HP shares sink on double whammy of huge writedown, falling sales

HP shares are tanking, down more than 10 percent to $11.95 as of this post, after the Silicon Valley giant reported a huge loss for the second quarter in a row as a result of a write-down of a big purchase. It announced today it is taking an $8.8 billion charge because of its $10 billion purchase of Autonomy, the British software company it is now accusing of lying about its finances.

“We have requested both agencies open criminal and civil investigations into this matter,” HP CEO Meg Whitman reportedly said. HP initiated the purchase of Autonomy last year, when Leo Apotheker was still chief executive of the Palo Alto company. Since then, Autonomy’s founder and CEO, Mike Lynch, has left the company, and Whitman said accounting irregularities there are being investigated. Lynch reportedly denies the allegations.

The Autonomy purchase is commonly regarded as a big contributor to the ouster of Apotheker last year after less than a year on the job, and about a month after he unveiled major changes in HP’s business, one of which included a possible shift away from the PC business. (See The new HP way, the day after and Another big HP shift? Leo Apotheker reportedly on way out.) In her effort to turn HP around, Whitman is mostly undoing Apotheker’s moves, including deciding to stay in the PC business, and saying the company will move back into mobile devices.

But HP has many problems. As Business Insider points out, revenue for the company’s core businesses, including PCs, printers, services and servers were all down at least 5 percent year over year. This is HP’s fifth quarter in a row of declining overall sales, according to the Wall Street Journal. The company posted revenue of $30 billion, missing analysts expectations of $30.43 billion. It reported a loss of $6.9 million, or $3.49 a share, compared with a year-ago profit of $239 million, or 12 cents a share.

By the way, it seems Oracle CEO Larry Ellison may have been right about Autonomy. Last year, he slammed HP’s purchase of the cloud software maker, saying Oracle had looked at the company and “thought it was absurdly high.” (See Is the proof in the PowerPoint? Oracle vs. HP — and Autonomy.)

 

 

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  • David

    HP sucks. Ever since 2008 I’ve seen a sharp decline in the quality and reliability of HP’s products. Whitman can’t save the company without a complete overhaul of the organization’s ideaology, creativity, and agility.

  • RedRat

    I am somewhat sympathetic to HP on this purchase but on the other hand they are the Big Boys in the industry. Have they not heard of “due diligence”? That is what the corporate board is supposed to do when contemplating these purchases. Yes, perhaps Autonomy might have fudged books here and there but laying out $10 Billion and then having to take an $8.8 Billion write down indicates some fudging here. You would think that a company like HP that has a spare $10 Billion lying around, could afford to do some gumshoeing on their own before they made that leap. Really?

    Who is running this company. Methinks HP perhaps has gotten way too big and way too diversified. When you get these very large, diversified companies that make everything from “soup to nuts” you fall prey to that old saying: “A jack of all trades and a master of none”.

  • Ron

    HP has been in a downward sprial since the put Fiorinia in charge (remember she drove other companies down the yellow brick road to oblivion…). The merger of Compaq and HP took care of the magic word “Quality” and only two people that made good on that deal was the two CEO’s of the two companies at the time…
    The back and forth on HP is in the PC business or not, has made a decisive buying decision not to buy HP.
    And buying Autonomey never made sense in the first place – forget the Larry at Oracle – wasting money seems to be the HP game.

  • David

    Hey HP, you need to take a few lessons from Apple and Microsoft, and start making quality products that aren’t designed like garbage, work like junk out of the box, and lack elegance in design.

  • Bruce

    HP needs to replace its board of directors who have repeatedly shown their incompetence in selecting a CEO. The last competent CEO was John Young. It is tragic the impact of these bad choices in both financial and human terms (for the employees) of the bad managers which certainly includes Carly Fiorina and her decision to buy Compaq. That decision cost the company far more than the purchase of Autonomy in both dollars and lost opportunities. HP invested in a PC company at a time when HP was losing money on every computer it sold and only stayed in the black thanks to the profits from its sales of ink for its printer business unit.

  • HP has indeed been on a long downward slide ever since I helped them grow so big in the 1980’s (biggest HP dealership in Los Angeles county, but that’s only part of the story). Maybe the kind of imaginative CEO who could improve quality, provide leadership (not just short-term profit focus), and hire innovators – just isn’t available.

    Bear in mind their best CEO was an engineer.

  • sd

    @Dale, I’m guessing that the person you refer to exists, but that hp has become such a cluster*#&% that no one in their right mind would inject themself into the balkanized landscape and panic that is hp right now. hp, IMHO, has three main issues: the worst corporate board in capitalism; a rickety infrastructure resulting from years and years of acquisitions and poor (or no) integration; and a reputation for being the anti-Bill-and-Dave company that will take years to eradicate.

  • @sd – I think you covered that one perfectly.

 
 
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