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BREAKINGVIEWS-How could HP find a $5bln gap in Autonomy’s value?
December 10, 2012 / 9:11 AM / 5 years ago

BREAKINGVIEWS-How could HP find a $5bln gap in Autonomy’s value?

By Quentin Webb

LONDON, Dec 10 (Reuters Breakingviews) - Hewlett-Packard paid $11 bln for the UK software maker. Now it effectively says it would have paid $5 bln less had it known about dodgy revenue recognition and hidden hardware sales. But the U.S. tech giant won’t explain its numbers. Breakingviews does some reverse-engineering.

Full view will be published shortly.





- On Nov. 20, Hewlett-Packard said it would take a non-cash impairment charge of $8.8 billion related to last year’s $11.1 billion acquisition of Britain’s Autonomy Corp Plc. Of that, HP said more than $5 billion was “linked to serious accounting improprieties, misrepresentation and disclosure failures” at Autonomy, while the remainder was “linked to the recent trading value of HP stock and headwinds against anticipated synergies and marketplace performance.”

- In an interview with CNBC, and in conference calls with journalists, Chief Executive Meg Whitman said HP now believed Autonomy’s operating margins were 28 to 30 percent rather than a reported 40 to 45 percent. “As we value this company going forward, it’s going to be at a lower revenue base, lower growth rate, and lower margins, which of course leads to the greater than $5 billion write-off,” she said, according to a transcript of one conference call.

- Former Autonomy boss Mike Lynch rejects all the allegations. He told Channel 4 News that HP was looking for “scapegoats”. Since the takeover, he said “the business has been very badly mismanaged, much of the talent has left, and that’s led to the business being written down.”

- Channel 4 interview with Mike Lynch: here

- Meg Whitman on CNBC:

- Mike Lynch letter to Hewlett-Packard:

- Reuters: Audit firms sued in HP’s Autonomy acquisition [ID:nL1E8MS8ZX]

- Reuters: How a desperate HP suspended disbelief for Autonomy deal [ID:nL1E8MUCAT]

- Reuters: HP rebuffs ex-Autonomy CEO, warns of legal action [ID:nL1E8MR6L6]

(The author is a Reuters Breakingviews columnist. The opinions expressed are his own)

- For previous columns by the author, Reuters customers can click on [WEBB/]

(Editing by Chris Hughes and David Evans)


((Reuters messaging: Keywords: BREAKINGVIEWS AUTONOMY/

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