Subscribe

HP Writes Down $8.8 Billion on Autonomy Acquisition

British subsidiary accused of accounting fraud, but HP’s underlying earnings also miss estimates

By Valentin Schmid
Epoch Times Staff
Created: November 21, 2012 Last Updated: November 21, 2012
Related articles: Business » Companies
Print E-mail to a friend Give feedback

Meg Whitman, president and CEO of Hewlett-Packard, and her husband Griffith Harsh IV attend a media and technology conference in Sun Valley, Idaho, July 2012. On Nov. 20, HP announced a $8.8 billion write-down on its Autonomy acquisition, due to accounting fraud. (Kevork Djansezian/Getty Images)

Meg Whitman, president and CEO of Hewlett-Packard, and her husband Griffith Harsh IV attend a media and technology conference in Sun Valley, Idaho, July 2012. On Nov. 20, HP announced a $8.8 billion write-down on its Autonomy acquisition, due to accounting fraud. (Kevork Djansezian/Getty Images)

Hewlett-Packard Co. today hit the markets with a double-whammy. The computer maker has to write down the value of its British subsidiary, Autonomy software, by $8.8 billion. In addition, its fourth-quarter earnings missed both earnings and sales estimates.

“HP is extremely disappointed to find that some former members of Autonomy’s management team used accounting improprieties, misrepresentations, and disclosure failures to inflate the underlying financial metrics of the company, prior to Autonomy’s acquisition by HP,” the company said in a press release.

HP acquired the British maker of pattern recognition software to diversify its line of computer hardware and services for $10.3 billion in August 2011.

HP learned about the fraud from Autonomy personnel who stepped forward after the company’s founder, Mike Lynch, left the company in May 2012. HP claims that it could not possibly have noticed the irregularities during the acquisition. It blamed Autonomy auditor Deloitte, as well as former management, for the mishap.

“The board relied on audited financials—audited by Deloitte—not Brand X accounting firm but Deloitte,” HP CEO Meg Whitman told investors in a conference call Nov. 20. “The CEO at the time and the head of strategy who led this deal are both gone—Leo Apotheker and Shane Robison.”

This statement by Whitman provided little respite for shareholders, however. The company also missed fourth-quarter expectations for revenue ($30.0 billion versus $30.4 billion expected) and guidance for Q1 earnings per share ($0.68–$0.71 versus $0.85 expected). HP shares traded down 12 percent to close at $11.71.

The Epoch Times publishes in 35 countries and in 19 languages. Subscribe to our e-newsletter.




GET THE FREE DAILY E-NEWSLETTER



Stock Info Market Monitor

Selected Topics from The Epoch Times

James Goodlatte