All is not well at Meg Whitman's HP, we learned during the company's fourth-quarter earnings call this morning. HP just recorded a $9 billion devaluation of its assets stemming from serious accounting tomfoolery at a company that HP bought for $11 billion last year. Ouch.
Last August, HP bought the British software company Autonomy for $11.1 billion making it one of HP's biggest assets. We knew at the time that it was probably a mistake, but the deal turned out to be so much worse than we could have imagined. In today's call, HP claimed that Autonomy's books had been cooked before HP ever got there, and the company will take an $8.8 billion hit to its balance sheet to compensate. Some nitty-gritty from the earnings statement:
The majority of this impairment charge is linked to serious accounting improprieties, disclosure failures and outright misrepresentations at Autonomy Corporation plc that occurred prior to HP's acquisition of Autonomy and the associated impact of those improprieties, failures and misrepresentations on the expected future financial performance of the Autonomy business over the long-term.
So even though Autonomy's accounting department was apparently staffed by liars, the software engineering is still sound. If I were an HP investor, I would be pissed. What, was HP too busy testing printer apps to do any due diligence? . [HP via Engadget]
This post has been updated to reflect that the Autonomy purchase price was $11.1 billion, not $10 billion as previously stated. Ouch.