Hewlett-Packard stunned Wall Street by alleging a massive accounting scandal at its British software unit Autonomy and taking an US$8.8 billion writedown, the latest in a string of reversals that renewed questions about the competence of the storied company’s board and senior managers.
HP said on Tuesday it discovered “serious accounting improprieties” and “a willful effort by Autonomy to mislead shareholders,” after a whistleblower came forward following the May ouster of former Autonomy Chief Executive Mike Lynch.
The news sent the company’s shares plunging 12 per cent to a 10-year low of US$11.71. HP, which for decades was synonymous with technical excellence and innovation as one of the bedrock companies of Silicon Valley, now has a market value of roughly US$20 billion, down from US$155 billion in April of 2000.
Chief Executive Meg Whitman took the helm at HP a little over a year ago when her predecessor, Leo Apotheker, was fired after less than a year on the job. Apotheker’s one big strategic move during his brief tenure was the US$11 billion acquisition of Autonomy, intended to hasten HP’s transformation into a software and services company but which was criticized by many analysts as over-priced.
“Most of the board was here and voted for this deal, and we feel terribly about that,” Whitman said on a call with analysts.
Tuesday’s announcement came just three months after the company took a write-down of almost US$11 billion on its EDS services division.
HP has for years relied on deal-making, acquiring businesses ranging from EDS to Compaq to Palm, but has largely failed to articulate a clear strategy or establish a strong position in growth businesses like computer services or mobile computing.