Hewlett-Packard says a British search engine company it bought last year for $10 billion US misrepresented its finances, resulting in a massive writedown of the value of the business.
HP is avoiding calling it a fraud, but it says there were "serious accounting improprieties, disclosure failures and outright misrepresentations at Autonomy Corporation PLC."
HP is taking an $8.8-billion US charge in its latest quarter to align the accounting value of Autonomy with its real value. It said most of that charge was due to the fictional accounting at Autonomy.
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 revelation is another blow for HP, which is struggling to reinvent itself as PC sales shrink.
HP shares sank almost 11 per cent, or $1.45, to $11.85 US per share in premarket trading.
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.
It was the second mammoth loss in a row for HP. In the third fiscal quarter, it lost a record $8.86 billion, or $4.49 per share. That was due to a charge for another acquisition — that of Electronic Data Systems, a technology consulting service that it bought for $13 billion in 2009. In that case, HP didn't blame improper accounting, just results that didn't live up to expectations.
Excluding the charges in the latest quarter, HP earned $1.16 per share in the latest quarter, just above the average analyst forecast of $1.14 per share, as polled by FactSet.
HP's revenue was $30.0 billion, down seven per cent from last year. That was below analyst expectations at $30.5 billion.