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Hewlett-Packard says itís the victim of fictitious accounting at company it acquired
WaPo ^ | 11/120/2012 | Unattributed

Posted on 11/20/2012 9:28:22 AM PST by mojito

Hewlett-Packard Co. said that a British company it bought for $9.7 billion last year lied about its finances, resulting in a massive write-down of the value of the business.

CEO Meg Whitman avoided calling it a fraud, but said Tuesday that there were “serious accounting improprieties, disclosure failures and outright misrepresentations at Autonomy Corporation PLC.”

HP is taking an $8.8 billion charge in its latest quarter largely to align the accounting value of Autonomy with its real value.

The revelation is another blow for HP, which is struggling to reinvent itself as PC and printer sales shrink. Its shares hit a 10-year low in morning trading.

Among other things, Autonomy makes search engines that help companies find vital information stored across computer networks. Acquiring it was part of an attempt by HP to strengthen its portfolio of high-value products and services for corporations and government agencies.

(Excerpt) Read more at washingtonpost.com ...


TOPICS: Business/Economy; Crime/Corruption; Extended News
KEYWORDS: autonomy; bookkeeping; cultureofcorruption; deloitte; fraud; globalism; hewlettpackard
Uh oh. Bad news for the tech sector.

HP acquired a company for $10 billion that was only worth $1 billion.

Any holders of HP shares might consider getting rid of them.

1 posted on 11/20/2012 9:28:29 AM PST by mojito
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To: mojito

I think the move in that direction started pre market today. I was surprised given the amount of the charge, the fall was only about 12%.


2 posted on 11/20/2012 9:31:07 AM PST by Mouton (Voting is an opiate of the electorate. Nothing changes no matter who wins..)
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To: mojito

Gee Whiz! Where was HP’s due diligence?


3 posted on 11/20/2012 9:32:03 AM PST by No Socialist
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To: mojito

Sounds like someone didn’t do their research very well.

If the deal is too good to be true, then...


4 posted on 11/20/2012 9:32:26 AM PST by stuartcr ("When silence speaks, it speaks only to those that have already decided what they want to hear.")
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To: No Socialist
"Gee Whiz! Where was HP’s due diligence?"

Exactly what I was thinking. They missed a 90% overvaluation of the company?

5 posted on 11/20/2012 9:34:31 AM PST by circlecity
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To: No Socialist

Due diligence sometimes can’t beat deliberate fraud, which is what apparently happened in this case.


6 posted on 11/20/2012 9:34:43 AM PST by Truthsearcher
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To: mojito

I’m glad I didn’t take the job they offered me a year ago! I’m sure it’ll be on the chopping block soon enough.

I dumped all 25 shares I had of HP. Not much, but I don’t need to lose anymore from their garbage.

I used to be a stalwart supporter of HP, but they’re not even a shadow of the company they were 10 years ago.


7 posted on 11/20/2012 9:35:10 AM PST by rarestia (It's time to water the Tree of Liberty.)
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To: mojito

Well, Meg Whitman’s toast.


8 posted on 11/20/2012 9:35:57 AM PST by Menehune56 ("Let them hate so long as they fear" (Oderint Dum Metuant), Lucius Accius (170 BC - 86 BC))
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To: mojito

Who buys a business - large or small - without auditing the books? Nice going, Meg. You would have made a GREAT governor.....


9 posted on 11/20/2012 9:37:05 AM PST by Donkey Odious ( Adapt, improvise, and overcome - now a motto for us all.)
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To: mojito

Hmmmmm. Carly Fiowhatshername.....Meg Whitman......figures....


10 posted on 11/20/2012 9:37:14 AM PST by Gaffer
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To: Truthsearcher

I would think that any accounting firm that misses 90% over evaluation isn’t worth much. Hopefully they can get a refund.


11 posted on 11/20/2012 9:37:39 AM PST by No Socialist
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To: Donkey Odious
She didn't say they didn't audit the books. She said

CEO Meg Whitman avoided calling it a fraud, but said Tuesday that there were “serious accounting improprieties, disclosure failures and outright misrepresentations at Autonomy Corporation PLC.”

deceptive accounting, failure to disclose, and lying.

Failure to disclose is, imho, the worst. That means you couldn't audit it even if you wanted to. It's like buying a house with a cracked foundation that isn't disclosed. If you miss it, then it's your tough luck.

This is not to say that HP couldn't have done better, but if they don't go into court after some of that cash they paid for that company, THEN we'll know that they really were idiots.

12 posted on 11/20/2012 9:44:25 AM PST by xzins (Retired Army Chaplain and Proud of It! True supporters of our troops pray for their victory!)
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To: Donkey Odious
Who buys a business - large or small - without auditing the books?

“What I will say is that the board relied on audited financials. Audited by Deloitte — not ‘Brand X’ accounting firm, but Deloitte. During our very extensive due diligence process, we hired KPMG to audit Deloitte. And neither of them saw what we now see after someone came forward to point us in the right direction.”

Somebody's in really big trouble.

