BSkyB v EDS - HP restates profits 3 weeks after announcing them

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A chronology:

3 February 2010: The High Court orders HP to pay £200m in damages to BSkyB which has won its claim for fraudulent misrepresentation. A judge found that EDS, which was acquired by HP in 2008, had overstated its abilities when selling a CRM system to BSkyB. The £200m must be paid within 14 days.

17 February 2010: HP announces its first-quarter results.

1 March 2010: The judge in the case orders HP to pay a further £70m to BSkyB in interim damages and interest. There's to be a further hearing in April over the amount of damages and interest.  

5 March 2010: HP restates its first-quarter results in the light of the judge's 1 March ruling. HP increases its contingency reserve in connection with the litigation, which hits its previously-announced first-quarter net profits by $73m [£48.3m]

As the amount of damages and interest have yet to be finalised, HP has told the US Securities and Exchange Commission that it will "continue to evaluate the reserve pending final resolution of the litigation".

**

This is HP's succinct summing up of the judge's 468-page ruling:

"The Court's March 1 order followed an earlier decision in January 2010 that dismissed the majority of BSkyB's claims against EDS but found the company liable in certain areas. HP is seeking permission to appeal the decision."

This was part of HP's announcement:

"HP today stated that it has revised its previously-announced financial results for its first fiscal quarter ended Jan. 31, 2010, following developments in litigation involving Electronic Data Systems (EDS), a company that HP acquired in August 2008.

"The revisions reflect an increase in the amount of the contingency reserve previously established in connection with the litigation and resulted in a negative impact on HP's first quarter net earnings of approximately $73 million, or $0.03 per diluted share. 
 
"EDS and one of EDS's subsidiaries are defendants in litigation filed in the United Kingdom by Sky Subscribers Services Limited and British Sky Broadcasting Limited (BSkyB) in 2004 relating to a customer relationship management project that was awarded to EDS in 2000.

"At a court hearing held on March 1, 2010, the court ordered EDS to make an interim payment to BSkyB of £70 million, or approximately $112 million, which is in addition to an interim payment of £200 million, or approximately $320 million, that HP made voluntarily to BSkyB in February 2010.

"Following that March 1 hearing, HP determined that it was appropriate to increase the contingency reserve. HP will continue to evaluate the reserve pending final resolution of the litigation.
 
"The court's March 1 order followed an earlier decision in January 2010 that dismissed the majority of BSkyB's claims against EDS but found the company liable in certain areas. HP is seeking permission to appeal the decision.
 
"As these developments occurred after the end of HP's first fiscal quarter and before the company had filed its financial statements as part of its Quarterly Report on Form 10-Q, applicable accounting rules required HP to update its financial results for that quarter to reflect the impact of the increased contingency reserve.

"The updated financial results do not reflect any other changes or adjustments to HP's previously announced first quarter financial results.
 
"As a result of the revisions, the company's GAAP net earnings for the quarter has been revised to $2.25 billion and GAAP diluted earnings per share (EPS) has been revised to $0.93 per share - down from GAAP net earnings of $2.32 billion and GAAP diluted EPS of $0.96 - as previously reported on Feb. 17, 2010..."
 
Links:

Beyond BSkyB, is HP dealing with other EDS litigation? - IT Projects Blog

HP's original first-quarter results with qualifying statement - HP website

Will the EDS/BSkyB case stop salespeople lying? - Inside Outsourcing

BSkyB ruling could push up price of IT contracts - ComputerWeekly.com

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