This is all over the financial news today, but ZDnet explains it best in layman’s terms.
HP took a massive charge related to its purchase of Autonomy and indicated that it bought the company based pumped up and fraudulent accounting.
In its fourth quarter earnings report, HP recorded a charge of $8.8 billion in its software unit. Then HP dropped this bomb:
The majority of this impairment charge is linked to serious accounting improprieties, disclosure failures and outright misrepresentations at Autonomy Corporation 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.
In other words, HP not only bought a clunker for $10 billion and decimated its balance sheet. HP bought Autonomy under false pretenses.
The company’s fourth quarter report was a mixed bag. HP reported a fourth quarter loss of $6.9 billion, or $3.49 a share, on revenue of $30 billion, down 7 percent from a year ago. Non-GAAP earnings, which exclude the massive Autonomy writedown were $1.16 a share.
Wall Street was expecting earnings of $1.14 a share on revenue of $30.4 billion.
For fiscal 2012, HP reported a net loss of $12.7 billion, or $6.41 a share, on revenue of $120.4 billion.
HP CEO Meg Whitman reiterated that HP is a multiyear turnaround project.
HP itself is not using the “FRAUD” word, but talking heads are using it. The tricks Autonomy used included giving it’s value-added resellers money to buy it’s products, and calling that money “marketing.”
Autonomy is a British company, and I think HP will seek legal redress in the UK as well as in SEC. This boneheaded deal from a year go, much criticized at the time for overvaluing an acquisition, was the brainchild of former HP CEO Leo Apotheker, who was forced to resign one month after the deal went thorugh. Meg Whitman will have her hands full trying to clean this mess up.
Expect HP’s stock price to take a massive, massive beating today.
In other news, France got it’s AAA rating downgraded by Moody’s. Join the party, France.