HP Suffers Massive Loss Because of Fraud at Autonomy

Falsified financial reports said to have been discovered, odds of compensation uncertain

By on November 20th, 2012 20:51 GMT

HP not only lost its position as the greatest PC supplier in the world, it also lost a lot of money, or soon will see its coffers seriously impacted by what is turning out to be a poor business choice.

Back in 2011, many analysts and other people working in the IT industry felt that HP was making a mistake by acquiring Autonomy.

A company that processes human information, Autonomy was considered an unprofitable venture, one that demanded too high a price.

Of course, $10.3 billion (8.03 billion Euro) would be too much in most every circumstances, but this isn't half of the story at this point.

What is truly troubling is that, rather than drawing any benefits from the acquisition, HP is suffering even more monetary damages, almost as high as the acquisition fee itself.

It turns out that “serious accounting improprieties” have been discovered, in other words fraud. Autonomy wasn't exactly sincere about its income and expenses and, thus, overall value.

HP CEO Meg Whitman revealed this as the result of a long investigation that began when a senior member of the Autonomy team came forward after Autonomy founder Mike Lynch left HP.

On HP's end, the ones responsible for letting the situation reach this stage are former CEO Leo Apotheker and former CSO Bill Veghte.

Both of them are gone now, though, and even if they are held accountable, the consequences suffered by HP cannot exactly be reversed, even if HP is seeking compensation.

HP could really have received this news at a better time. This year hasn't been good for it, what with total hardware sales down 20%, PC sales (laptops/desktop) down 12% and an overall business decline.

"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," HP said in a statement.

The deal with Autonomy only happened because those responsible for the finances of the company were externally audited twice, and none of these irregularities was found.
HP finds fraudulent financial reports in Autonomy
   HP finds fraudulent financial reports in Autonomy
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