story first appeared on courierpostonline.com
Hewlett-Packard Co. said on Tuesday that it’s the victim of a multibillion dollar fraud at the hands of a British company it bought last year that lied about its finances.
HP CEO Meg Whitman said executives at Autonomy Corporation PLC boosted the company’s figures through various accounting tricks, which convinced HP to pay $9.7 billion for the company in October 2011.
Autonomy’s former CEO said HP’s allegations are false.
HP is now taking an $8.8 billion charge to align Autonomy’s purchase price with what HP now says is its real value. More than $5 billion of that charge is due to false accounting, HP said.
The revelation is another blow for HP, which is struggling to reinvent itself as PC and printer sales shrink. The company’s stock hit a 10-year low in morning trading.
Among other things, Autonomy makes search engines that help companies find vital information stored across computer networks. Acquiring it was part of an attempt by HP to strengthen its portfolio of high-value products and services for corporations and government agencies. The deal was approved by Whitman’s predecessor, Leo Apotheker, but closed three weeks into Whitman’s tenure as chief executive. Whitman was a member of HP’s board of directors when Apotheker initiated the Autonomy purchase.
Among the tricks used at Autonomy, Whitman said: The company had been booking the sale of computers as software revenue and claiming the cost of making the machines as a marketing expense. Revenue from long-term contracts was booked upfront, instead of over time.
The allegations are serious, according to accounting experts.
Mark Williams, a finance professor at Boston University and a former bank examiner for the Federal Reserve, said that according to GAAP, the overstatement of revenue under any tax code is illegal.
As a result of its alleged accounting practices, Autonomy appeared to be more profitable than it was and seemed to be growing its core software business faster than was actually the case. The moves were apparently designed to groom the company for an acquisition, Whitman said.
Once HP bought the company, Autonomy’s reported revenue growth and profit margin quickly declined. Autonomy CEO Mike Lynch continued to run the company as part of HP, but Whitman forced him out on May 23 because it was not living up to expectations.
With Lynch gone, a senior Autonomy executive volunteered information about the alleged accounting irregularities, prompting an internal investigation, Whitman said.
The case has been referred to the U.S. Securities and Exchange Commission and the UK’s Serious Fraud Office, she said. The company will also try to recoup some of the cash it paid for Autonomy through lawsuits.
In a statement to the Financial Times, Lynch said, “The former management team of Autonomy was shocked to see this statement today and flatly rejects these allegations, which are false.”
On a conference call with Whitman following the earnings report, analyst Ben Reitzes of Barclays Capital asked who will be held responsible internally for the disastrous acquisition.
Whitman answered that the two executives who should have been held responsible — Apotheker and strategy chief Shane Robison — are gone. But the deal was also approved by the board of directors.
Apotheker told The Associated Press on Tuesday that he was stunned and disappointed to learn of the allegations against Autonomy, and pointed out that they had gone undiscovered by HP’s auditors, executives and directors.
Deloitte UK said it could not comment on the matter because of client confidentiality rules.
Whitman said she still views Autonomy as a “growth engine for HP software,” albeit a weaker one than initially thought.
HP’s stock dipped $1.59, or 12 percent, to close at $11.71 in Tuesday’s trading. Just after the market’s open, the stock hit $11.35, its lowest level since 2002.
HP’s net loss for the fiscal fourth quarter, which ended Oct. 31, amounted to $6.85 billion, or $3.49 per share.
That compares with net income of $239 million, or 12 cents per share, in the same period last year.
Showing posts with label HP. Show all posts
Showing posts with label HP. Show all posts
Wednesday, November 28, 2012
Wednesday, September 8, 2010
HP sues to stop ex-CEO Hurd joining Oracle
Reuters
Hewlett-Packard Co sued former Chief Executive Mark Hurd and asked a court to block him from joining Oracle Corp, saying his hiring by the rival technology firm puts HP's trade secrets "in peril."
Oracle, the world's third-largest software maker, named Hurd co-president and director on Monday, a month after he resigned from HP over expense account irregularities related to a female contractor.
Hurd's separation agreement from HP did not include a non-compete provision, which are generally unenforceable in California. But it did include a two-year confidentiality pact.
In a civil complaint filed in Superior Court in Santa Clara County on Tuesday, HP said: "In his new positions, Hurd will be in a situation in which he cannot perform his duties for Oracle without necessarily using and disclosing HP's trade secrets and confidential information to others."
But employment and intellectual property lawyers said HP will have a tough time convincing a court.
"I think HP has a real uphill battle here," said Cliff Palefsky of San Francisco law firm McGuinn, Hillsman & Palefsky, who represents plaintiffs in employment cases.
"The notion is that you cannot do your job without using our trade secrets. And without specifics, it's just not likely to fly," he said.
Oracle called HP's lawsuit "vindictive" and said the company's board is making it "virtually impossible" for the two companies to partner together.
"By filing this vindictive lawsuit against Oracle and Mark Hurd, the HP board is acting with utter disregard for that partnership, our joint customers, and their own shareholders and employees," Oracle CEO Larry Ellison said in a statement.
