Hewlett-Packard accuses Autonomy of lying over £7.1 billion sale

HP accuses Autonomy of lying over �7.1bn deal. Getty Images
HP accuses Autonomy of lying over �7.1bn deal. Getty Images
Share this article
Have your say

Computer giant Hewlett-Packard has accused a British software company it bought for £7.1 billion last year of lying about the state of its finances, resulting in a massive write-down in the value of the business.

HP chief executive Meg Whitman said the “serious accounting improprieties” only came to light when a whistle-blower came forward after Autonomy founder Mike Lynch left in May.

Lynch pocketed around £500 million from the sale of the Cambridge-based firm and a spokeswoman rejected HP’s claims as “false”.

She added: “The former management team of Autonomy was shocked to see this statement today, and flatly rejects these allegations.

“HP’s due diligence review was intensive, overseen on behalf of HP by KPMG, Barclays and Perella Weinberg. HP’s senior management has also been closely involved with running Autonomy for the past year.”

Whitman said the matter has been referred to the Serious Fraud Office and the US Securities and Exchange Commission, and HP was preparing to seek 
redress against “various parties” in the civil courts to recoup what it can for its shareholders.

She added: “This 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 is taking an $8.8bn (£5.5bn) charge in its fourth quarter, largely to align the accounting value of Autonomy with its real value.

The group said: “The majority of this impairment charge is linked to serious accounting improprieties, disclosure failures and outright misrepresentations at Autonomy Corporation that occurred prior to HP’s acquisition of Autonomy.”

Victor Basta, managing director of technology-focused advisory firm Magister, said HP had made a “huge mistake” with its strategy of buying large software firms as it shifted its focus away from hardware.

He added: “Many large businesses will do a series of bread and butter mid-sized deals, but in HP’s case they went for broke.”

Fourth-quarter revenues at the group fell 6.7 per cent to $30bn, with its personal computer division recording the steepest drop at 14 per cent.