13 posted on 11/20/2012 9:45:34 AM PST by mojito (Zero, our Nero.)
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To: rarestia

“I used to be a stalwart supporter of HP, but they’re not even a shadow of the company they were 10 years ago.”

Ten years ago they were already down the tubes. The “witch” had already done her damage. The problem really started when they split off Agilent.


14 posted on 11/20/2012 9:46:00 AM PST by babygene
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To: mojito

Who’s watching the watchers?


15 posted on 11/20/2012 9:46:15 AM PST by dfwgator
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To: babygene

Worst laptop I ever bought was an HP, never again!


16 posted on 11/20/2012 9:47:22 AM PST by dfwgator
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To: mojito

TG, I dumped my HP shares 2 years ago.


17 posted on 11/20/2012 9:49:49 AM PST by fivecatsandadog (Don't let reality ruin your day.)
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To: Donkey Odious

Once a company’s had the books looked at Deloitte and Deloitte’s work audited by KPMG, what more can you expect them to do?


18 posted on 11/20/2012 9:51:51 AM PST by Bob
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To: circlecity

I think the valuation of many of these Internet firms are overinflated, but this seems WAY beyond just overvaluation. Although Facebook pulled a bit of a stunt with their valuation notes when they were doing their road show prior to their IPO. Their advertising revenue models were based upon computer users and did not include the proper valuation of users who access through mobile devices. They made the change the week before the IPO and it made a huge difference in their projections, but they didn’t make a big announcement about it.

Basic takeaway from all of this is that the stock market is no place for individuals. It’s a computer game probably no more secure than online poker, except you’re playing against thousands of investment houses with better information than you.


19 posted on 11/20/2012 9:56:18 AM PST by pie_eater
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To: Bob

So now we will have Sarbanes Oxly deux?


20 posted on 11/20/2012 9:56:18 AM PST by cicero2k
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To: mojito

Victim, my ass! This is why HP and all big companies employ hoardes of accountants and attorneys. It’s a FAILURE to perform due diligence prior to the deal. Yes companies can lie and fudge a little but NOT this much. This is incompetence and following the Obama Rule, ones own incompetence is always to be blamed on others.


21 posted on 11/20/2012 9:59:30 AM PST by bigbob
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To: Gaffer

Actually, Leo started this fiasco, but blame it on the women.
< P>
Meg does own a large share of this mess; she was on the board when Leo started it and a CEO can’t do something like a $10b aquisition without board approval. Not because she is a woman.


22 posted on 11/20/2012 10:06:20 AM PST by 5thGenTexan
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To: 5thGenTexan

I’ve been an engineer for nearly 40 years. During that time HP really meant something, especially for instrumentation.

When they gave up the instrumentation division, their innovation, their smarts and vision and turned the company into a printer giveaway to sell inkjet cartridges and the odd PC and laptops, I knew it could only go south from there.

I have an HP desktop....stupid me bought an HP printer to go with. The damned thing wouldn’t even talk to the computer much of the time. The wireless option was worthless. Completely worthless.

I finally trashed the printer and got an Epson 545 with AirPrint...much much better. All my Apples can print to it....seamless connection BTW.


23 posted on 11/20/2012 10:11:11 AM PST by Gaffer
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To: mojito

This is a distraction, folks!

HP wanted to hide the fact that their “restructuring” is going in the wrong direction with revenue lower than last year, missing analyst expectations.

This “fraud” blows that story off the front page.


24 posted on 11/20/2012 10:11:39 AM PST by Erik Latranyi (When religions have to beg the gov't for a waiver, we are already under socialism.)
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To: mojito

I wonder what happened here...how the heck can you come up with a valuation that is 10 times reality?

This should be interesting to see how this happened.

And I would change the board. They are useless.


25 posted on 11/20/2012 10:11:49 AM PST by buffaloguy
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To: Erik Latranyi

“HP wanted to hide the fact that their “restructuring” is going in the wrong direction with revenue lower than last year, missing analyst expectations.”

I’ll bet that is the real story.


26 posted on 11/20/2012 10:13:44 AM PST by buffaloguy
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To: stuartcr

Or perhaps some sort of creative payoff with a wink and a nod from both sides because Fortune 100 companies (is HP still fortune 100) simply don’t make those types of mistakes.

If it is indeed just fraud on the part of the asset they acquired I’m sure some accounting firms have their butts on the line too.


27 posted on 11/20/2012 10:17:57 AM PST by Usagi_yo
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To: dfwgator

Same here—they knew my entire model was bad, just tried to ride out the warranties. Put me off of HP forever.


28 posted on 11/20/2012 10:17:57 AM PST by 9YearLurker
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To: xzins; mojito; Bob

“Autonomy makes search engines that help companies find vital information stored across computer networks.”

Maybe HP should have tried out some of Autonomy Corps equipment prior to purchase.


29 posted on 11/20/2012 10:18:09 AM PST by Donkey Odious ( Adapt, improvise, and overcome - now a motto for us all.)
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To: bigbob

Victim, my ass! This is why HP and all big companies employ hoardes of accountants and attorneys. It’s a FAILURE to perform due diligence prior to the deal. Yes companies can lie and fudge a little but NOT this much. This is incompetence and following the Obama Rule, ones own incompetence is always to be blamed on others.
____________________________________

Step one: how much does the company have in the bank as cash?

