New Year letter to Dr Michael Lynch of Autonomy

Dr Michael Lynch,

CEO, Autonomy Corporation,

Cambridge Business Park

Cowley Rd

Cambridge

CB4 0WZ

2^nd January 2010

Dear Dr Lynch

You may recall that I wrote to you back in August expressing my concerns about Blinkx management.

You were kind enough to take the time and trouble to reply and assure me that Blinkx was being “extremely well managed”.

Here we are, four months on at the start of a new decade, and I am writing to you again because I regret to say I see absolutely no evidence of the good management you allude to.

I have a number of specific concerns, Dr Lynch:

1/ Transaction Hijacking (TH). Ever since the IPO, TH has been trailed as a source of massive future revenues/profits – and yet on the conference call to accompany the last set of figures Chandratillake stated that TH was now ‘not on the horizon’ – and yet there has been not one word of explanation to shareholders about this apparent u-turn. Why?

2/ SmartShopper. Available for download to anyone who is aware of its existence, but as far as I am aware there has been absolutely no promotion or rollout of the product, not any attempt (again, so far as I am aware) to partner with a large media organisation with tens/hundreds of millions of users (a Yahoo!, a Bertelsmann, a News Corp or similar) to roll SmartShopper out to those users on a revenue-sharing basis. Why?

3/ Blinkx Music. Again, a product which has been built but not (so far as I am aware) promoted, and which seems now to have been overtaken by Vevo. Why spend time, money and effort building something to then not do anything with it?

What kind of effective and competent company management is it which leaves such assets unexploited? If they aren’t core to Blinkx’s business they should be sold – not left to gather dust on the shelf or be overtaken by competitors who do know how to promote products.

Given that your personal stake combined with Autonomy’s recently-enlarged stake in Blinkx exceed 20% of the share capital, one of two things must be true: either that you share my concern on the above points, or that you are aware of the reasons for the issues I raise and are satisfied; but if the latter, and given that under stock market rules all shareholders must be given the same information at the same time, why am I not also aware of those reasons?

I am also extremely curious as to why Blinkx has not seen fit to release an iPhone app or a Facebook video search/sharing widget. There have been approximately 50 million iPhones and iTouches sold to date, and Apple has just celebrated the two billionth download from its app store. Facebook has approximately 350 million users (and plans to treble that as soon as it can), and is the second-biggest referrer to YouTube after Google itself – Facebook users clearly have a hunger to view and share video. Why has not Blinkx taken the opportunity to pluck this low-hanging fruit, spend 3-6 months developing apps/widgets, and then leave it to viral processes to spread word of them? Why, in fact, does Blinkx not seem to have any kind of B2C strategy whatsoever?

I’m afraid, Dr Lynch, that I disagree with your view that Blinkx is being “extremely well managed”. Yes, revenues seem to be doubling every six months or so, but as the last set of figures showed costs are also rising, and in any case Blinkx revenues are increasingly arithmetically, whilst online video seems to be growing exponentially. The company’s management seems to me to be missing some very obvious tricks, and failing to exploit assets they already have. I’m afraid that doesn’t fit my idea of good management.

I will make two last points.

The first, a point I have made previously, is this: if Blinkx has as bright a future ahead of it as Chandratillake never tires of telling any journalist who will listen, why have the management team still, to date, not once bought any shares in the market to demonstrate their confidence in the company’s future and their own future wealth?

The second is this: why is Blinkx’s PR and news management so utterly woeful? If Blinkx has a good story to tell, why on earth isn’t the company telling it?

Yours sincerely,