HP said if Hurd is allowed to go to Oracle it would "give Oracle a strategic advantage as to where to allocate or not allocate resources and exploit the knowledge of HP's strengths and weaknesses."
Hurd "cannot separate out HP's trade secrets and confidential information in performing his daily duties at Oracle," the complaint said.
HP asked the court to block Hurd from holding a position with a competitor in which it will be impossible for him to avoid disclosing sensitive information.
Linda Stevens, an intellectual property attorney at Schiff Hardin, said California courts have not been receptive to the doctrine of so-called "inevitable disclosure."
"It's pretty clear in California now that the courts are hostile to and have not adopted and in fact have rejected the inevitable disclosure doctrine," she said.
BIG HIRE
Wall Street analysts say Hurd would bring a formidable set of skills to Oracle, particularly given his expertise in IT hardware and in integrating large acquisitions.
Oracle is a major partner of HP, as well as a rival. Oracle competes with HP in the server market, following Oracle's $5.6 billion purchase of Sun Microsystems, which closed earlier this year. Oracle declined to comment on HP's suit on Tuesday.
At Oracle, Hurd will oversee sales, marketing and support.
In its lawsuit, HP said it paid Hurd handsomely with the understanding the he would not divulge sensitive information about the company.
"Despite being paid millions of dollars in cash, stock and stock options in exchange for Hurd's agreements to protect HP's trade secrets and confidential information during his employment ... (HP) alleges that Hurd has put HP's most valuable trade secrets and confidential information in peril," HP's complaint said.
Hurd's compensation from HP was valued at nearly $100 million over the three years prior to his resignation, and his exit package was worth an estimated $34.6 million.
Some legal experts said HP could have taken different steps to ensure that Hurd did not land at a close rival in such a short time.
A better way to prevent Hurd from working for a competitor would have been for HP to make his severance payable over time, said Stephen Hirschfeld, an employment attorney in San Francisco.
"I would have linked some sort of continuing obligation to the money," Hirschfeld said.
If the case follows the typical path for cases in which motions for injunctive relief are filed, a judge will soon schedule a hearing over HP's request to bar Hurd from going to Oracle.
Oracle shares surged 6 percent on Tuesday as investors cheered Hurd's appointment, which analysts generally praised as a boon for Oracle.
Hurd resigned from HP on August 6. HP said he filed inaccurate expense reports related to Jodie Fisher, a marketing contractor who worked for Hurd's office from 2007 through 2009. Although Fisher leveled allegations of sexual harassment at Hurd, HP found no harassment had occurred.
Oracle, the world's third-largest software maker, named Hurd co-president and director on Monday, a month after he resigned from HP over expense account irregularities related to a female contractor.
Hurd's separation agreement from HP did not include a non-compete provision, which are generally unenforceable in California. But it did include a two-year confidentiality pact.
In a civil complaint filed in Superior Court in Santa Clara County on Tuesday, HP said: "In his new positions, Hurd will be in a situation in which he cannot perform his duties for Oracle without necessarily using and disclosing HP's trade secrets and confidential information to others."
But employment and intellectual property lawyers said HP will have a tough time convincing a court.
"I think HP has a real uphill battle here," said Cliff Palefsky of San Francisco law firm McGuinn, Hillsman & Palefsky, who represents plaintiffs in employment cases.
"The notion is that you cannot do your job without using our trade secrets. And without specifics, it's just not likely to fly," he said.
Oracle called HP's lawsuit "vindictive" and said the company's board is making it "virtually impossible" for the two companies to partner together.
"By filing this vindictive lawsuit against Oracle and Mark Hurd, the HP board is acting with utter disregard for that partnership, our joint customers, and their own shareholders and employees," Oracle CEO Larry Ellison said in a statement.
HP said if Hurd is allowed to go to Oracle it would "give Oracle a strategic advantage as to where to allocate or not allocate resources and exploit the knowledge of HP's strengths and weaknesses."
Hurd "cannot separate out HP's trade secrets and confidential information in performing his daily duties at Oracle," the complaint said.
HP asked the court to block Hurd from holding a position with a competitor in which it will be impossible for him to avoid disclosing sensitive information.
Linda Stevens, an intellectual property attorney at Schiff Hardin, said California courts have not been receptive to the doctrine of so-called "inevitable disclosure."
"It's pretty clear in California now that the courts are hostile to and have not adopted and in fact have rejected the inevitable disclosure doctrine," she said.
BIG HIRE
Wall Street analysts say Hurd would bring a formidable set of skills to Oracle, particularly given his expertise in IT hardware and in integrating large acquisitions.
Oracle is a major partner of HP, as well as a rival. Oracle competes with HP in the server market, following Oracle's $5.6 billion purchase of Sun Microsystems, which closed earlier this year. Oracle declined to comment on HP's suit on Tuesday.
At Oracle, Hurd will oversee sales, marketing and support.
In its lawsuit, HP said it paid Hurd handsomely with the understanding the he would not divulge sensitive information about the company.
