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HP reports massive $8.8-billion charge; shares plummet

November 20, 2012|By Andrea Chang

Hewlett-Packard Co. reported a hefty $8.8-billion charge in its fourth quarter, largely due to serious accounting problems stemming from its 2011 purchase of a British software maker.

The Palo Alto company released its earnings Tuesday and revealed that it had to take a massive charge to align the accounting value of Autonomy Corp., which it bought for $10 billion last year, with its real value.

The writedown, combined with a weak first-quarter outlook for struggling HP, caused shares to plunge in morning trading. The company's stock was down $1.44, or 10.8%, to $11.86 at 9:20 a.m. PST.

"The majority of this impairment charge is linked to serious accounting improprieties, disclosure failures and outright misrepresentations at Autonomy Corp. plc that occurred prior to HP's acquisition of Autonomy and the associated impact of those improprieties, failures and misrepresentations on the expected future financial performance of the Autonomy business over the long term," HP said in a statement. "The balance of the impairment charge is linked to the recent trading value of HP stock."

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HP Chief Executive Meg Whitman said the company began to realize something was amiss after Autonomy founder and Chief Executive Mike Lynch left on May 23, according to the Associated Press. A senior Autonomy executive then volunteered information about the accounting improprieties, which led to an internal investigation.

The case has been referred to the U.S. Securities and Exchange Commission and the UK's Serious Fraud Office, the AP said, citing Whitman. HP will also try to recoup some of what it paid for Autonomy through lawsuits.

Autonomy is a software company that helps organizations understand the meaning in information, according to the firm's website: "A pioneer in its industry, Autonomy's unique meaning-based technology is able to make sense of and process unstructured, 'human information,' and draw real business value from that meaning."

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Autonomy was founded in 1996 and has more than 65,000 customers worldwide.

HP's fourth-quarter revenue was $30 billion, down 7% from the same quarter in 2011 and down 4% when adjusted for the effects of currency. The company reported a loss of $6.9 billion, or $3.49 a share, compared with a profit of $200 million, or 12 cents, a year earlier.

Across business categories, personal systems revenue was down 14% year-over-year; printing revenue declined 5%; services revenue fell 6% and enterprise servers, storage and networking dropped 9%.

Software revenue, however, grew 14% year over year, including the results of Autonomy.

For the first quarter of fiscal 2013, HP estimated earnings per share to be in the range of 34 to 37 cents.

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