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Uploaded: Wednesday, November 21, 2012, 9:44 AM
HP stock falls on news of acquisition fraud
British software company Autonomy misstated its financial performance, HP says
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by Eric Van Susteren
Palo Alto Weekly Staff
Palo Alto-based HP said Tuesday, Nov. 20, that "accounting improprieties, misrepresentations and disclosure failures" caused it to massively overpay for the British software company Autonomy Inc. last year, which it bought for nearly $11 billion.
The company announced an $8.8 billion impairment charge in the fourth quarter, stating that the majority of the charge, more than $5 billion, was related to accounting improprieties that resulted in Autonomy being "extremely overvalued" at the time of its acquisition.
HP said Autonomy intentionally misstated its financial performance, including its revenue, core growth rate and gross margins, and the misrepresentation of its business mix.
"These efforts appear to have been a willful effort to mislead investors and potential buyers, and severely impacted HP management's ability to fairly value Autonomy at the time of the deal," the company stated in a press release.
The bad news caused HP's stock value to fall to $11.52, its lowest point since 2002.
On the same day, the company reported that its revenue was down 5 percent from last year, falling from $127.2 billion to $120.4 billion. The company's fourth-quarter revenue was $30 billion, down 7 percent from last year's $32.1 billion fourth quarter.Are you receiving Express, our free daily e-mail edition? See a sample and sign-up for Express.
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Posted by resident, a resident of the College Terrace neighborhood, on Nov 21, 2012 at 11:27 am HP has screwed up a lot in the last few years. There is a lot of blame to spread around on this one, though. HP reportedly hired Deloitte, one of the world's biggest auditing companies, to evaluate Autonomy before the purchase. I expect a big lawsuit between the 2 companies and maybe HP can get some of their money back.
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Posted by Ducatigirl, a resident of the Old Palo Alto neighborhood, on Nov 21, 2012 at 1:48 pm Seems like HP has steadily gone downhill since Carly Fiorina was CEO. It has just been one bad decision after another. It is really sad to watch a venerable company go downhill like this.
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Posted by resident, a resident of the College Terrace neighborhood, on Nov 21, 2012 at 1:53 pm Reports in various business newspapers today are saying that HP's explanation is either a hoax or at most a gross exaggeration to coverup poor management and poor business decisions by HP. Yes, HP did lose a ton of money on this deal, but they could have figured out ahead of time that the deal stunk.
Further, the real reason for HP's stock price plunge is a poor quarterly earnings report. Autonomy may be just a smoke screen for the mass media, but professional bankers and investors aren't buying it.
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Posted by DeeDee, a resident of the Crescent Park neighborhood, on Nov 21, 2012 at 4:32 pm HP simply illustrating - once again - the fallacy of the past 30 years of being led by the "Best and the Brightest" in our politics and our economy...
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Posted by Silly, a resident of the Embarcadero Oaks/Leland neighborhood, on Nov 21, 2012 at 9:58 pm There were 15 big-name advisers on the deal -- auditors, law firms and bankers -- on which $100,000,000 was spent to check out the deal. HP decided to ignore its own CFO and Larry Ellison who said the Autonomy was way over-valued and NOW they're demanding an FBI, SEC and Serious Frauds investigation??
The best comment was along the lines of "They bought a Rolls-Royce, drove it around for more than a year and only then did they realize they'd gotten a Yugo?"
Don't forget they wrote down EDS last quarter. What's left next time?
I'm SO glad Meg is only screwing up HP and not the whole state of CA.
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Posted by TomRome, a resident of the Midtown neighborhood, on Nov 25, 2012 at 5:34 pm Not surprised at all. HP has been making one bad decision after another.
They better get rid of Meg and do some top level house cleaning soon. They need someone who is ready to make some hard and very drastic changes to insure HP has a future.
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Posted by Crescent Park Dad, a resident of the Crescent Park neighborhood, on Nov 25, 2012 at 10:59 pm @ silly & @ TomRome: At least read up on what happened and get your facts straight before going off and declaring that HP should rid itself of MW over this.
The previous CEO was the one who signed off on the acquisition. MW had nothing to do with it.
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