Hewlett-Packard said today that it has taken an $8.8 bn accounting charge after finding "serious accounting improprieties, disclosure failures, and outright misrepresentations" at Autonomy, a British software company it bought last year.
The charges were announced during Hewlett-Packard's quarterly earnings statement
, after which shares sank almost 11 per cent in premarket trading.
Hewlett-Packard said it launched the internal investigation after a senior member of Autonomy came forward. The company has avoided calling it fraud, and said that the allegations are related to "disclosure failures" at Autonomy that happened before the merger.
Autonomy primarily makes search engines, and was bought by Hewlett-Packard in an effort to strengthen the number of services it provides to corporations and government agencies. The takeover was criticised at the time as an expensive mistake, leading to the resignation of Leo Apotheker, Hewlett-Packard's then chief executive.
Commenting on HP’s announcement, Victor Basta, managing director of Magister Advisors, said:
"HP’s pursuit of a “buy software to get out of hardware” strategy has failed. Autonomy was always an off piste deal....
... HP are clearly on a mission to change but it was essential they worked first to fix the culture and revamp the business before making a game-changing acquisition. HP’s leadership made a huge mistake by attempting to ‘fix by buying’."