Executives at Hewlett-Packard are publicly seething after
announcing £5.5bn ($8.8m) writedown after "serious accounting
improprieties" were unearthed at Autonomy, the British tech firm acquired
for over £10bn last year.
HP are now clamouring for a formal investigation by British
and American authorities for what they have described as "serious
accounting improprieties, disclosure failures and outright misrepresentations
at Autonomy."
The £5.5m writedown wiped out all of HP's quarterly profits,
resulting a net loss of nearly $7bn. Contrasting against a $200m profit last
year, HP shares have plummeted 13%. HP said it would attempt to recoup
shareholder money by seeking "redress against various parties" in
civil courts.
HP's statement read:
"This appears to have been a wilful effort on behalf of certain former Autonomy employees to inflate the underlying financial metrics of the company in order to mislead investors and potential buyers. These misrepresentations and lack of disclosure severely impacted HP management's ability to fairly value Autonomy at the time of the deal."
The company said the US securities and exchange commission
and Britain's Serious Fraud Office had been notified. In response, a
spokesperson for Autonomy's former management team said:
"HP has made a series of allegations against some unspecified former members of Autonomy Corporation plc's senior management team. The former management team of Autonomy was shocked to see this statement today, and flatly rejects these allegations, which are false. 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. It took 10 years to build Autonomy's industry-leading technology and it is sad to see how it has been mismanaged since its acquisition by HP."
Autonomy founder Mike Lynch, who made £500m from the sale,
refuted HP's claims in the Wall Street Journal. Lynch left the company May as
HP announced 27,000 global redundancies in a $3bn cost-cutting initiative.
"I think what has happened here is that they have got
themselves in a mess," said Lynch. "I can't understand how you can
write down $9bn of value and say somehow this was all caused by something you
didn't notice when you did due diligence with 300 people. It would be kind of a
big elephant to have missed."
According to the BBC, HP chief executive Meg Whitman said:
"We did a whole host of due diligence but when you're lied to, it's hard
to find. [Autonomy] was smaller and less profitable that we had thought."
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