HP is no stranger to losses, however a very large chunk of the tech giants most recent $8.8 billion write-off is not its own fault. Company officials on Tuesday announced that it was taking the write-off because of its 2011 acquisition of enterprise information firm Autonomy.
According to officials the “majority of this impairment charge is linked to serious accounting improprieties, disclosure failures and outright misrepresentations at Autonomy… that occurred prior to HP’s acquisition.”
Earlier in the year HP wrote off $8 billion related to its 2008 acquisition of Electronic Data Systems.
What sets this most recent write-off apart from the EDS deal is that HP wasn’t expecting any type of massive account fraud.
In a press release the organization writes:
“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. These efforts appear to have been a willful effort to mislead investors and potential buyers, and severely impacted HP management’s ability to fairly value Autonomy at the time of the deal. We remain 100 percent committed to Autonomy and its industry-leading technology.”
The company says at least $5 billion of its write-off is based off “serious accounting improprieties, misrepresentation and disclosure failures.”
HP is continuing to investigate the false accounting claims made by Autonomy’s former staff members. HTC says the misrepresentations have so far included:
- The mischaracterization of revenue from negative-margin, low-end hardware sales with little or no associated software content as “IDOL product,” and the improper inclusion of such revenue as “license revenue” for purposes of the organic and IDOL growth calculations.
- This negative-margin, low-end hardware is estimated to have comprised 10-15% of Autonomy’s revenue.
- The use of licensing transactions with value-added resellers to inappropriately accelerate revenue recognition, or worse, create revenue where no end-user customer existed at the time of sale.
HP has handed its finding over to the US Securities and Exchange Commission’s Enforcement Division and the UK’s Serious Fraud Office for civil and criminal investigation.
HP will also seek redress in civil court to recuperate shareholder losses.