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Hewlett-Packard is taking an $8.8 billion charge against earnings after discovering what the company called "serious accounting improprieties" by Autonomy, the information management software company HP acquired last year for $11.1 billion.
The shocking announcement came Tuesday morning when the company issued fiscal fourth-quarter financial results that included a $3.49 billion loss on a 7 percent drop in revenue to $30.0 billion.
"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," Hewlett-Packard said in a statement.
"These efforts appear to have been a willful effort to mislead investors and potential buyers, and severely impacted HP management's ability to fairly value Autonomy at the time of the deal. We remain 100 percent committed to Autonomy and its industry-leading technology."
HP has referred the case to the U.S. Securities and Exchange Commission's Enforcement Division and the U.K.'s Serious Fraud Office "for civil and criminal investigation," HP said. (Autonomy was based in the U.K.) The company also intends to "seek redress against various parties in the appropriate civil courts to recoup what it can for shareholders. The company intends to aggressively pursue this matter in the months to come."
"This is a big financial hit HP is taking as an organization," said Venero. "An $8.8 billion write off would impact even the biggest companies in the world. It could affect a wide range of investments from R&D to the channel."
Venero said it appears that the financial shortcomings of Autonomy were "swept under the carpet" under former CEO Leo Apotheker's tenure to get the acquisition completed.
"Leo's direction was to move away from hardware and more into software and services," said Venero. "He obviously steamrolled [the board] to get this deal done. FutureTech's hope is this is a cleansing of the poor decisions and direction from previous leadership."
One top solution provider executive for a large HP partner, who did not want to be identified, said customer purchase decisions will definitely be impacted by the write off.
"Customers are going to be talking about this and will draw their own conclusions," said the CEO. "It will definitely have a negative impact because of the unknown and uncertainties it creates in the field. As a reseller and customer who loves the products, we have to hope and pray the company comes back. We have to wait and see what happens."
NEXT: Who's At Fault For HP's Autonomy Debacle?