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HP takes $8.8bn hit on Autonomy fraud allegations

20 Nov 2012
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Tech giant HP has taken a $8.8bn hit on its acquisition of enterprise search firm Autonomy, after alleging serious accounting irregularities at the software maker that led it to pay over the odds for the UK firm.

HP accused Autonomy's former leadership of deliberately overstating the firm's worth and has referred the matter to the US Securities and Exchange Commission's Enforcement Division and the UK's Serious Fraud Office.

“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,” HP said in a statement.

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

HP said it was first alerted to the potential problems after a senior member of Autonomy's leadership alerted it to “questionable accounting and business practices” at the software firm following the departure of Mike Lynch, Autonomy's founder.

HP accused Autonomy's former management team of “mischaracterising” the revenues it made from its Idol line as well as fudging the value of licensing deals signed through resellers.

Most market watchers were caught off guard when in 2011, HP announced it was paying $10.3bn to acquire Autonomy. But while many believed HP's then-chief executive Leo Apotheker had paid over the odds, most assumed the premium was down to his determination to expand the tech giant's software business.

Lynch was asked for comment on the allegations but had not replied at the time of publication.

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