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HP: 'Autonomy misled on finances' HP: 'Autonomy misled on finances'
(35 minutes later)
Computer maker Hewlett Packard has asked US and UK authorities to investigate alleged misrepresentations of Autonomy's finances before HP took over the UK software group last year.Computer maker Hewlett Packard has asked US and UK authorities to investigate alleged misrepresentations of Autonomy's finances before HP took over the UK software group last year.
HP said it was "extremely disappointed" that Autonomy had appeared to have "inflated" the value of the company prior to the takeover.HP said it was "extremely disappointed" that Autonomy had appeared to have "inflated" the value of the company prior to the takeover.
"These efforts appear to have been a wilful effort to mislead," HP said."These efforts appear to have been a wilful effort to mislead," HP said.
This led to a $5bn (£3.1bn) charge in its latest quarterly accounts.This led to a $5bn (£3.1bn) charge in its latest quarterly accounts.
The total one-off charge recorded in HP's accounts for the three months to the end of October was $8.8bn, pushing the company to a $6.85bn net loss. "We did a whole host of due diligence but when you're lied to, it's hard to find," said HP chief executive Meg Whitman during a conference call following the announcement.
"[Autonomy] was smaller and less profitable that we had thought."
She said HP's investigations suggested that the UK firm had misstated its revenues and growth rate.
Taking into account recent falls in HP's share value and lower-than-anticipated returns from the merger, the total one-off charge recorded in HP's accounts for the three months to the end of October was $8.8bn, pushing the company to a $6.85bn net loss.
'Questionable accounting' 'Questionable accounting'
"HP is extremely disappointed to find that some former members of Autonomy's management team used accounting improprieties, misrepresentations and disclosure failures to inflate the underlying financial metrics of the company, prior to Autonomy's acquisition by HP," the company said in a statement. HP said during the conference call that "a very senior person" from Autonomy had come forward "with specific details [of accounting misrepresentations]". That person was still at the company, it said.
This "severely impacted" its ability to value the company accurately, it added. Ms Whitman said HP had discovered a number of irregularities, including hardware sales that had been reported as software revenues, which inflated both overall revenues and profit margins.
HP said it had launched an internal investigation after a "senior member [of Autonomy's management] alleged there had been a series of questionable accounting and business practices" at the group. She said margins of between 40% and 45% had been reported, whereas HP now believed them to be between 20% and 28%.
The company said as well as referring the matter to the regulatory authorities, it would be taking civil court action against "various parties" to recoup money for its shareholders. She added that as well as referring the matter to the regulatory authorities, the company would be "aggressively pursuing individuals responsible for this wrongdoing".
HP shares fell 11% in pre-market trading in New York following the announcement. This would involve trying to recover money for HP shareholders.
HP completed the takeover of Autonomy for $12bn in October last year. HP shares fell 13% in early trading in New York following the announcement.
CriticismCriticism
HP completed the takeover of Autonomy for $12bn in October last year.
Autonomy was founded by Mike Lynch in 1996 and grew to become one of the largest software companies in the UK. Mr Lynch is a non-executive director of the BBC.Autonomy was founded by Mike Lynch in 1996 and grew to become one of the largest software companies in the UK. Mr Lynch is a non-executive director of the BBC.
It gained a listing on the US Nasdaq exchange in May 2000, at the height of the technology boom, and was listed in London six months later.It gained a listing on the US Nasdaq exchange in May 2000, at the height of the technology boom, and was listed in London six months later.
The firm has often been cited as an example of how academic research can be turned into a profitable business, although it has attracted criticism from the City, particularly when, in October 2010, it warned there had been unexpected volatility in its customers' "purchasing behaviour" and lowered its full-year forecasts.The firm has often been cited as an example of how academic research can be turned into a profitable business, although it has attracted criticism from the City, particularly when, in October 2010, it warned there had been unexpected volatility in its customers' "purchasing behaviour" and lowered its full-year forecasts.
HP's decision to buy the company was part of the US firm's long-term plan to move away from making computers into the more profitable software business.HP's decision to buy the company was part of the US firm's long-term plan to move away from making computers into the more profitable software business.