SAN FRANCISCO — Hewlett-Packard (HP) said on Tuesday that it took an $8.8bn charge for the "wilful effort to mislead investors and potential buyers" at Autonomy, the software company it agreed to purchase last year for $10.3bn.
HP said it was disappointed when it discovered 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".
More than $5bn of the total charge was because of accounting practices, which a senior executive at Autonomy disclosed after founder Mike Lynch departed, HP said. Autonomy’s UK spokesman George Lockett did not have an immediate comment.
Former HP CEO Leo Apotheker agreed to buy Autonomy, the second-largest UK software manufacturer, to expand in cloud-computing and add software that searches a broad range of data, including e-mails, music, videos and posts on social networks.
The shares of Palo Alto, California-based HP fell as much as 12% in early trading on Tuesday. They had advanced 3.5% to $13.30 at the close in New York on Monday and is down 48% this year.
Also on Tuesday, HP forecast fiscal first-quarter profit that missed analysts’ estimates amid a continuing slump in personal computer sales. Earnings excluding some items will be 68c to 71c per share for the period, which ends in January. Analysts on average had estimated profit of 85c per share.
The net loss in the fiscal fourth quarter was $6.85bn, or $3.49 per share, compared with net income of $239m, or 12c, a year earlier. Fourth-quarter sales fell to $30bn.
HP CEO Meg Whitman is paring product lines and cutting staff to make the company more competitive. HP, once a hotbed of invention and the world’s biggest personal computer (PC) maker, has suffered declining sales and has been late to develop mobile and cloud computing products.
"They have a lot of deep-rooted problems," said Eric Maronak, chief investment officer at Victory Capital in New York. "A lot of it is self-inflicted."
Results included an impairment charge of $8.8bn from the acquisition of Autonomy, because of "accounting improprieties, disclosure failures and outright misrepresentations" that happened before HP purchased the company.
HP, which gets more than a quarter of sales from PCs, is suffering as consumers and business users increasingly favour smartphones and tablets.
"The environment remains challenging for HP and other technology companies in the space," said Abhey Lamba, an analyst at Mizuho Securities USA. "HP is unlikely to post revenue growth for a couple of years due to market dynamics in the PC and printing businesses."
The total PC market will contract 1.2% to 348.7-million units this year, according to market researcher IHS iSuppli. That is the first annual decline since 2001.
Ms Whitman said at the company’s annual investor meeting last month that a turnaround would not happen soon. She is cutting 29,000 jobs by the end of fiscal year 2014 to save as much as $3.5bn a year.