News Column

HP Writes Down Autonomy Deal Amid Fraud Accusation

Nov. 20, 2012
Hewlett-packard

The problems facing troubled tech giant Hewlett-Packard mounted Tuesday after it wrote down its $10.3 billion dollar purchase of software firm Autonomy, saying the deal had been completed based on fraudulent information presented by the British company.

HP, which until recently was the world's largest PC maker, said it was writing down 8.8 billion dollars of the 10.3 billion dollars it paid for Autonomy in 2011.

In a statement HP accused Autonomy of "serious accounting improprieties, disclosure failures and outright misrepresentations" and said it had asked both the Securities and Exchange Commission, as well as Britain's Serious Fraud Office to investigate.

"This appears to have been a willful effort on behalf of certain former Autonomy employees to inflate the underlying financial metrics of the company in order to mislead investors and potential buyers," HP said.

"These misrepresentations and lack of disclosure severely impacted HP management's ability to fairly value Autonomy at the time of the deal."

In a conference call with analysts, HP chief Meg Whitman claimed that the irregularities were only discovered after Autonomy founder Mike Lynch left the company following the completion of the deal.

The former Autonomy management team rejected the allegations, saying in a statement to the New York Times that HP's mismanagement had ruined the company they spent a decade building.

"The former management team of Autonomy was shocked to see this statement today, and flatly rejects these allegations, which are false," the group said in a statement.

"It took 10 years to build Autonomy's industry-leading technology and it is sad to see how it has been mismanaged since its acquisition by HP," it continued.

The disclosures helped send HP's shares sharply lower in US trading Tuesday in conjunction with a disappointing earnings report which saw the company book a fourth quarter loss of 6.9 million dollars, compared to a profit of 239 million dollars a year ago. Revenue sank 6.5 per cent to 30 billion dollars.

The company is in the midst of an aggressive turnaround effort under Whitman. She was installed earlier this year to replace Leo Apotheker, a German executive who approved the Autonomy deal during his brief stint at the head of the company.



Source: Copyright 2012 dpa Deutsche Presse-Agentur GmbH


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