Another big scandal for the US. Hewlett-Packard Autonomy accounting scandal would costs of $8.8 billion in charges. Wall Street was once again surprised to know that.
Scandal involved company Hewlett-Packard opened the trading at a 12-year low and has lost more than 75% of its market cap in 2 years. Hewlett-Packard Co (HPQ) swung to a fiscal fourth-quarter loss as the technology giant recorded much weaker revenue and higher costs and was also hit by a massive write-down tied to its acquisition of search software developer Autonomy Corporation last year.
Shares of HP, which backed its earnings view for the year, dropped 9.3% to $12.06 in recent premarket trading as revenue fell short of views. The stock has fallen 52% over the past year. (Ref: WJS.com)
Hewlett Packard announced that it had taken an $8.8 billion accounting charge, after discovering “serious accounting improprieties” and “outright misrepresentations” at Autonomy, which they bought by a British software maker that it bought for $10 billion last year.
The charge essentially wiped out its profit. In the latest quarter, H.P. reported a net loss of $6.9 billion, compared with a $200 million profit in the period a year earlier. The company said the improprieties and misrepresentations took place just before the acquisition, and accounted for the majority of the charges in the quarter, more than $5 billion. (Ref: NYTimes)
HP alleged that Autonomy’s former management inflated revenue and gross margins to mislead potential buyers. It said Autonomy executives mischaracterized revenue from low-end hardware sales as software sales and booked some licensing deals with partners as revenue, even though no customer bought products.
HP said Autonomy claimed its gross margins were in the 40 percent to 45 percent range while realistically they were in the 28 percent to 30 percent range.
Moreover, Autonomy always represented itself as a software firm but 10 percent to 15 percent of its revenue came from money-losing sales of low-end hardware, HP added. (Ref: Reuters)