Nov. 20, 2012 at 8:25 AM ET
Hewlett-Packard Co said on Tuesday it took an $8.8 billion charge related to its acquisition of British software firm Autonomy, citing "serious accounting improprieties," as it swung to a fourth-quarter loss.
The company, fresh off a nearly $11 billion charge last quarter for its EDS services division, said more than $5 billion of the Autonomy charge was tied to "improprieties, misrepresentation and disclosure failures" discovered after a whistleblower came forward.
HP said it has referred the matter to the Securities and Exchange Commission's enforcement division and the UK's Serious Fraud Office for civil and criminal investigation. It said it will take legal action to recoup "what we can for our shareholders."
In an interview with CNBC, HP's CEO Meg Whitman said Autonomy's executives deliberately misled management and shareholders.
"We believed there is a willful effort on the part of certain members of Autonomy management to mislead shareholders when Autonomy was a publicly traded company, and to mislead potential buyers including HP, Whitman told CNBC.
"We stand by the forensic review that we’ve seen," she added.
The former CEO of Autonomy, Mike Lynch, rejected the accusations.
"The former management team of Autonomy was shocked to see this statement today, and flatly rejects these allegations, which are false," a spokeswoman told Reuters in a brief statement. "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."
Silicon Valley-based HP, in the midst of a multiyear turnaround plan, said the charge is linked to the "associated impact of those improprieties, failures and misrepresentations on the expected future financial performance of the Autonomy business over the long-term."
HP said the accounting issues happened prior to its acquisition of Autonomy in 2011 for $11.5 billion. HP had been criticized by analysts for overpaying.
HP said that personal computer sales shrank again and its quarterly revenue fell 6.7 percent. HP's stock dropped 6.6 percent in premarket trading.
Net revenue fell 6.7 percent to $29.96 billion for the fourth quarter ended October 31 from $32.12 billion a year. Analysts, on average, expected $30.43 billion, according to Thomson Reuters I/B/E/S.
The personal computer maker, which employs more than 300,000 people globally, is undergoing a restructuring aimed at focusing the sprawling company on enterprise services, in the mold of International Business Machines Corp.
Revenue from all of its main business units fell, with the personal computer division recording the steepest drop at 14 percent.
Whitman told CNBC that she thought Autonomy could still be salvaged.
"Now what we need to do is turn this over to the authorities, seek redress on behalf of HP shareholders to recoup what we can," she said. "Then we want to take the Autonomy business and grow it because it does solve a real need in the market place on the behalf of customers."
Reuters and CNBC contributed to this report.