HP Takes £5bn Charge For Autonomy ‘Accounting Improprieties’

HP has sustained an $8.8billion (£5.3bn) non-cash impairment charge for “accounting improprieties” relating to its $10.3 billion (£6.7bn) takeover of Autonomy last year.

The company said that the majority of this charge, more than $5 billion, resulted from a number of practices employed by former members of Autonomy’s management team to inflate the value of the company and mislead investors and potential buyers at the time of the acquisition. The remainder of the charge is related to other factors such as the recent trading value of HP stock and marketplace performance.

At the time of the takeover, the purchase price was widely criticised as being too high by analysts. Around 87.3 percent of Autonomy shareholders accepted HP’s offer of £25.50 per share, over 79 percent more than the market price for those shares.

Autonomy overvalued says HP

“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,” said HP in a statement. “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.”

HP’s findings were the result of an internal investigation and forensic review of Autonomy’s historical financial results prior to the takeover.

“HP launched its internal investigation into these issues after a senior member of Autonomy’s leadership team came forward, following the departure of Autonomy founder Mike Lynch (pictured), alleging that there had been a series of questionable accounting and business practices at Autonomy prior to the acquisition by HP,” said the company. “This individual provided numerous details about which HP previously had no knowledge or visibility.”

“The company intends to aggressively pursue this matter in the months to come,” said HP, adding that it was ready to take legal action against certain individuals to recoup what it could for shareholders. It has also referred its findings to the US Securities and Exchange Commission’s (SEC) Enforcement Division and the UK Serious Fraud Office for civil criminal investigations.

“We remain 100 percent committed to Autonomy and its industry-leading technology,” said HP.

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