Hewlett-Packard on Tuesday claimed that there were substantial instances of financial fraud in connection with its acquisition of the software company Autonomy in 2011 for $11.1 billion. Scott McGrew reports.
HP Claims Fraud At Autonomy
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Hewlett-Packard claimed Tuesday that there were substantial instances of financial fraud in connection with its acquisition of the software company Autonomy in 2011, and took a one-time $8.8 billion accounting charge.
In its routine quarterly report, the Silicon Valley tech giant based in Palo Alto alleged that there was serious fraud and misrepresentation on the part of Autonomy, a British company. Analysts had always thought the purchase was a mistake, and that backlash from the purchase led to the ouster of former CEO Leo Apotheker. Now, HP is claiming this wasn't just a mistake but a disaster.
Speaking on CNBC Tuesday morning, CEO Meg Whitman said she "regrets" voting for the purchase, and is "seeking redress." She added that the case of "serious accounting improprieties" and the "willful effort to deceive" is now in the hands of the Securities and Exchange Commission.
In the same breath, she said she wanted to "take Autonomy and grow it."
According to Forbes, HP also reported October quarter profits slightly ahead of Street estimates, but cautioned that January quarter profits will be below consensus estimates.
Specifically, HP today disclosed $8.8 billion in non-cash charges "linked to serious accounting improprieties, disclosure failures and outright misrepresentations at Autonomy … that occurred prior to HP's acquisition of Autonomy and the associated impact of those improprieties, failures and misrepresentations on the expected future financial performance of the Autonomy business over the long-term." In effect, the company is writing down close to 90 percent of the value of the transaction, according to Eric Savitz of Forbes.
The deal was originally reached under Apotheker, and closed under current CEO Meg Whitman.
MarketWatch wrote that shares of HP plunged after the company disclosed these "serious accounting improprieties."
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