HP takes $8.8 bn charge on Autonomy acquisition

Personal computer and technology leader Hewlett-Packard Co today announced a non-cash impairment charge of $8.8 billion related to the acquisition of the software firm Autonomy in the fourth quarter of its 2012 fiscal year.

HP, which bought the software company for over $10 billion in 2011, said the majority of this impairment charge - more than $5 billion – has been due to serious accounting improprieties, misrepresentation and disclosure failures prior to its acquisition by HP.

The balance of the impairment charge is linked to the recent trading value of HP stock and headwinds against anticipated synergies and marketplace performance, the company said.

HP had taken a nearly $11 billion charge last quarter for its EDS services division. The latest writedown comes after HP discovered ''a willful 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 and severely impacted HP management's ability to fairly value Autonomy at the time of the deal.''

HP launched its internal investigation after a senior member of Autonomy's leadership team spilled the beans, following the departure of Autonomy founder Mike Lynch. The whistleblower provided details of a series of questionable accounting and business practices at Autonomy prior to the acquisition by HP, the company said.

Although the investigation is ongoing, HP said, accounting improprieties and misrepresentations, including mischaracterisation of revenue from negative-margin, low-end hardware sales with little or no associated software content as ''IDOL product,'' and the improper inclusion of such revenue as ''license revenue'' for purposes of the organic and IDOL growth calculations have come to light.