Autonomy purchase turns sour for HP - Sydney Morning Herald

FOR Hewlett-Packard, the alarm bells started ringing less than a year after the technology company bought the British software maker Autonomy for $US11.1 billion.

Unhappy with the business's sagging performance, HP ousted the software company's founder and sent a team to Britain to review its books in May. It was then that a finance official at the British company stepped forward, raising questions about the accuracy of the numbers.

Months of investigation followed, prompting HP's accusations this week that Autonomy had engaged in ''serious accounting improprieties''.

Before the deal, HP claimed, Autonomy had inflated its sales. The problems went undetected by outside accountants - both Autonomy's auditors and a firm that HP hired to vet the deal. The accounting issues at Autonomy, which sells software that examines data for patterns, cost Hewlett more than $US5 billion.

Now the matter has been referred to regulators in Britain and the US, and the FBI has opened a case. HP is also considering its own legal action.

''This took time [to uncover],'' said Meg Whitman, the chief executive at HP. The issues, she said, ''were designed to be hidden''.

Hewlett can't escape the onslaught of bad news. In the latest quarter, the company reported a $US6.9 billion loss.

On Tuesday, the stock continued falling, dropping 12 per cent to less than $US12, its lowest since 2002.

''We intend to be very aggressive in recovering value for our shareholders,'' said John Schultz, HP's chief counsel. Individuals will be examined as well as accounting firms, he said.

Autonomy's founder, Mike Lynch, rejected the claims, denying that the company committed any accounting chicanery. He indicated that the company's practices were in line with international accounting standards.

The problems complicate an already difficult turnaround effort, as Hewlett-Packard continues to face weakness in its core businesses. Revenue for the full fiscal year dropped 5 per cent to $US120 billion. Earnings dropped 23 per cent, to $US8 billion, over the same period.

The New York Times