HP claims to have been wilfully misled by ‘former’ members of Autonomy’s management team in the lead up to its acquisition and has now written $8.8bn off of the company’s value.
The announcement of the write down came in the firm’s fourth quarter results for fiscal year 2012, accompanied by a statement putting the blame squarely at the Cambridge company’s door and its former CEO, Mike Lynch.
HP said a senior member of Autonomy’s leadership team came forward after Lynch left HP in May to report “a series of questionable accounting and business practices at Autonomy” before HP paid $11.7bn for the company back in August 2011.
As a result, HP has now reported the issues to the US Securities and Exchange Commission (SEC) and the UK’s Serious Fraud Office “for civil and criminal investigation.”
“HP is extremely disappointed to find that some former members of Autonomy’s management team used accounting improprieties, misrepresentations and disclosure failures to inflate the underlying financial metrics of the company, prior to Autonomy’s acquisition by HP,” read a statement from the firm.
“These efforts appear to have been a wilful effort to mislead investors and potential buyers, and severely impacted HP management’s ability to fairly value Autonomy at the time of the deal.”
However, it still said the company was “100% committed to Autonomy and its industry-leading technology.”
Lynch has firmly denied the allegations.
"The former management team of Autonomy was shocked to see this statement today, and flatly rejects these allegations, which are false," a spokeswoman told Reuters in a statement.
"HP's due diligence review was intensive, overseen on behalf of HP by KPMG, Barclays and Perella Weinberg. HP's senior management has also been closely involved with running Autonomy for the past year."
With the $8.8bn write-down, HP’s results filing was unlikely to make for a pleasant read, but other elements of the business also took a hit.
Net revenues for the quarter were $30bn but the company still recorded an overall loss of $6.9bn for the three month period.
Personal Systems revenues – which include PC sales – were down 14% year-on-year, the Enterprise Servers, Storage and Networking (ESSN) division dropped 9% year-on-year and services fell 6% year on year.
Even HP’s printing business revenues were down 5% compared to last year, with hardware sales falling by 20%.
“Fiscal 2012 was the first year in a multiyear journey to turn HP around," said Meg Whitman, president and CEO of HP. "We're starting to see progress in key areas.”
20 Nov 2012