Hewlett-Packard Walloped by Charge Relating to Fraud

A Billion Dollars

Hewlett-Packard reported a $8.8 billion accounting charge relating to allegations of fraud tied to the acquisition of its Autonomy software unit.

The company, in the midst of a multiyear turnaround plan, said alleged accounting "improprieties" at the acquired company led to a one-time accounting charge of $8.8 billion.

While avoiding calling it fraud, Hewlett-Packard said there was "serious accounting improprieties, disclosure failures, and outright misrepresentations at Autonomy" that was discovered during a nearly seven-month-long internal investigation.

The accounting issues happened prior to its acquisition of Autonomy for $11.5 billion in 2011, when Hewlett-Packard was criticized by analysts for overpaying. Among other things, Autonomy makes search engines that help companies find vital information stored across computer networks. Acquiring it was part of an attempt by Hewlett-Packard to strengthen its portfolio of high-value products and services for corporations and government agencies.

The company launched the investigation after a senior member of Autonomy's leadership team came forward, Hewlett-Packard said.

After the earnings announcement, the company's shares (NYSE: HPQ) fell in pre-market trading. (Click here to get the latest quotes for Hewlett-Packard.)

The company posted fiscal fourth-quarter earnings excluding items of $1.16 per share, down from $1.17 a share in the year-earlier period.

Revenue decreased to $29.96 billion from $32.12 billion a year ago, as the company's share of the personal computer market shrank and sales of its printers declined.

The personal computer maker, which employs more than 300,000 people globally, is undergoing a restructuring aimed at focusing the sprawling company on enterprise services, in the mold of International Business Machines (NYSE: IBM).

Analysts had expected the company to report earnings excluding items of $1.14 a share on $30.43 billion in revenue, according to a consensus estimate from Thomson Reuters.

Including charges, Hewlett-Packard's net loss for the quarter came to $6.85 billion, or $3.49 per share. That compares with net income of $239 million, or 12 cents per share, in the same period last year.

It was the company's second mammoth loss in a row. In the third fiscal quarter, it lost a record $8.86 billion, or $4.49 per share. That was due to a charge for another acquisition - that of Electronic Data Systems, a technology consulting service that it bought for $13 billion in 2009. In that case, Hewlett-Packard didn't blame improper accounting, just results that didn't live up to expectations.

The company said it sees full-year earnings per share of $3.40 to $3.60, in line with prior guidance, but its first-quarter outlook was lowered to 34 cents to 37 cents a share, well below expectations.

-The Associated Press and Reuters contributed to this report


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