Hewlett-Packard Reports Multi-Billion-Dollar Charge in Quarterly Results

Hewlett-Packard Co. shares fell by more than 10 percent after the company reported an $8.8 billion charge in its fourth quarter earnings report Nov. 20. The company attributed the charge to accounting issues resulting from its 2011 purchase of British software maker Autonomy Corp.

“The majority of this impairment charge is linked to serious accounting improprieties, disclosure failures and outright misrepresentations at Autonomy Corp. 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 in a statement. “The balance of the impairment charge is linked to the recent trading value of HP stock.”

Although Hewlett-Packard has not alleged fraud, HP’s CEO Meg Whittman, who joined the company about a month after the Autonomy acquisition, told CNBC there was a “willful effort” by Autonomy to divert attention from the true state of its financial status. In fact, Autonomy founder and chief executive Mike Lynch left the company May 23, after which a senior autonomy executive provided information about accounting improprieties, when then led to an internal investigation. The case has since been referred to the US Securities and Exchange Commission and the UK’s Serious Fraud Office for investigation.

“We believed there is a willful effort on the part of certain members of Autonomy management to mislead shareholders when Autonomy was a publicly traded company, and to mislead potential buyers, including HP,” Whitman told CNBC. “We stand by the forensic review that we’ve seen.”

Whitman still believes, however, that the HP acquisition of Autonomy can still turn into a positive since the latter’s business solves a market need for HP’s customers. Autonomy is known for making search engines that enable companies to locate vital information stored in their computer networks. The acquisition was HP’s attempt at strengthening its portfolio of products and services for corporations and government agencies, although Hewlett-Packard was criticized at the time for paying too much.