Is this the beginning of the end for HP?
The iconic tech company takes an $8.8 billion impairment charge related to accounting improprieties at Autonomy. The rest of its quarter was dismal as well.
Updated 11:10 a.m. ET
Shares of Hewlett-Packard (HPQ) were trading down nearly 10% Tuesday after the Silicon Valley stalwart reported that it took an $8.8 billion charge upon finding "serious accounting improprieties, disclosure failures and outright misrepresentations" at Autonomy, a company it acquired in 2011. Oh, let's not forget that the Palo Alto, Calif. company also reported earnings that were god-awful.
HP's announcement regarding Autonomy is simply mind-blowing. Though the company wasn't using the word, CNBC's David Faber described it as "massive fraud." If that's true, it's huge, not Enron- or Worldcom-huge, but enormous nonetheless.
This raises many disturbing questions. How could have HP, its investment bankers, auditors and lawyers been so thoroughly snookered by Autonomy? The first clue that something was amiss came in May when HP CEO Meg Whitman fired Autonomy CEO and founder Mike Lynch, who originally was supposed to stay on and run the company after it was acquired. At the time, investors linked the ouster to Autonomy's poor performance, CNET reported.
Whitman wasn't responsible for the Autonomy deal. That distinction belongs to Leo Apotheker, one of three HP CEOs who have been ousted. Apotheker had argued that the Autonomy deal was needed to enable the company to break its dependence on the PC. In that respect, the acquisition was a dismal failure.
Now that its accounting has come into question, HP should immediately try to recoup some, if not all of the $25 million golden parachute that Apotheker received, according to CNNMoney. CNBC reported that HP has contacted law enforcement officials in the U.K, where Autonomy is based. The Securities and Exchange Commission and the U.S. Department of Justice may get involved as well.
Most investors will probably overlook the HP's quarterly results in the wake of the accounting bombshell. Unfortunately, there wasn't much good news there either. The company reported a net loss of $6.85 billion, or $3.84 per share, an improvement from a loss of $8.86 billion, or $4.49 per share, according to the company's earnings press release. Revenue fell 7% to $30 billion. Excluding one-time items, the company earned $1.16 per share. For those keeping score, HP was forecast to earn $1.14 per share on revenue of $30.4 billion.
Going forward, the company is expected to earn between 68 cents and 71 cents in the first fiscal quarter, way under the 85 cents that analysts had expected. Earnings per share for the year are seen at $3.40 to $3.60. Analysts' expectations were for $4.04 per share.
HP's big problem is hardly a secret: the company has failed to adapt to the post-PC world. This is painfully obvious. Hardware volumes plunged 20% and both desktops and notebooks units were down 12%. Apple (APPL), among others, continues to decimate HP.
Meg Whitman has been tasked with cleaning up the mess that her predecessors made. She's already announced plans to slash 29,000 workers by the end of fiscal 2014, Bloomberg reported. With Tuesday's news about potential massive fraud, her job just got much more difficult. HP may eventually be forced to find a suitor but it seems unlikely that will happen until the Autonomy issues are resolved.
Jonathan Berr does not own shares of the listed stocks. Follow him on Twitter@jdberr.
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They need Bain capital to get in there and tell everybody "we`re looking out for ".The next
day the pink slips are passed out, then the assets are sold to China and Bain gets big
checks.The American way!!!!
I remember about 5 years ago I went to the store to replace my ink cartridge, it was used up. I saw the price was $95.00, seemed way to high, I then noticed a new printer was $110.00. I told a near by store clerk that landfills are going to be full of my old printers as I might as well by a new one for the price difference, she looked at me and said I get much more value out of buying just the cartridge. I asked how do you figure that? She said they only fill the cartridges in the new printers half full..............
So to me it seems like the company has been a bit dirty all along so no surprise that it goes all the way to the top. Ussually comes from the top doesn't it?
Guessing they don't like the "paperless society" idea.
Well, "What did you expect?" or "Of course another TBTF company is in trouble." Take your pick. No American business really concentrates seriously on the business of doing business. Its all about politics. It's all about giving people the business. There probably hasn't been any old-fashioned, serious, business conducted by American companies in over 45-years,
Business is all about politics. Union busting. Employee busting. Customer busting. Lobbying to bust unions and employees. running away from standing behind the product produced. Special interests organized to skirt the consequences of producing poisons that kill people, that kill the land, that kill the world, that kill the planet. Why else would a company advertise itself as "We bring good things to life . . . ." if the exact opposite wasn't actually taking place. Gotta love that old PR.
Business is all about politics. Downsizing. Butt-sizing. Pay-check-sizing. Out-sourcing. In-sourcing, creating H1B visa systems to kick Americans out of their jobs by foreigners right here at "home." Globalization, which is nothing more than making a moveble plague of Capitalism. Jobs for some, starvation for the many.
No American company knows how to either run a business or even do business unless it is giving the business to as many people as it can. Phony accounting practices. Non-existent safety practices. Obscene bonuses. Fraud. Theft. Cronyism. Bullyism. Thugism. Non-existent accounting practices. Under-funded (read "raided") pension plans. Non-existent health insurance plans. Phony bankruptcies. The list of criminal behavior is endless.
Meanwhile, the whole world goes off a cliff.
The Invisible Hand
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Serious issues like drought and the deterioration of the developed world spell opportunity for this industry leader.
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