HP’s Earnings Report Suffers Due to Accounting Fraud

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HP looks to finish the year on a downward trend, after the information technology giant reported fourth quarter revenue of $30B, showing a seven percent drop from the same quarter last year.

Even more troubling is the one time non-cash goodwill and intangible asset impairment charge of $8.8B related to the acquisition of the European infrastructure software company, Autonomy.

HP announced their Q4 2012 earnings report earlier yesterday.

Accounting Fraud Hampers HP’s Autonomy Acquisition

According to HP, a range of fraudulent behavior was the reason behind their $9B charge related to Autonomy. Today’s earning report detailed the issue: “The charge relates to serious accounting improprieties, disclosure failures and outright misrepresentations at Autonomy that occurred prior to HP’s acquisition of Autonomy and the trading value of HP stock during the period preceding the recording of the charge.”

HP Brick

HP Bricks their earnings report.

HP boss, Meg Whitman, in an earnings conference call with reporters, stated the company “felt terrible about the deal.” HP reportedly beat out Oracle and Microsoft when buying Autonomy, as the two were rumored to be interested in the company, according to All Things D.

The Autonomy write down played a large role in HP showing an overall net loss of $6.9B for Q4 2012; without it the company would have earned a profit slightly south of $2B, barely missing Wall Street estimates.

Other Highlights from the HP Earnings Report

Even with HP’s disastrous Q4 2012 earnings, CEO Meg Whitman feels 2012 is just the start of a multi-year journey to turn around the fortunes of the information technology giant. Whitman, formerly the CEO of eBay, became the HP boss last year.

“We’re starting to see progress in key areas, such as new product releases and customer wins. We’re particularly pleased that in Q4, we were able to improve our balance sheet, generating $4.1 billion in operating cash flow, and we returned $384 million to shareholders in the form of share repurchases and dividends,” said Whitman.

Still the earnings report revealed lower revenue in HP’s Personal Systems, Printing, Services, and Enterprise Servers, Storage, and Networking divisions, in both the consumer and business sectors. On the plus side of the ledger was the 14 percent growth in software revenue, driven by the 9 percent increases in licensing and support, as well as the relatively massive 48 percent growth in service revenue.

Ultimately, HP’s Q4 2012 earnings report will be judged by the accounting improprieties that happened at Autonomy before being purchased by HP.

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