Make us your home page
Instagram

HP claims fraud prompted $5 billion overpayment for company

Hewlett-Packard CEO Meg Whitman says the accounting moves made by Autonomy were designed to bring an acquisition.

Getty Images (2010)

Hewlett-Packard CEO Meg Whitman says the accounting moves made by Autonomy were designed to bring an acquisition.

NEW YORK — Hewlett-Packard Co. said Tuesday that it's the victim of a multibillion-dollar fraud at the hands of a British company it bought last year that lied about its finances.

HP chief executive Meg Whitman said executives at Autonomy Corp. "willfully" boosted the company's figures through various accounting tricks, which persuaded HP to pay $9.7 billion for the company in October 2011.

Autonomy's former CEO, Mike Lynch, said HP's allegations are false.

HP is taking an $8.8 billion charge to align Autonomy's purchase price with what HP now says is its real value. More than $5 billion of that charge is due to false accounting, HP said.

The revelation is another blow for HP, which is struggling to reinvent itself as PC and printer sales shrink. HP's stock dipped $1.59, or 12 percent, to close at $11.71 in Tuesday's 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.

Among the tricks used at Autonomy, Whitman said: The company had been booking the sale of computers as software revenue and claiming the cost of making the machines as a marketing expense. Revenue from long-term contracts was booked up front, instead of over time.

The allegations are serious, according to accounting experts.

"According to GAAP (generally accepted accounting principles), the overstatement of revenue under any tax code is illegal," said Mark Williams, a finance professor at Boston University and a former bank examiner for the Federal Reserve.

As a result of its alleged accounting practices, 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.

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.

HP claims fraud prompted $5 billion overpayment for company 11/20/12 [Last modified: Tuesday, November 20, 2012 8:26pm]
Photo reprints | Article reprints

Copyright: For copyright information, please check with the distributor of this item, Associated Press.
    

Join the discussion: Click to view comments, add yours

Loading...
  1. Pinellas construction licensing board needs to be fixed. But how?

    Local Government

    LARGO –– Everyone agrees that the Pinellas County Construction Licensing Board needs to be reformed. But no one agrees on how to do it.

    Rodney Fischer, former executive director of the Pinellas County Construction Licensing Board Rodney, at a February meeting. His management of the agency was criticized by an inspector general's report. [SCOTT KEELER   |   Times]

  2. New owners take over downtown St. Petersburg's Hofbräuhaus

    Retail

    ST. PETERSBURG — The downtown German beer-hall Hofbräuhaus St. Petersburg has been bought by a partnership led by former Checkers Drive-In Restaurants president Keith Sirois.

    The Hofbrauhaus, St. Petersburg, located in the former historic Tramor Cafeteria, St. Petersburg, is under new ownership.
[SCOTT KEELER  |  TIMES]

  3. Boho Hunter will target fashions in Hyde Park

    Business

    Boho Hunter, a boutique based in Miami's Wynwood District, will expand into Tampa with its very first franchise.

    Palma Canaria bags will be among the featured items at Boho Hunter when it opens in October. Photo courtesy of Boho Hunter.
  4. Gallery now bringing useful art to Hyde Park customers

    Business

    HYDE PARK — In 1998, Mike and Sue Shapiro opened a gallery in St. Petersburg along Central Ave., with a majority of the space dedicated to Sue's clay studio.

     As Sue Shapiro continued to work on her pottery in St. Petersburg, her retail space grew and her studio shrunk. Now Shapiro's is bringing wares like these to Hyde Park Village. Photo courtesy of Shapiro's.
  5. Appointments at Raymond James Bank and Saint Leo University highlight this week's Tampa Bay business Movers & Shakers

    Business

    Banking

    Raymond James Bank has hired Grace Jackson to serve as executive vice president and chief operating officer. Jackson will oversee all of Raymond James Bank's operational business elements, risk management and strategic planning functions. Kackson joins Raymond James Bank after senior …

    Raymond James Bank has hired Grace Jackson to serve as executive vice president and chief operating officer. [Company handout]