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HP Hit By 'False Accounting' At Autonomy

(c) Sky News 2012

Hewlett-Packard (HP) has accused Autonomy (LSE: AU.L - news) of lying about its finances, as it announced a write-down of $8.8bn (£5.5bn) relating to its purchase of the company.

The Silicon Valley computing firm said the majority of this charge was because of "serious accounting improprieties" at the Cambridge (BSE: CTE.BO - news) -based software company.

HP bought Autonomy for £7.1bn last summer, but said it now believes it was "substantially overvalued" at the time of the sale.

Nine months after the deal, the chief executive of Autonomy, Mike Lynch - who founded the company in 1996 and made more than £500m from the deal - stepped down.

Following HP's announcement, Dr Lynch's spokeswoman said he "flatly rejects" the allegations, describing them as "false".

A statement said: "The former management team of Autonomy was shocked to see this statement today, and flatly rejects these allegations, which are false.

"HP's due diligence review was intensive, overseen on behalf of HP by KPMG, Barclays (LSE: BARC.L - news) and Perella Weinberg. HP's
senior management has also been closely involved with running Autonomy for the past year."

An internal investigation into Autonomy's finances was launched by HP after a whistleblower came forward, alleging suspect accounting and business practices at the firm.

These "mislead investors and potential buyers", HP said, adding that it had referred the case to the Serious Fraud Office and the US Securities and Exchange Commission.

"HP is extremely disappointed to find that some former members of Autonomy's management team used accounting improprieties, misrepresentations and disclosure failures to inflate the underlying financial metrics of the company, prior to Autonomy's acquisition by HP," the company said in a statement.

"These efforts appear to have been a willful effort to mislead investors and potential buyers, and severely impacted HP management's ability to fairly value Autonomy at the time of the deal."

This one-off charge pushed HP to a $6.9bn (£4.3bn) loss in the fourth quarter - compared with a $200m (£125m) profit in the same quarter last year.

The company's share of the personal computer and printer markets also shrunk, and revenues fell 6.7% to $29.9bn (£18.8bn).

Earlier this year, the struggling firm warned of cuts to its UK operations as part of a restructuring resulting in 27,000 job cuts globally.

HP shares fell by 12% in early trading in the US.

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