Hewlett-Packard has a big case of buyer’s remorse.
The computer giant leveled serious allegations against a UK software firm it bought last year, saying it would take an $8.8 billion write-down after Autonomy execs duped it into overpaying for the company. The huge charge for the $11.7 billion deal shocked investors and contributed to a a nearly $7 billion loss for HP in the latest quarter.
HP, which has been in a near constant state of turmoil as it struggles to revive its business, claims Autonomy inflated its value with accounting tricks — an accusation the firm’s founder and former CEO, Michael Lynch, denied.
It seems everyone but HP was skeptical of Autonomy’s high price tag.
Last year, after the sale to HP, rival Oracle said it was approached by banker Frank Quattrone of Qatalyst Partners to gauge the company’s interest in buying Autonomy. At the time, Lynch denied shopping the company to Oracle.
In a scathing release headlined “Another Whopper From Autonomy CEO Mike Lynch,” Oracle said: “After the sales pitch was over, Oracle refused to make an offer because Autonomy’s current market value of $6 billion was way too high.”
Analysts, too, were suspicious of the valuation, and warned HP investors that the company would regret the deal.
While Autonomy had not reached $1 billion in revenue, the deal was based on the company’s growth, which HP now says was made to look better than it really was. HP said an internal investigation has discovered “serious accounting improprieties” and “outright misrepresentations.” CEO Meg Whitman said HP has alerted the Securities and Exchange Commission as well as UK regulators.
“Clearly, we overpaid,” an HP spokesman told The Post. “At the end of the day, they are finding that the asset that they bought didn’t have the revenue trajectory they though it would have.”
HP claims Autonomy was engaged in sales accounting practices that inflated its revenue and margins, and that an Autonomy insider brought the problems to its attention six months ago.
Lynch told CNBC that he was “shocked” by the allegations and said yesterday was the first he was hearing about allegations of fraud.