resales had been incorrectly billed as software - both of which could manipulate the company's revenue prospects.
Interestingly, Holway has been contacted by people, who do not want to be quoted, that support HP's claims.
Holway said: "Indeed, most seem to infer that this was going on at Autonomy for many years. The media this morning is full of analysts saying that they had long questioned Autonomy's accounting methods. 'I told you so' was writ large."
However, he argues that if the allegations are true, this then "casts an even bigger shadow over nearly aspect of governance at our largest companies", as Autonomy was a FTSE 100 company for many years and would have been audited time and time again.
However, Holway also draws HP's role into question.
He said: "There is little doubt that Lynch's reputation and Autonomy's place as an icon for the UK tech sector has been damaged. But HP's reputation is in tatters. HP's board has limped from one disaster to another over years.
"Its board comes over as dysfunctional. Its M&A record is about the worst you can have. It has destroyed considerable shareholder value. It's #1 position in almost every sector of the tech sector has been conceded to others."
He concludes: "Some say the worst is now over for HP. I'm not so sure."