What the Heck? – Business Edition
In business news today, Hewlett-Packard reported reasonable earnings in comparison to predictions… with one minor exception.
Shares of Hewlett-Packard (HPQ) are down $1.74, or 13%, at $11.57 after the company this morning reported fiscal Q4 revenue slightly below expectations and beat by two cents on the bottom line, and sat would take an $8.8 billion accounting charge because of “serious accounting improprieties” with the $10 billion purchase of software maker Autonomy in 2011. The company said it was working with the Securities & Exchange Commission’s enforcement division to investigate what CEO Meg Whitman called “outright misrepresentations” on the part of Autonomy that occurred prior to HP buying the company.
Um, wow? The Register has some more detail from Meg Whitman’s conference call:
“Autonomy remains a work in progress as we move the business from startup to grownup” – an ironic characterization given that Autonomy was a public company with 25,000 customers when HP bought it.
HP’s CEO said that a top executive within Autonomy had shown HP where to look in uncovering the true situation: which was not picked up by KPMG, hired by HP as part of its due diligence during the Autonomy deal to audit the company’s books (put together by Deloitte).
Well, good for said exec to blow the whistle. The question remains whether that whistle was blown when people realized that it had happened, or when people realized that they were going to get caught… HP itself blamed an ex-CEO and ex-CSO (both long gone) and intends to redress as necessary.
I’m not blaming HP for the error. You can only do things with the data you have. However, I wonder what was going through the heads of the people who mis-represented the data in the first place? Was is deliberate? Was it an error based on hope by the execs who wanted to cash out? Was it outright criminal? And why would you do something this big when you know it’ll eventually be seen?
I hope this was just an error of judgment that got missed at a crucial time and caused a flap. If this is criminal, I hope the people involved get pursued and prosecuted. These days, the trust for big business is very low. I’ve never been one of those people who say that the market is a bad place for people not on the inside, and I’d expect that we’ll hear a few of those people jumping on the wagon to tell us why we shouldn’t invest. Here’s my advice: do what you want with your money, as long as you understand the risks of any investment. You’ll be smarter, and wiser with your money.
Meanwhile, I hope HP figures this out. They’re an important company with a lon g history in technology, and I’d like to see them recover well.