HP takes $8.8 bln charge from Autonomy accounting

(Reuters) - Hewlett-Packard Co (HPQ.N) said on Tuesday it took an $8.8 billion charge related to its acquisition of software firm Autonomy, citing "serious accounting improprieties," as it swung to a fourth-quarter loss.

HP said personal computer sales shrank again and its quarterly revenue fell 6.7 percent.

The stock lost 11.8 percent to $11.73 in premarket trading.

The company, fresh off a nearly $11 billion charge last quarter for its EDS services division, said more than $5 billion of the Autonomy charge was tied to "improprieties, misrepresentation and disclosure failures" discovered after a whistleblower came forward.

HP said it has referred the matter to the U.S. Securities and Exchange Commission's enforcement division and the UK's Serious Fraud Office for civil and criminal investigation. It said it will take legal action to recoup "what we can for our shareholders."

The charge and the revenue miss were driving down shares, said Neil MacDonald, an analyst at Gartner.

"Earlier in the year when HP took a charge for EDS, the question we had was, 'When are you going to take the charge for Autonomy'? It was clear they had overpaid," MacDonald said. "At least they came clean about it."

The Silicon Valley technology company, in the midst of a multiyear turnaround plan, said the charge is linked to the "associated impact of those improprieties, failures and misrepresentations on the expected future financial performance of the Autonomy business over the long-term."

The rest of the Autonomy charge is related to the declining value of HP's stock and the difficulties of achieving anticipated synergies and market performance.

HP stock is down 48.4 percent year to date.

HP said the accounting issues occurred prior to its acquisition of Autonomy in 2011 for $11.5 billion.

It launched the internal investigation, which included an outside firm's forensic review, after a senior member of Autonomy came forward after founder Mike Lynch left. HP pushed out Lynch in May after its software division posted disappointing results.

Net revenue fell 6.7 percent to $29.96 billion for the fourth quarter ended October 31 from $32.12 billion a year earlier. Analysts, on average, expected $30.43 billion, according to Thomson Reuters I/B/E/S.

Revenue from all of its main business units fell, with the personal computer division recording the steepest drop at 14 percent.

HP reported a quarterly net loss of $6.85 billion, or $3.49 a share, versus a profit of $239 million, or 12 cents, a year earlier.

The sprawling company, which employs more than 300,000 people globally, is undergoing a restructuring aimed at focusing on enterprise services in the mold of International Business Machines Corp (IBM.N).

(Reporting by Poornima Gupta in San Francisco and Supantha Mukherjee in Bangalore; Editing by Saumyadeb Chakrabarty and Jeffrey Benkoe)

Updated Date: Nov 20, 2012 23:45 PM

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