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HP was Duped

Hewlett-Packard reported it’s quarterly earnings last week.  And the stock promptly dropped to a ten-year low.

In its report, HP acknowledged that “serious accounting improprieties, disclosure failures, and outright misrepresentations” tied to the acquisition of its Autonomy software unit led to a one-time charge of $8.8 billion.

HP CEO Meg Whitman was quick to defend the company, saying that Autonomy made a “willful effort” to mislead management about its true financial state.  And to be fair to HP: a total of 15 legal, financial and accounting firms were involved in the transaction, and none of them raised any red flags about ‘serious accounting improprieties’.  As much as this makes HP’s management look a little incompetent, their advisors have some explaining to do, too.

The bottom line: this is the second massive loss in a row for HP.  In the last quarter it reported a record loss of $8.86 billion on the acquisition of Electronic Data Systems.  There was no accounting fraud to blame there…it just plain didn’t pan out.

I have said quite a few times before that HP is a sell. It has been a clear, long-term sell since early 2011.  And at this point, it’s a screaming sell.


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