Final letter to Dr Michael Lynch of Autonomy

Dr Michael Lynch,

CEO, Autonomy Corporation,

Cambridge Business Park

Cowley Rd

Cambridge

CB4 0WZ

14th February 2010

Dear Dr Lynch

I’m disappointed not to have had a reply from you to my letter of 2^nd January. I can only imagine that you don’t have any arguments to rebut my criticisms of Blinkx management. That being the case, I think the time has come to seriously consider change at the top for Blinkx and the replacing of the current woeful management team with a new team which can deliver for shareholders.

Despite apparently good recent news – including a deal with Miniweb, the extension of the partnership with ITN, the BBC Democracy Live website – the share price remains stubbornly stuck at less than a third of the IPO price, and roughly 20% below the recent £5m (roughly $8m) placing. And this from the self-styled “world’s largest and most advanced video search engine”.

I think the reason why the markets are so negligent of Blinkx lies with the senior management of the company, and that is why I believe it is time for change.

For more than two years now Chandratillake has been proclaiming to any journalist who will listen what a bright future Blinxk has (although he hasn’t, as I’ve mentioned before, actually put his own money where his mouth is). And of course it is true that revenues seem to have been doubling about every six months - one would have thought that fact alone would cause the markets to sit up and take notice of Blinkx. Apparently not.

However, against that apparent achievement must be set the total fiasco of the Miva ‘bid’ (how much exactly was the company worth? The 125c Blinkx originally offered, or the 55c ‘advisory’ that Blinkx announced subsequently? If Miva was only worth 55c a share why offer 125c? If, on the other hand, Miva was really worth 125c a share, what was the offer of 55c supposed to achieve?), and the secrecy-bordering-on-paranoia of the Zango takeover. Both of these show, to my mind, an amateur, inexperienced approach both to deal-making and communication which certainly I wouldn’t expect from a world-class company.

As you will see from the enclosure, I have already had cause to write once to the FSA about what I consider to be a blatant misrepresentation by Chandratillake of Blinkx’s financial position, made to Martin Sorrell of WPP in public and on the record in January 2008 (I know that at least one other shareholder has also written to the FSA on the same matter). I’m afraid I intend to write again about the Zango acquisition. It may or may not be true that the purchase price was so small that Blinkx was not under an obligation to release an RNS about it. But judging from LinkedIn and other anecdotal information, Blinkx has been hiring very significant numbers of ex-Zango employees - perhaps as many as 50, doubling the Blinkx workforce. How can that not have a material impact on the company’s financial position, for good or ill?

The markets don’t like uncertainty, they don’t like obfuscation, they don’t like unpleasant surprises and they don’t like management which talks the talk but doesn’t walk the walk. It may well be that the next results will again show a doubling of revenue – but if those figures do, I wonder what nasty shock will accompany them? Another whopping forex loss? Another unexpected rise in costs? Some other unforeseen and unfortunate event to take the shine off what would otherwise be an excellent set of figures?

While we’re on that subject, Dr Lynch - a $9m forex loss and you claim this company is “extremely well managed”? If I were FD of a company, and I lost that company $9m in unhedged currency swaps, I’d expect to be shown the door pretty quickly - maybe along with the CEO who should have been overseeing me. But instead the FD keeps his job and the good ship Blinkx lurches on…

I’m afraid I am not prepared any longer to sit back and watch the value of my investment eroded by someone (Chandratillake) I consider to be a clueless muppet without the first idea of modern digital media. I don’t doubt for one second that Chandratillake knows a heck of a lot about video search, but he doesn’t seem to know about much else. Blinkx is missing out on not one but two technology revolutions – social media and the apps economy. Since I last wrote to you several video companies (TVCatchup, 1Cast and others) have announced that they will be releasing iPhone apps - Apple, as you may have seen, recently announced that they sold 8.7 million iPhones in the last quarter, double the figure of a year ago, and also announced the three billionth download from the apps store. iPhone purchasers tend to be young and affluent with high disposable incomes – in other words a perfect advertising audience which Blinkx is entirely missing out on.

If I am wrong in my (very low) opinion of Chandratillake then where’s the evidence that I’m wrong? Where are the blockbuster, company-transforming deals that would persuade me he can sit at the top table of the global technology industry? Yahoo are ramping up their online TV effort – which one would have thought could use a good video search function and an index of 35m+ hours of professional longform video – and yet of Blinkx there is no sign. Apple announce the iPad – once again, a custom-designed media-consumption tablet which one would have thought would need good video search/content to help give it a killer USP – and yet once again of Blinxk there is no sign. Those are the sorts of deals Blinkx should be getting involved with, and yet those are precisely the sorts of deals Chandratillake seems incapable of cutting. Instead we get another bloody BobVila.com - although even they seem to have dried up recently. It may be that MIniweb and Canvas will be Blinkx’s (and Blinkx shareholders’) salvation, but I can’t think of a single good reason for not having fingers in as many pies as possible. Equally it may transpire that those initiatives are yet more damp squibs and disappointments for Blinkx shareholders.

I won’t waste my time or yours by writing to you again, Dr Lynch. My next communication will be an email to Chandratillake letting him know exactly what I think of the job he’s doing for shareholders – and I intend to BCC that email to more than 50 technology and media journalists. If Chandratillake won’t talk to shareholders let’s see if the press has any better luck – Chandratillake does, after all, seem to think that journalists and not shareholders are his natural audience anyway. I will also, as I mentioned, be writing to the FSA again, and also to the large institutional shareholders to see whether they are as sick as I am (and as sick as many others shareholders are) of waiting for this useless, utterly clueless management team to deliver.

Another negative review of Blinkx on Glassdoor I see recently, Dr Lynch? The words that stuck in my mind from it were ‘incompetent’, ‘paranoid’, and ‘arrogant’ – which sounds about right to me. You may dismiss such reviews, Dr Lynch, but there’s no smoke without fire. It’s time for a change.

Yours sincerely,

____________

xxxxx xxxxxxx

PS: Further to the point in my last letter about building products and then not leveraging them, I note that Blinkx seems to have a new ‘DealScout’ product, which looks to me to be very similar to SmartShopper. Does the company intend to actually roll this product out or partner for it, or just leave it to moulder on the shelf along with SmartShopper, Transaction Hijacking and Blinkx Music?