National: Hewlett-Packard accuses UK firm over �5.5billion hit
Hewlett-Packard took an 8.8 billion US dollar (�5.5 billion) hit today as it accused former staff at a UK software company it bought last year of cooking the books.
HP acquired Cambridge-based Autonomy in a �7.1 billion deal that saw its founder Dr Mike Lynch, from Suffolk, pocket around �500 million.
The American firm alleges that former members of Autonomy’s management fiddled accounts in a bid to “mislead investors and potential buyers” and has referred the matter to the Serious Fraud Office (SFO).
It has been reported this afternoon that Dr Lynch’s spokeswoman said he “flatly rejects” the allegations, describing them as “false”.
HP wrote off 8.8 billion US dollars in its fourth quarter earnings, with the majority linked to “serious accounting improprieties, misrepresentation and disclosure failures” discovered by an internal investigation.
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The inquiry, run by accountancy firm PwC, was launched after a whistleblower at Autonomy approached HP with the allegations.
Autonomy was considered one of the UK’s biggest technology success stories, having pioneered software that helps companies to search data, particularly in cases involving compliance and legal issues. Clients include Procter & Gamble, Nestle and Shell.
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In a statement, HP said it was “extremely disappointed” by the findings of its internal investigation.
It added that the actions of former staff “appear to have been a wilful effort to mislead investors and potential buyers, and severely impacted HP management’s ability to fairly value Autonomy at the time of the deal”.
But it went on: “We remain 100% committed to Autonomy and its industry-leading technology.”
HP said more than 5 billion US dollars (�3.1 billion) of the impairment charge was linked to the allegations of account-fiddling, while the remainder is connected to the recent trading value of HP stock.
HP said it was approached by a senior member of Autonomy’s leadership team following the departure of Dr Lynch in May this year.
After the PwC investigation, HP now believes that Autonomy was “substantially overvalued” at the time of its acquisition due to the mis-statement of Autonomy’s financial performance.
As well as the SFO, HP has referred the matter to the US Securities and Exchange Commission’s Enforcement Division and is preparing to seek compensation against various parties.
The impairment charge has pushed HP to a 6.9 billion US dollar (�4.3 billion) loss in the fourth quarter, compared with a 200 million US dollar (�125 million) profit in the same quarter last year.