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HP posts $8.8bn charge on Autonomy deal; alleges 'accounting improprieties'

20 November 2012  |  4678 views  |  0 Stock market graph on screen

Hewlett-Packard says it has taken an $8.8 billion accounting charge and asked US and UK authorities to investigate what it calls "accounting improprieties" at Autonomy, the UK software house it acquired last year.

HP agreed to buy Autonomy - which counts a raft of the world's biggest financial services firms, including Citi, Deutsche Bank, Lloyds and the New York stock Exchange, among its customers - for around $10.3 billion last August.

It now says that when Mike Lynch, who founded Autonomy in 1996, left the firm soon after the deal was completed a senior member of its leadership approached the buyer alleging a "series of questionable accounting and business practices" before the takeover.

This prompted an internal investigation - including a forensic review by PricewaterhouseCoopers of Autonomy's historical financial results - which found what HP says "appears to have been a wilful effort on behalf of certain former Autonomy employees to inflate the underlying financial metrics of the company in order to mislead investors and potential buyers".

HP has taken a non-cash impairment charge of $8.8 billion in the fourth quarter, more than $5 billion of which is linked to the investigation in Autonomy. The balance is related to the recent trading value of HP stock and other business factors.

The tech giant has referred the issue to the US Securities and Exchange Commission and the UK's Serious Fraud Office for civil and criminal investigation. It is also preparing to seek redress against "various parties" in the civil courts to recoup money for shareholders and warns it intends to "aggressively pursue" the matter.

Shares in HP were down nearly 10% in pre-market trading in New York on the news.

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