By Steven Burke, originally published on CRN Nov. 20, 2012

HP’s top solution provider partners are lashing out at the company’s board of directors in the wake of HP claims that it was duped by former members of Autonomy’s management team into paying a whopping $10.3 billion for the software maker last year.

“It is amazing how much incompetence they have shown at the top board level,” said the CEO for a top HP enterprise partner, who did not want to be identified. “This is another example of pouring gas on the already raging fire.”

“The board now has a body of work that allows us to judge their effectiveness,” added the HP partner who has invested heavily in HP certifications, sales and engineering resources over the last decade. “I have never seen a worse track record of errors from dismissing a CEO, hiring a CEO to making acquisitions and product development decisions that everyone questioned at the time. We are still behind HP, but I worry about questions raised by our mutual customers and their confidence that HP has its act together.”

HP Tuesday said it is taking an $8.8 billion charge against earnings after discovering what the company called “serious accounting improprieties” by Autonomy. HP said the majority of the impairment charge, “more than $5 billion, is linked to serious accounting improprieties, misrepresentation and disclosure failures discovered by an internal investigation by HP and forensic review into Autonomy’s accounting practices prior to its acquisition by HP.”

The HP Autonomy deal was touted by HP management at the time as a cloud computing enterprise software game changer for the company which was looking to break from its low margin PC business. But many partners and industry observers at the time blasted HP for paying what amounted to 11 times Autonomy’s sales.

The Autonomy allegations, along with the $8.8 billion accounting charge sent HP’s shares down 12 percent, closing at $11.71 Tuesday, the lowest level in more than a decade. HP also announced Tuesday that it was posting a fiscal fourth-quarter net loss of $6.9 billion on a 7 percent drop in sales to $30 billion.

In a prepared statement, HP said it “launched its internal investigation” into the Autonomy issues “after a senior member of Autonomy’s leadership team came forward, following the departure [last May] of Autonomy founder Mike Lynch, alleging that there had been a series of questionable accounting and business practices at Autonomy prior to the acquisition by HP. This individual provided numerous details about which HP previously had no knowledge or visibility.”

HP said it then initiated what it called an “intense internal investigation,” including a forensic review by PricewaterhouseCoopers of Autonomy’s historical financial results.

Several top HP partners say the Autonomy misstep is one of a number of controversial decisions that the HP board of directors has been part of that have wiped out billions of dollars in market capitalization. Among the questionable HP board decisions cited by HP partners: firing former HP CEO Mark Hurd, who is now president of HP rival Oracle; the decision to hire former HP CEO Leo Apotheker, one of the driving forces behind the Autonomy acquisition, who was later fired; the company’s decision to publicly disclose it was considering the spin-off of its PC division, which was stopped by current CEO Meg Whitman; the decision to kill the HP Touchpad tablet in August 2011 after only three weeks on the market and, finally, the company’s decision to buy WebOS operating system and mobile device maker Palm in 2010 for $1.2 billion, which was later written off as part of a $3.3 billion charge related to the winding down of the HP WebOS device business.

An HP spokesperson said the executive management team stands firmly behind the current HP board. “The board of two years ago is completely different than the board of today,” said an HP spokesperson. “Our executive management has complete faith in the board we have right now.”

HP solution provider partners see it differently. They blame the board of directors, past and present, for a good deal of the current troubles.

“The board is incompetent, incompetent, incompetent,” said an HP solution provider CEO, who has pulled back on his commitment to the vendor over the last year. “It is as incompetent a leadership as you can get. I don’t know why someone didn’t stop the Autonomy acquisition. I don’t know what they are doing over there. They need to write all this stuff off, go back to the drawing board and start over.”

HP’s board deserves a large amount of the blame for green-lighting the high-priced Autonomy acquisition, said another HP partner. “The Autonomy guys were laughing all the way to the bank,” said the executive. “HP isn’t even using Autonomy itself from what I know. It is inexcusable how much they paid for Autonomy.”

HP acquired Autonomy in October of last year. The acquisition was initiated in August by then-CEO Apotheker in a bid to expand HP’s miniscule software business. Apotheker was fired a little more than a month later, but his replacement, current CEO Whitman — who was a member of the board that green-lighted the acquisition — went ahead with the Autonomy deal. HP CFO Cathie Lesjak had reportedly objected to the Autonomy deal at the time, citing the high price tag.

Bruce Geier, CEO of Technology Integration Group (TIG), a $341 million national solution provider ranked at No. 69 on CRN’s 2012 Solution Provider 500, said the allegations surrounding the Autonomy acquisition raises questions about how HP “did due diligence” related to the $11.1 billion Autonomy deal.

“This doesn’t take away from the value they saw in Autonomy to start with,” said Geier, who plans to add Autonomy software solutions to his portfolio next year. “The product is still there. It’s just that they overpaid for it. There is a marketplace for Autonomy. Is it a game changer? No. But it does have some powerful dynamics. We’ll have to see how it grows and what kind of play there is for it down the road. They have to reload. This isn’t something they are going to come back quickly from, that’s for sure.”

[highlight type=”one”]Bob Venero, CEO of Future Tech, a Holbrook, N.Y.-based HP enterprise partner, said he was not “surprised” by the HP Autonomy announcement.[/highlight]

[highlight type=”one”]”Sometimes when you get too big, there are too many layers in place that mask the real answers by the time it gets to the decision makers,” he said. “Right now, they have to talk to the investors and explain how it happened and how it won’t ever happen again. They have to look at how it will impact their own employees and their ability to retain employees. And they have to address the channel as to what the impact is going to be to the solution providers who back and support HP. They have a lot of communicating to do.”[/highlight]