HP has confirmed in its annual report that the U.S. Department of Justice has launched an investigation stemming from the Palo Alto company’s allegations that it uncovered widespread accounting fraud at Autonomy, the British software maker it acquired for $11 billion last year. HP confirmed the investigation in its Thursday  filing with the U.S. Securities and Exchange Commission, though it offered no further details about the alleged fraud:

As a result of the findings of an ongoing investigation, HP has provided information to the U.K. Serious Fraud Office, the U.S. Department of Justice and the SEC related to the accounting improprieties, disclosure failures and misrepresentations at Autonomy that occurred prior to and in connection with HP’s acquisition of Autonomy. On November 21, 2012, representatives of the U.S. Department of Justice advised HP that they had opened an investigation relating to Autonomy. HP is cooperating with the three investigating agencies.

Autonomy’s founder and former CEO Mike Lynch had written a week ago in a blog post that he hoped HP’s 10-K filing would detail how HP added up the write-down of $5 billion it says it was forced to take because of “serious accounting improprieties, misrepresntation and disclosure failures” by Autonomy. Today Lynch lashed out at the lack of detail in the HP filing:

“It is extremely disappointing that HP has again failed to provide a detailed calculation of its $5 billion write down of Autonomy, or publish any explanation of the serious allegations it has made against the former management team, in its annual report filing today.

Furthermore, it is now less clear how much of the $5 billion write down is in fact being attributed to the alleged accounting issues, and how much to other changes in business performance and earnings projections. This appears to be a material change in HP’s allegations.

Simply put, these allegations are false, and in the absence of further detail we cannot understand what HP believes to be the basis for them.

We also do not understand why HP is raising these issues now given that Autonomy reported into the HP Finance team from the day the acquisition completed in October 2011, there was an extensive due diligence process and Autonomy was audited as a public company for many years.

HP alleged in November that Autonomy executives used accounting tricks to make the the British company appear more profitable than it actually was, forcing HP to take a massive write-down for the acquisition, the worst strike in what was already a difficult quarter. HP bought Autonomy, its largest acquisition to date, in October 2011.

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Another one of Zynga’s recent departures has landed.

Wilson Kriegel, who was OMGPOP’s chief revenue officer until the Draw Something maker was acquired for $210 million in cash and retention, is taking a president and chief operating officer role at New York-based Paltalk. He left Zynga, which bought OMGPOP earlier this year following a slew of other executives who have left the ailing social gaming company.

Paltalk, a video chat service, has had a very low profile for years, but the company has remained profitable and hasn’t taken funding since a $6 million round from SoftBank eight years ago. It has 150 million registered users (though no disclosed numbers on monthly actives). Paltalk is a video chat community that offers free group video calls and chats. Kriegel says that more than 20 million streams are viewed a day through Paltalk and the average log-in time is 61 minutes per session.

“This company is generating tens and tens of millions of dollars in revenue every year,” Kriegel said. “It’s highly profitable, and its business model is in subscriptions, virtual currency and advertisement. My gaming background is exactly in that.”

At Paltalk, Kriegel will oversee usability and user and revenue growth with the compnay’s premium and in-app currency services. The company makes money when users send virtual gifts to each other or when they sign up for subscriptions that get rid of pop-up or banner ads and allow more simultaneous video windows.

Like many other founders or executives Zynga has acquired over the years, Kriegel is leaving the gaming industry entirely.

“I wasn’t seeing anything that wasn’t differentiated,” Kriegel said. “Beyond companies like Kixeye and Supercell, there aren’t really a lot of market makers. There’s not a lot of differentiation on the content side, and we’re in a down cycle which started — at least in perception — because of Zynga.”

Other acquired Zynga founders like Siqi Chen and Roger Dickey are working on non-gaming concepts, while others like Nabeel Hyatt and Robin Chan have crossed over into the venture side.

While Kriegel wasn’t a co-founder at OMGPOP, he was with the startup through the extensively difficult time before the company found a hit on the iOS platform in Draw Something. He said he didn’t want to take time off.

“I’ve never spent more than a couple weeks not working and I’m a dad now. That changes perspective on what matters,” he said. “I didn’t feel that not working would be a valuable use of my time.”

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Since launching its first product in 2008, Beats has gone from an obscure niche headphone brand to a multi-million dollar business with plenty of star power (Dr. Dre, Lady Gaga, Justin Bieber, etc.) catapulting the brand into the mainstream spawning several celebrity and musician endorsed rival brands. Now it’s going after an older crowd with the Executive over-the-ear headphones, which I’ve been testing for the last few days.

Originally partnered with Monster, the company has since detached itself from the audio manufacturer, had the majority of the company acquired (51 percent) by HTC, acquired music service MOG, and then regained 25 percent of HTC’s shares back this past July. It’s also had its brand name attached to HP laptops and HTC smartphones.

