Autonomy Fiasco May Lead to Billion-Dollar Lawsuit for HP

Hewlett-Packard’s mishandling of the purchase of Autonomy may come back to haunt the company as it faces a billion-dollar lawsuit. HP had been pursuing the British software company for quite some time before the deal came through near the end of 2011. HP paid $11.3 billion and now it seems that they got it all wrong. According to the lawsuit filed against the company, there were warnings regarding the price being inflated yet they were ignored. Moreover, the company tried to back out of the deal at the last moment, which caused an embarrassing situation for those involved.

Interestingly, the lawsuit has not been filed by someone from Autonomy. Rather, the shareholders of HP are the ones who have combined to sue the company they own part of. They feel that HP’s poor handling of the Autonomy deal led to severe deterioration of HP’s stock value and there are a couple of major issues that could have been averted if due diligence had been exercised. The terms of the lawsuit state that the shareholders are suing the company to the tune of a billion dollars. If the charges are proved, HP will have to pay that amount to its shareholders.

Several august officials of the company have been named as defendants in the lawsuit. The shareholders feel that they failed to fulfill their responsibility towards the company and its stakeholders when conducting the Autonomy deal. In particular, the company had to write the value of the company purchased down by $8.8 billion last year. This was the result of HP realizing that some fiscal irregularities had taken place when the original deal was being finalized. As a result of the write-down, the market value of the company decreased considerably, with the shareholders bearing the brunt.

Even without the Autonomy write-down, the performance of HP has been anything but satisfactory. The company has had three CEOs in quick succession which shows the instability that roams the corridors of the tech giant. So, with the company already struggling to put up the numbers required to keep shareholders happy, a write-down of almost $9 billion was the last thing they needed. The problem was compounded because the write-down was made right after an $8 billion charged was announced by the company related to its purchase of EDS Systems back in 2008.

So, the impact of the write-down multiplied because of the charge already being levied. The market capitalization had to suffer directly because of it which made the shareholders feel aggrieved about the whole fiasco. It is only natural that they are seeking a legal reprieve to resolve the situation with the company once and for all as it is clear that something went amiss during the Autonomy deal. And this is not the only lawsuit HP has had to face in relation to its purchase of the British company. Just after the write-down was announced, they were sued by a shareholder.

This time around, it seems as though there is no way out for the company unless it can prove that the Autonomy purchase was made in good faith and without any backdoor lobbying.

[Image via bloomberg]