- ‘Gay Jeans’ that fade into rainbow-colored denim created
- Divided court strikes down big porn award
- Jimmy Carter: Don’t hurt Russian people with sanctions
- Oldest ex-MLB player dies in Cuba, 2 days shy of 103rd birthday
- ‘Top Gun’ for drones: Squadrons of carrier-based killers have Navy’s approval
- Bill Clinton to endorse Charlie Rangel for re-election
- Pfc. Bradley Manning is now Pfc. Chelsea Manning: Court says so
- Secret base U.S. special forces used to train Libyans now under terrorist control: report
- 9th suspect in N.C. kidnapping turns self in to FBI
- L.A. sheriff admits to testing flyover spy program without notifying residents
HP says fraud prompted $5B overpayment for co.
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.
With Lynch gone, a senior Autonomy executive volunteered information about the accounting shenanigans, prompting an internal investigation, she 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.
In a statement to the Financial Times, Lynch said “The former management team of Autonomy was shocked to see this statement today, and flatly rejects these allegations, which are false.”
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.
TWT Video Picks
By Andrew P. Napolitano
Obama's veil of secrecy is pierced
- 'Top Gun' for drones: Squadrons of carrier-based killers have Navy's approval
- Pentagon plans to replace flight crews with 'full-time' robots
- Kansas will nullify local regulation of guns
- America is an oligarchy, not a democracy or republic, university study finds
- Nevada rancher Cliven Bundy hailed as patriot, ripped as lawless deadbeat
- CARSON: When government looks more like foe than friend
- Opposition rising to Colorado gun control laws
- Tactical advantage: Russian military shows off impressive new gear
- Obama avoids 'red line' for China; prepared to impose tougher sanctions on Russia
- Protesters, police clash in Philippines ahead of Obama visit
Top 10 handguns in the U.S.
Celebrity deaths in 2014