Step two: how much deferred revenue?

Step three: how much deferred expenses?

If you are valuing the company on two and three, beware. I’m sure the accounting firms will be held harmless.


30 posted on 11/20/2012 10:19:14 AM PST by cicero2k
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To: Gaffer
Exactly. It is their mismanagement that has caused the fall. That is linked to the bad aquisition investments, falling product quality, lost innovation, etc.

I am a 25 yr engineer, with my last 14 in HP after they bought the company I worked for. I resolved to accept the EER package this last go-round.

Every mention of HP in the business news since then has reaffirmed my decision.

31 posted on 11/20/2012 10:32:27 AM PST by 5thGenTexan
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To: mojito

HP used to make the best scientific and medical test equipment. Somewhere along they line the thought making $99 printers and selling $50 ink cartridges was the way to go.


32 posted on 11/20/2012 10:33:11 AM PST by Usagi_yo
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To: Menehune56

remember xerox? i bet they had suffered the same fate. managment incompetence.


33 posted on 11/20/2012 10:50:40 AM PST by longtermmemmory (VOTE! http://www.senate.gov and http://www.house.gov)
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To: Gaffer
I have an HP desktop....stupid me bought an HP printer to go with. The damned thing wouldn’t even talk to the computer much of the time. The wireless option was worthless. Completely worthless.

I won't buy a HP computer but I did buy a HP 7515 wireless printer a few months ago. Works like a champ. No probs so far.

34 posted on 11/20/2012 10:52:02 AM PST by Getsmart64
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To: Getsmart64

In my experience:

HP laptops have definitie vacuum issues,

HP Pavilion desktops are just about the best you can get for the money,

and the all-in-one scanner/printer is a gold-plated teh winnah that would have been a bargain for a benjamin. (At our level of printing, cartridges last a year.)


35 posted on 11/20/2012 11:03:57 AM PST by ExGeeEye (I'll give y'all 90 days for the wounds to heal; then we start on 2014. Carpe GOP!)
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To: rarestia

When I started at my current employer 12 years ago, it was a Compaq shop with the exception of an old HP “coffee table” server (I think it was the LH line).

I was so impressed that the thing was still in service with little in the way of maintenance, that when we bought several new servers, I went with HP on the recommendation of our software vendor. About six months later, I bought 5 more. The next few years showed that to be the worst decisions I ever made. Desktop quality product in a server box, IMHO.

That was 10 years ago, and nothing in my server room has been HP since. I have had stellar performance from both IBM and Dell equipment over the last decade>.

HP lost me as a customer, basically forever. I won’t even consider their products.


36 posted on 11/20/2012 11:10:53 AM PST by chrisser (Starve the Monkeys!)
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To: chrisser

I’m in the opposite side of the house. I’ll swear by HP enterprise-class hardware. I’ve installed and maintained everything from the old Compaq white box dishwashers to the latest ProLiant-class DL and ML line servers and love everything about them: intuitive design, easy installation, great management software and tools.

IBM and Dell were a running joke in our engineering offices. Dell servers are clunky and just try too hard while IBM servers are overpriced for a product that’s more prone to problems than the price dictates. Add on top of that very awkward installation and wasteful “features” (why won’t the damn UID light turn off?!), we always went to HP for our hardware. I still would for server hardware.

Desktop stuff... well I’m a tinkerer and build my own systems from scratch (heavy ASUS/nVidia promoter), so I’ve not played with big name mfg desktops. I’ve had both Dell and HP laptops for work and have had no complaints about either. HP workstations seem to be a little bit more forgiving than Dells in my experience.


37 posted on 11/20/2012 11:16:47 AM PST by rarestia (It's time to water the Tree of Liberty.)
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To: Menehune56
Not her buy. She was hired 2 weeks before this deal closed. You can literally lay this on at her predicessors feet.
38 posted on 11/20/2012 11:23:27 AM PST by Freeport (The proper application of high explosives will remove all obstacles.)
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To: Menehune56
Well, Meg Whitman’s toast.

Autonomy was acquired and championed by her predecessor, Leo Apotheker.

39 posted on 11/20/2012 11:36:54 AM PST by Pearls Before Swine (/S?)
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To: Pearls Before Swine

OK, Meg can stay on.


40 posted on 11/20/2012 1:36:05 PM PST by Menehune56 ("Let them hate so long as they fear" (Oderint Dum Metuant), Lucius Accius (170 BC - 86 BC))
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To: mojito

A LOT of good SOX strangulations did for us here!


41 posted on 11/20/2012 5:03:25 PM PST by Caipirabob (Communists... Socialists... Democrats...Traitors... Who can tell the difference?)
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To: Freeport
Not quite correct. She became CEO two weeks before the deal closed. But she was on the BOD that approved the acquisition.
42 posted on 11/21/2012 8:08:25 AM PST by GalaxyAB
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