"Despite being paid millions of dollars in cash, stock and stock options in exchange for Hurd's agreements to protect HP's trade secrets and confidential information during his employment ... (HP) alleges that Hurd has put HP's most valuable trade secrets and confidential information in peril," HP's complaint said.
Hurd's compensation from HP was valued at nearly $100 million over the three years prior to his resignation, and his exit package was worth an estimated $34.6 million.
Some legal experts said HP could have taken different steps to ensure that Hurd did not land at a close rival in such a short time.
A better way to prevent Hurd from working for a competitor would have been for HP to make his severance payable over time, said Stephen Hirschfeld, an employment attorney in San Francisco.
"I would have linked some sort of continuing obligation to the money," Hirschfeld said.
If the case follows the typical path for cases in which motions for injunctive relief are filed, a judge will soon schedule a hearing over HP's request to bar Hurd from going to Oracle.
Oracle shares surged 6 percent on Tuesday as investors cheered Hurd's appointment, which analysts generally praised as a boon for Oracle.
Hurd resigned from HP on August 6. HP said he filed inaccurate expense reports related to Jodie Fisher, a marketing contractor who worked for Hurd's office from 2007 through 2009. Although Fisher leveled allegations of sexual harassment at Hurd, HP found no harassment had occurred.
Saturday, August 14, 2010
HP Cooperating in International Bribe Probe
Associated Press
Hewlett-Packard Co. said Thursday it is cooperating with U.S. and German authorities investigating allegations that three company executives used bribes to win a contract to sell computer gear to the Russian prosecutors' office.
German prosecutors have been looking into whether the executives, plus at least six accomplices who did not work for the company, paid bribes totaling 8 million euros (about $10.3 million) to win a 35 million-euro contract to supply computers, software and hardware to the Russians. Prosecutors say at least two of the executives no longer work for HP.
The Wall Street Journal reported Thursday that the Justice Department has asked HP to hand over internal documents to German prosecutors after they complained that the company had refused to provide them with relevant records.
The Securities and Exchange Commission is also investigating possible violations of the foreign Corrupt Practices Act, which prohibits bribes of foreign officials. Russian officials, who raided HP's Moscow offices in April at the request of German prosecutors, have joined the investigation, too.
"HP is and has been fully cooperating with all authorities on this matter," the company said in a statement.
The Justice Department and SEC declined comment to The Associated Press.
The latest development came just days after HP CEO Mark Hurd abruptly resigned following an investigation into sexual-harassment claims. The company said it found that its sexual harassment policy wasn't violated, but it uncovered falsified expense reports connected to dinners and other meetings with the woman who made those claims, Jodie Fisher. Hurd has settled with Fisher for an undisclosed sum.
HP, based in Palo Alto, Calif., is the world's No. 1 personal computer maker.
The contract for the Russian deal was signed in 2000, and the deliveries continued until 2006 or 2007, German authorities have said.
The three executives were arrested in Germany and Switzerland in December and later freed on bail. The participants are suspected of offenses including breach of trust, tax evasion and money laundering, authorities said. Authorities say it's unclear who took the bribes, which flowed through a network of foreign firms and bank accounts.
The matter came to the attention of Dresden prosecutors when a tax office in Germany's Saxony state inspected a local company whose account was used in the kickback scheme, authorities said.
German prosecutors have been looking into whether the executives, plus at least six accomplices who did not work for the company, paid bribes totaling 8 million euros (about $10.3 million) to win a 35 million-euro contract to supply computers, software and hardware to the Russians. Prosecutors say at least two of the executives no longer work for HP.
The Wall Street Journal reported Thursday that the Justice Department has asked HP to hand over internal documents to German prosecutors after they complained that the company had refused to provide them with relevant records.
The Securities and Exchange Commission is also investigating possible violations of the foreign Corrupt Practices Act, which prohibits bribes of foreign officials. Russian officials, who raided HP's Moscow offices in April at the request of German prosecutors, have joined the investigation, too.
"HP is and has been fully cooperating with all authorities on this matter," the company said in a statement.
The Justice Department and SEC declined comment to The Associated Press.
The latest development came just days after HP CEO Mark Hurd abruptly resigned following an investigation into sexual-harassment claims. The company said it found that its sexual harassment policy wasn't violated, but it uncovered falsified expense reports connected to dinners and other meetings with the woman who made those claims, Jodie Fisher. Hurd has settled with Fisher for an undisclosed sum.
HP, based in Palo Alto, Calif., is the world's No. 1 personal computer maker.
The contract for the Russian deal was signed in 2000, and the deliveries continued until 2006 or 2007, German authorities have said.
The three executives were arrested in Germany and Switzerland in December and later freed on bail. The participants are suspected of offenses including breach of trust, tax evasion and money laundering, authorities said. Authorities say it's unclear who took the bribes, which flowed through a network of foreign firms and bank accounts.
The matter came to the attention of Dresden prosecutors when a tax office in Germany's Saxony state inspected a local company whose account was used in the kickback scheme, authorities said.
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