HP cites “serious accounting improprieties, disclosure failures and outright misrepresentations at Autonomy Corp. PLC," which it purchased for $10-billion.
NEW YORK—Hewlett-Packard says a British search engine company it bought last year for US$10 billion misrepresented its finances, resulting in a massive writedown of the value of the business.
HP is avoiding calling it a fraud, but it says there were “serious accounting improprieties, disclosure failures and outright misrepresentations at Autonomy Corporation PLC.”
HP is taking an US$8.8-billion charge in its latest quarter to align the accounting value of Autonomy with its real value. It said most of that charge was due to the fictional accounting at Autonomy.
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 revelation is another blow for HP, which is struggling to reinvent itself.
HP’s net loss for the fiscal fourth quarter, which ended Oct. 31, amounted to $6.85 billion, compared with net income of $239 million in the same period last year.
It was the second mammoth loss in a row for HP. In the third fiscal quarter, it lost a record $8.86 billion due to a charge for another acquisition—Electronic Data Systems, a technology consulting service that it bought for $13 billion in 2009.
In that case, HP didn’t blame improper accounting, just results that didn’t live up to expectations.
Excluding the charges in the latest quarter HP’s revenue was $30.0 billion, down seven per cent from last year and below analyst expectations at $30.5 billion.