HP reports bruising loss for fourth quarter, says Autonomy officials misrepresented financial position prior to 2011 acquisition.

Paul McDougall, Editor At Large, InformationWeek

November 20, 2012

3 Min Read

Hewlett-Packard on Tuesday reported a $6.9 billion loss for its fiscal fourth quarter, and said it would take a charge of $8.8 billion after writing down the value of its Autonomy software unit, which it said it's investigating for "serious" bookkeeping improprieties.

For the quarter ended Oct. 31, HP said revenue was $30 billion, down 7% from the same period a year ago. The company posted a loss of $3.49 per share. For the full fiscal year 2012, HP recorded a loss of $12.7 billion, on revenue of $120.4 billion which was off 5% from the prior year.

HP attributed much of the loss to the write-down of Autonomy. It acquired the U.K.-based company in October 2011 for $11.1 billion. HP said at the time that it was attracted to Autonomy's enterprise search and knowledge management tools, which allow users to search across multiple forms of unstructured information, including audio and video files, as well as text.

[ Learn more about an HP long shot: Project Moonshot, HP's attempt to bring low power servers into the data center. ]

In its earnings report Tuesday, HP said Autonomy had misrepresented its value.

"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," HP said.

HP said it may pursue civil charges against Autonomy officers it believes are guilty of misrepresentation. "These efforts appear to have been a willful effort to mislead investors and potential buyers, and severely impacted HP management's ability to fairly value Autonomy at the time of the deal. We remain 100% committed to Autonomy and its industry-leading technology," HP said in a separate statement.

Former Autonomy CEO Mike Lynch, who was let go from HP following the acquisition, is "reviewing" HP's claims, a spokesperson for Lynch told Reuters.

HP saw weakness across most of its operating units in the fourth quarter. Sales of PCs and other personal systems were off 14% year-over-year, while revenue from printing products dipped 5%. Enterprise services revenues fell 6%. Sales of servers, storage and networking equipment dropped 9%. Software, the lone bright spot, saw revenue increase 14%.

"Fiscal 2012 was the first year in a multiyear journey to turn HP around," said CEO Meg Whitman, in a statement. "We're starting to see progress in key areas, such as new product releases and customer wins."

Whitman replaced Leo Apotheker as HP's CEO in September 2011. Apotheker was blamed for a number of missteps, including the release of a confusing roadmap under which HP was to abandon the PC business. He later reversed course. Apotheker initiated the transaction to acquire Autonomy, which could further tarnish his legacy if the charges against the company bear out.

Shares of HP were off 12.71%, to $11.61, in opening trading Tuesday.

About the Author(s)

Paul McDougall

Editor At Large, InformationWeek

Paul McDougall is a former editor for InformationWeek.

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