HP claims fraud prompted $5B overpayment for co.

[Omaha Steve]

Source: AP-Excite

By PETER SVENSSON

NEW YORK (AP) - Hewlett-Packard Co. (HPQ) (HPQ) said on Tuesday that it's the victim of a multi-billion dollar fraud at the hands of a British company it bought last year that lied about its finances.

HP CEO Meg Whitman said executives at Autonomy Corporation PLC "willfully" boosted the company's figures through various accounting tricks, which convinced HP to pay $9.7 billion for the company in October 2011.

Autonomy's former CEO said HP's allegations are false.

HP is now taking an $8.8 billion charge to align Autonomy's purchase price with what HP now says is its real value. More than $5 billion of that charge is due to false accounting, HP said.

FULL story at link.



Read more: http://apnews.excite.com/article/20121120/DA2M06SG3.html

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In this Jan. 27, 2010, file photo, Leo Apotheker, speaks at a press conference in Frankfurt. Hewlett-Packard Co. said Tuesday, Nov. 20, 2012, that a British company it bought for $9.7 billion lied about its finances, resulting in a massive write-down of the value of the business. The deal was greenlighted by HP CEO Meg Whitman's predecessor, Leo Apotheker, but closed in October 2011, three weeks into Whitman's tenure. (AP Photo/dapd,Thomas Lohnes)

[dipsydoodle]

1. That news is actually from Tuesday morning - yesterday

One of the original links here for example : http://www.cnbc.com/id/49900639

IF the allegation is true than chances are that licences / future revenue had been capitalised. That was more or less form what I understood at the time had happened in this old chestnut from 12 years ago :

In March 2000, the U.S. Securities and Exchange Commission charged the company with overstatement of revenues and stated profits that were actually losses. Michael Saylor (CEO), Sanju Bansal (COO), and Mark Lynch (former CFO) settled with the SEC later that year without admitting wrongdoing and the company paid $10 million in disgorgement. Cease-and-desist orders were issued to two accounting employees for reporting and recordkeeping violations. The company stated its intention to undertake changes in corporate governance to ensure compliance with securities laws.[18] The company's stock dropped 61% on March 20, 2000 to close at $86 per share, and lost over 90% of its value within a few weeks.[19] A 10:1 reverse stock split in July 2002 reduced the number of outstanding common shares.[20] http://en.wikipedia.org/wiki/MicroStrategy

More here on that case : http://www.nytimes.com/2000/12/15/business/microstrategy-chairman-accused-of-fraud-by-sec.html

Associated fallout from that was humungous.

[customerserviceguy]

2. Interesting that Meg Whitman is now running HP into the ground

It used to be Carly Fiorina's job to do that. They're the Republican version of Lucy and Ethel.

[wilt the stilt]

4. Meg had nothing to do with this

I don't like Meg but she was saddled with this. Personally, I think Meg is way more competent than Carly.

[customerserviceguy]

12. Hmm, OK

But that's like saying Moe is the smart Stooge. I'm glad she never became governor of California, and whatever she does with HP doesn't concern me, I don't buy their junk.

Too bad, it was just a few decades ago that an HP printer was a technological marvel.

[wilt the stilt]

3. This is way to funny

I am more involved with this entire fiasco than you would ever imagine. Autonomy was always a house of cards. My only regret is that I didn't short Autonomy.

[Cynicus Emeritus]

5. HP has had a series of overpaid incompetent CEOs

Every CEO since, and including Fiorina, have been a disaster for shareholders and employees. Whitman made billions at eBay because of her timing before it went public, not because of her ability.

[davidpdx]

8. Yes they have

Their decision to buy Compaq was a huge blunder (that one is on Fiorina's head). The company used to be so good. I very much like their products and have to HP laptops. I've even been able to get them serviced here in South Korea.

It's going to be a difficult choice the next time I need to buy a computer.

[banned from Kos]

6. Wow, HPQ is down to $11.70 and they are in the Dow

they were pushing $50 a few years ago.

Roll-up companies seem to always get hammered. Growth through acquisition is tough (Worldcom, Tyco). Oracle probably overpaid for Sun too but that won't hurt them nearly as much as this blunder.

[fasttense]

7. Ha ha

So they failed to do their due diligence and investigate the company they planned to harvest. Too bad for stupid people.

[dipsydoodle]

9. HP’s Accounting Claims Are Seen as Cover for Bad Deals

“How does that translate into a $5 billion write-off?” said Lynn E. Turner, former chief accountant of the U.S. Securities and Exchange Commission and a managing director at LitiNomics Inc., an economic and forensic consulting firm. “The big issue isn’t the fraud they’re talking about. The big issue is that HP has made acquisitions that have turned out to be a disaster.”

The writedown follows Hewlett-Packard’s August announcement that it would take a charge of $9.2 billion, largely related to its purchase of Electronic Data Systems Corp. When companies make an acquisition, the difference between the value of the target’s hard assets and the purchase price is known as goodwill. That gets carried on the company’s balance sheet as an asset and is reviewed periodically by public companies.

The Autonomy and EDS writedowns together total $18 billion, while Hewlett-Packard’s balance sheet as of April showed almost $45 billion in goodwill.

“Those were decisions approved by the board and they raise serious questions about the competency of the board and management team,” Turner said.

http://www.bloomberg.com/news/2012-11-20/hp-s-accounting-claims-are-seen-as-cover-for-bad-deals.html

[sofa king]

10. Now they know how every HP-owner feels.

[KurtNYC]

11. So now their half empty ink cartridges will rise to $52 each

and will produce about 7 pages of output before a warning comes up that you have to replace the color cartridges in order to print black ?