Saturday, April 6, 2013

The HP Board Changes

I want to make a comment on the HP Board changes of today. I do not know how the HP Board missed the Autonomy fraud. It puzzles me because 

(a). Autonomy accounts were superficially funky (for instance receivables were over double unearned income in a software firm),

(b). some of the press - particularly FTAlphaville (by far the best finance blog at any newspaper) were persistently but gently skeptical of Autonomy and 

(c). several short sellers (most notably Jim Chanos) were all over it.

If I were forced to blame anyone it would have been Ken Thomson - the former Wachovia/First Union chairman because Thomson over all other board members he should have had the skills to pick up the accounting fraud by noticing the superficially funky accounts. [Not everyone on a board should have those accounting skills. Some for instance are highly skilled in some aspects of technology or staff management or any of the other myriad skills a board needs.]

But that is not why I am writing. I am not in any way privy to the board discussion of Autonomy and I do not understand how the mistake was made. And it is not for me to speculate really...

I am writing to praise the departing Ray Lane.

Over the years I have written to several companies (at least a dozen) to ask/query/complain or speculate about funky things in accounts. The reaction is often hostile and usually the more hostile and the less transparent the worse the situation is. Sometimes there is some smoke and some fire but not quite in the form I surmised. [This is a problem with misleading disclosure. When disclosure is misleading you can often accurately surmise things are not right and not as they seem and be totally wrong when you take a guess at the underlying reality...]

HP however was by far the most transparent company I have ever speculated about. I wrote them a fairly aggressive letter and discussed it a little on the blog. 

I was wrong. Flat wrong in my speculations. That will happen.

However the process set in place by Ray Lane in response to my original letter was exemplary. It was transparent, thorough and efficient.

The HP board may have got many things wrong - but in my only substantial contact with them they were way better than many. 

Just saying.




John

1 comment:

Dangerous Dave said...

Interesting John..
To err is human,

There will come a time when accounts and business are run by real people making real stuff, not clever accounting...

Until that nirvana is reached there will be a myriad of polished crap rolled in glitter to short...

DD

General disclaimer

The content contained in this blog represents the opinions of Mr. Hempton. Mr. Hempton may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Hempton's recommendations. The commentary in this blog in no way constitutes a solicitation of business or investment advice. In fact, it should not be relied upon in making investment decisions, ever. It is intended solely for the entertainment of the reader, and the author.  In particular this blog is not directed for investment purposes at US Persons.