Hewlett-Packard Co. (NYSE: HPQ) reported that it would take a write-down of $8.8 billion blaming the company’s $10 billion purchase of British software company Autonomy Corp. and citing fraud on the part of the target’s leaders.
The Palo Alto, Calif. technology company said in a filing with the U.S. Securities and Exchange Commission that "serious accounting improprieties, disclosure failures and outright misrepresentations at Autonomy Corporation plc" occurred prior to HP’s acquisition in 2011.
Deloitte, Autonomy's auditor during that period, never reported any accounting discrepancies. Deloitte also audited Autonomy during the deal process with HP. As part of the due diligence, HP hired KPMG to audit Deloitte's work. Calls to both Deloitte and KPMB were not returned.
Regarding HP's allegations, Deloitte said in a statement that it could not comment on the matter. “We will cooperate with the relevant authorities with any investigations into these allegations,” the accounting firm said.
An investigation from the SEC and the U.K. Serious Fraud Office are currently underway, says HP chief executive Meg Whitman.
These recent developments underscore just how much HP has changed since its heyday as a corporate dealmaker and Silicon Valley staple.
The company’s selling of personal computers, printers and other products for businesses propelled the company into one of the world's largest technology makers by revenue. When former chief executive Mark Hurd took over in April 2005, he helped build HP's reputation as an acquirer, spending $13.9 billion for Electronic Data Systems in 2008, and $2.7 billion for 3Com in 2010. But when Hurd stepped down in 2010 following a sexual harassment probe that revealed he had allegedly falsified expense reports, HP endured a series of hardships, including CEO changes, executive turnover and slowing demand of its products.
Leo Apotheker stepped in to replace Hurd as CEO in September 2010 after spending 10 months as CEO of software giant SAP AG (NYSE: SAP). Under his leadership, the bid for Autonomy was considered overpriced while plans to shut down HP’s tablet and WebOs software segments were met with intense scrutiny. While the latter never came to fruition, Apotheker resigned in September 2011 after he was widely criticized for the company’s direction.
Enter Whitman, the former CEO of eBay Inc. (Nasdaq: EBAY) who has since had to deal with declining revenue. For example, HP's revenue for the fourth quarter of 2012 was $30 billion compared with $32.1 billion a year earlier. Sales to consumers were hit particularly hard during the quarter, decreasing 16 percent, while sales to businesses sank 13 percent. Revenue in its flagship PC business fell 14 percent.