While the company has tapped into the youth of this country, it hasn’t quite gained traction with the folks whose annual incomes are, well, significantly higher than a 17-year-old’s. It’s unclear why Beats is going in this particular direction given that the “b” brand can be seen just about everywhere you look.

Maybe it has something to do with Monster now marketing its own line of headphones geared towards an older demo. Or the fact that the Beats brand commands over 60 percent of the over $100 headphone market in the U.S. I guess a $1 billion industry is worth protecting.

“If you look at the category right now, almost all the competing products are made of plastic. We’re bringing craftsmanship and premium materials, such as aluminum alloy, stainless steel, and hand-stitched leather,” Luke Wood, president and COO of Beats, told me. “Beats has fans of every age, but we wanted to build the Executive for the business traveller who doesn’t necessarily feel comfortable wearing bright green headphones on the plane.”

Other than looks and what I assume are subtle changes to the audio components under the hood, the Executives appear to be built on the same platform as the original Beats by Dr. Dre headphones, including the use of regular AAA batteries to power the active noise-cancelling functionality. And just like the originals, the Executives won’t work when those batteries die. Pretty annoying in my opinion for a $300 pair of headphones but maybe I’ve grown accustomed to all my doodads having rechargeable batteries.

The Executives are said to last upwards of 25 hours per set of batteries. So far I’ve logged several thousand miles (SFO>JFK>ICN) and roughly 15 hours with the included batteries. The noise-cancellation function can be muted by depressing the “b” icon on the right earcup. Batteries are deposited into the left earcup by popping off the cover, which is tethered by a string and kept in place with magnets. A nice touch overall and they definitely feel premium.

When asked why the core feature still relies on standard batteries, Wood had this to say: “Our research of this particular use case shows the consumer preference is split in regards to rechargeable and disposable batteries. Keeping the demographic in mind for this product, there is anxiety around forgetting to charge your batteries and getting on the plane for a business trip to find they’re dead and there’s no time or place to charge. Many people would rather just bring a spare set of batteries than risk being stranded on a flight with no sound. With that said, as our products continue to evolve we will consider the technology that makes the most sense as well as sustainability issues.”

Regardless of whether I think that a $300 pair of headphones should function sans batteries, the Executives are really comfortable (it’s worth noting that I wear glasses and find it annoying to wear over-the-ears) and offer a less bass-y sound than previous models. Even with the noise cancellation or because of it, you really have to crank up the volume to hear your tunes. The low end seems a bit muddled and when cranked up all the way up it just sounds a bit fuzzy. Albeit ever so slightly.

They’ll be available in mid-October and come with a carrying case, cleaning cloth, two adapters and two sets of audio cables, including one for use with your phone.

Since the dissolution of its partnership with Monster on July 1, Wood says the Executives are “an example of what’s to come” from the now free-standing company.

Click to view slideshow.

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In a bit of fallout from Dalton Caldwell’s decision to refocus his company App.net on building a real-time social platform, as well his subsequent open letter to Facebook CEO Mark Zuckerberg criticizing the company’s “bad-faith” acquisition practices, investor Marc Andreessen (pictured) is leaving the startup’s board.

Andreessen will be replaced on the board of Mixed Media Labs (the company that Caldwell co-founded to launch photosharing service Picplz, and which now operates App.net) by Scott Weiss, another partner at Andreessen Horowitz. Andreessen is a Facebook board member, so the swap is supposed to avoid the conflicts of interest likely to arise as Caldwell builds his own alternative to social platforms like Facebook and Twitter.

Weiss isn’t quite as big a name as Andreessen, but he’s an experienced entrepreneur, having co-founded and served as the CEO of IronPort Systems. (He’s also an occasional TechCrunch columnist.)

The news was first reported in AllThingsD, and Caldwell confirmed the story to me via email, telling me, “This was not unexpected.”

Caldwell first announced last month that he’s taking App.net in a new direction by building real-time social service and API “where users and developers come first, not advertisers,” and that he wants to raise $500,000 for the initiative through Kickstarter. Then yesterday, Caldwell offered a little more of the backstory. He wrote that he’d been meeting with Facebook executives to discuss a new app that App.net was building on the Facebook platform, allowing users to see which apps their friends were using. However, Caldwell claims that the meeting took an “odd turn”, with the executives saying Caldwell’s product would compete with the Facebook App Center, and pressurizing him to sell to Facebook instead.

His reaction? “I told your team I would rather reboot my company than go down that route.” And here we are, mid-reboot.

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The latest session at TechCrunch Disrupt was a fireside chat between Sarah Lacy and accomplished entrepreneur Fritz Demopoulos — an expat who arrived in China in the late 90s while he was working at News Corp and went on to start (and sell) two very successful companies.

The conversation, which you’ll find a recording of above, focused largely on the issues facing Western companies as they try to make their way into China.

