NEW YORK (AP) — Hewlett-Packard Co. said on 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 CEO 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 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.
Among other things, Autonomy makes search engines that help companies find vital information stored across computer networks.
The deal was approved by Whitman's predecessor, Leo Apotheker, and closed three weeks into Whitman's tenure as chief executive.
Once HP bought the company, Autonomy's reported revenue growth and profit margin quickly declined. Autonomy CEO Mike Lynch continued to run the company as part of HP, but Whitman forced him out on May 23 because it was not living up to expectations.
“Little did I know that there was more than met the eye,” Whitman said.
With Lynch gone, a senior Autonomy executive volunteered information about the alleged accounting irregularities, prompting an internal investigation, Whitman said.
The case has been referred to the U.S. Securities and Exchange Commission and the UK's Serious Fraud Office, she said. The company will try to recoup some of the cash it paid for Autonomy through lawsuits.
In a statement to the Financial Times, Lynch said, “The former management team of Autonomy was shocked to see this statement today, and flatly rejects these allegations, which are false.”
“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,” he added.
Quarterly loss adds to Best Buy's troubles
The Associated Press
Best Buy Co. reported another dismal quarter on Tuesday, recording a loss in the third quarter, hurt by a continued sales slump and charges related to restructuring.
“In line with trends experienced over the last three years, Best Buy's third quarter financial performance was clearly unsatisfactory,” said CEO Hubert Joly, who was tapped in August to help improve results at the electronics chain.
Best Buy reported a loss of $10 million, or 3 cents per share, for the three months ended Nov. 3. That compares with net income of $156 million, or 42 cents per share, in the prior-year period.
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