Hewlett-Packard said on Tuesday that it had taken an $8.8 billion accounting charge, after discovering “serious accounting improprieties” and “outright misrepresentations” at Autonomy, a British software maker that it bought for $10 billion last year.
It is a major setback for H.P., which has been struggling to turn around its operations and remake its business.
The charge essentially wiped out its profit. In the latest quarter, H.P. reported a net loss of $6.9 billion, compared with a $200 million profit in the period a year earlier. The company said the improprieties and misrepresentations took place just before the acquisition, and accounted for the majority of the charges in the quarter, more than $5 billion.
Shares in H.P. plummeted more than 13 percent in early morning trading on Tuesday, to $11.55.
Hewlett-Packard bought Autonomy in the summer of 2011 in an attempt to bolster its presence in the enterprise software market and catch up with rivals like I.B.M. The takeover was the brainchild of Léo Apotheker, H.P.’s chief executive at the time, and was criticized within Silicon Valley as a hugely expensive blunder.
Mr. Apotheker resigned a month later. The management shake-up came about one year after Mark Hurd was forced to step down as the head of H.P. as a result of accusations of sexual harassment.
Since then, H.P. has tried to revive the company and to move past the controversies. Last year, Meg Whitman, a former head of eBay, took over as chief executive and began rethinking the product lineup and global marketing strategy.
But the efforts have been slow to take hold.
In the previous fiscal quarter, the company announced that it would take an $8 billion charge related to its 2008 acquisition of Electronic Data Systems, as well as added costs related to layoffs. Then Ms. Whitman told Wall Street analysts in October that revenue and profit would be significantly lower, adding that it would take several years to complete a turnaround.
“We have much more work to do,” Ms. Whitman said at the time.
Hewlett-Packard continues to face weakness in its core businesses. Revenue for the full fiscal year dropped 5 percent, to $120.4 billion, with the personal computer, printing, enterprise and service businesses all losing ground. Earnings dropped 23 percent, to $8 billion, over the same period.
“As we discussed during our securities analyst meeting last month, fiscal 2012 was the first year in a multiyear journey to turn H.P. around,” Ms. Whitman said in a statement. “We’re starting to see progress in key areas, such as new product releases and customer wins.”
The strategic troubles have weighed on the stock. Shares of H.P. have dropped to about $13 from nearly $30 at their high this year. After Tuesday’s announcement, the stock continued to plunge in premarket trading, dropping nearly 11 percent.
The latest developments could present another setback for Ms. Whitman’s efforts.
When the company assessed Autonomy before the acquisitions, the financial results appeared to pass muster. Ms. Whitman said H.P.’s board at the time – which remains the same now, except or the addition of the hedge fund investor Ralph V. Whitworth – relied on Deloitte’s auditing of Autonomy’s financial statements. As part of the due diligence process for the deal, H.P. also hired KPMG to audit Deloitte’s work.
Neither Deloitte nor KPMG caught the accounting discrepancies. Nigel Mercer, the Deloitte accountant listed on Autonomy’s last annual report, did not return calls seeking comment.
Hewlett-Packard said it first began looking into potential accounting problems in the spring, after a senior Autonomy executive came forward. H.P. then hired a third-party forensic accounting firm to conduct an investigation.
H.P. has turned over its findings to Securities and Exchange Commission in the United States and the Serious Fraud Office in Britain. In a conference call with analysts, Ms. Whitman said the company might consider legal actions against several parties.
A spokesman for Mike Lynch, former chief executive of Autonomy, did not have an immediate comment.
DealBook: Hewlett-Packard Takes Big Hit on ‘Improprieties’ at Autonomy
This article
DealBook: Hewlett-Packard Takes Big Hit on ‘Improprieties’ at Autonomy
can be opened in url
https://newsjoin.blogspot.com/2012/11/dealbook-hewlett-packard-takes-big-hit.html
DealBook: Hewlett-Packard Takes Big Hit on ‘Improprieties’ at Autonomy
