NEW YORK (AP) - Hewlett-Packard Co. said on Tuesday that it’s the victim of a $5-billion-plus fraud, claiming a British company it bought last year 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.
The revelation is another blow for HP, which is struggling to reinvent itself as PC and printer sales shrink. Its shares hit a 10-year low in morning trading.
Among other things, Autonomy makes search engines that help companies find vital information stored across computer networks. Acquiring it was part of an attempt by HP to strengthen its portfolio of high-value products and services for corporations and government agencies. The deal was approved by Whitman’s predecessor, Leo Apotheker, but closed three weeks into Whitman’s tenure as chief executive. Whitman was a member of HP’s board of directors when Apotheker initiated the Autonomy purchase.
Among the tricks used at Autonomy, Whitman said: The company had been booking the sale of computers as software revenue claiming the cost of making the machines as a marketing expense. Revenue from long-term contracts was booked up front, instead of over time.
As a result, Autonomy appeared to be more profitable than it was, and seemed to be growing its core software business faster than was actually the case. The moves were apparently designed to groom the company for an acquisition, Whitman said.
Once HP bought the company, Autonomy’s reported results quickly declined. Autonomy CEO Mike Lynch continued to run the company as part of HP, but Whitman forced him out on May 23 because it was not living up to expectations.
“Little did I know that there was more than met the eye,” Whitman said.
The case has been referred to the U.S. Securities and Exchange Commission and the UK's Serious Fraud Office, she said. The company will also try to recoup some of the cash it paid for Autonomy through lawsuits.
On a conference call with Whitman following the earnings report, analyst Ben Reitzes of Barclays Capital asked who will be held responsible internally for the disastrous acquisition.View Entire Story
'Your papers, please' must never be heard in America
Independent voices from the TWT Communities
Al Maurer provides a common sense, conservatarian, Constitutional conservative perspective from the battleground state of Colorado
Actor, composer, thinking Michael Moriarty looks at that which is often ridiculously incongruous
The column where people and countries are described in a new fashion. Henry Biernacki depicts experiences of a traveler, with no set itinerary, combining non-fiction with fiction.
Benghazi: The anatomy of a scandal
Vietnam Memorial adds four names
Cinco de Mayo on the Mall