The issue, Demopoulos says, is that companies can’t simply look at China as an important market. CEOs and other executives have to be looking at China as a commitment, both from an organizational and financial perspective. Many companies, he says, scoff at the idea of putting several years or more into building a sustainable presence in China (in part, in some cases, because they’re public). But they need to be willing to do this.

Asked about the lack of acquisitions in China, Demopoulos said he’s hearing that more bankers and lawyers are actually working on M&A style transactions, so it looks like they’re picking up. He added that the shortage of M&A historically may step from a Romance of the Three Kingdoms scenario, where “everyone hates each other”.

Finally, the talk turned to what it takes to start a successful company in China. There’s a widely held perception that you need to ‘know someone’ with connections to the Chinese government to make it there, which Demopoulos addressed. To succeed, he says, you need to do one of four things:

• The first, is to be a broker or middle-man
• The second is to participate in the china information industry, or PR
• The third is to take advantage of government related opportunities
• And finally, the fourth is the find new markets or create great products

As for the government connections? Demopoulos didn’t dismiss that entirely (there are some times when they can help), but he said that when you think about it, there are probably tens of thousands of people with various connections. In some ways, it’s sort of a buyer’s market for those who need them.

Article courtesy of TechCrunch

Level 3 Communications has acquired IP solutions and networking provider Global Crossing. The transaction is valued at $23.04 per share, or approximately $3 billion, including the assumption of approximately $1.1 billion of net debt from Global Crossing. The deal was an all-stock transaction.

Global Crossing’s networking platform offers businesses VPN, leased lines, audio and video conferencing, long distance telephone, managed services, dialup, colocation and VoIP services. Global Crossing’s network is currently being used by 40 percent of Fortune 500 companies, as well as 700 carriers, mobile operators and ISPs.

Jim Crowe, chief executive officer of Level 3, said in a statement: “This is a transformational combination that we believe will deliver significant value to the investors, customers and employees of both Level 3 and Global Crossing…The complementary fit between the two companies’ networks, service portfolios and customers is compelling. By leveraging the respective strengths and extensive reach of both companies, we are creating a highly efficient and more extensive global platform that is well-positioned to meet the local and international needs of our customers.”

Global Crossing has had a tumultuous past. The company’s market cap was once $40 billion, which is well below the $3 billion acquisition price (or $1.9 billion minus debt). In 2002, the company filed for bankruptcy. Global Crossing’s founder Gary Winnick was sued for fraud by the company’s shareholders; Winnick and other executives eventually paid $325 million in a settlement.

The two companies will create a giant in the networking space. The combined company’s platform will be anchored by fiber optic networks on three continents, and will support clients in 50 countries (including Netflix). The revenue from both companies in 2010 was $6.26 billion.

Article courtesy of TechCrunch

CitySocialising, the subscription-based social network that lets members find local and likeminded people to socialise with in the real world, has secured £1m in a Series A round led by PROfounders Capital, the European VC fund backed by the likes of Brent Hoberman and Michael Birch.

PROfounders’ previous investments include Made.com, TweetDeck and Keynoir, while CitySocialising’s original early-stage funding in March 2009 was provided by the London Business Angels network. The new investment will be used for product development and expansion, including mobile, along with recruitment of “key Executives” including Marketing and Business Development Director and Product Manager.

Article courtesy of TechCrunch

Back in April when HP bought Palm, we spoke with HP Senior Vice President of Strategy and Corporate Development, Brian Humphries, who made it clear that the acquisition was about webOS. “Our intent is to double down on webOS,” is exactly what he said. Palm’s intellectual property was another key part of the deal, we were told. Downplayed was the role Palm employees would play after the merger — including key Palm executives. Now we may know why.

A number of Palm’s Senior Vice Presidents appear to be out there door, some of their own accord, and some not, we’re hearing from a couple of sources. This may not be that surprising considering how many had left in recent months (and most recently two key webOS guys had), but HP did say in April that they had put thought into how to retain key members of Palm’s team. All that thinking apparently hasn’t paid off based on what we’re hearing now.

The timetable for the exits isn’t yet clear, but it should be soon. Also not entirely clear is just which executives are leaving and which are staying. But from what we’re told, it will be more clear than ever that HP didn’t buy Palm for the management team.

One wild card in this remains Palm CEO Jon Rubinstein. Before the HP deal, we heard rumors he may be out — those turned out to be not true, perhaps because his former employer — he worked at HP in the 1980s — was buying his company. Immediately after the acquisition, HP’s press release stated that Rubinstein expected to remain with the company. But when we asked, Humphries wouldn’t say exactly what Rubinstein’s role with HP would be. It’s not clear if he’s going to be one of the executives leaving HP now as well.

We’ve reached out to HP for comment, but have yet to hear back. Stay tuned for more information as we get it.

[photo: flickr/echiner1]

Article courtesy of TechCrunch