Autonomy Accounting Fraud Dooms Hewlett-Packard’s Fourth Quarter (HPQ)


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PC and printer maker Hewlett-Packard Company ( HPQ ) on Tuesday reported fiscal fourth quarter earnings results that included an unwelcome surprise: accounting fraud at Autonomy, the enterprise software maker H-P acquired back in 2011.

The Palo Alto, CA-based company reported a fiscal fourth quarter net loss of $6.85 billion, or -$3.49 per share, compared with a worse loss of $8.86 billion, or -$4.49 per share, in the year-ago period. Excluding special items, adjusted profit was $1.16 per share.

Revenue fell 7% from last year to $30 billion.

On average, Wall Street analysts expected a smaller adjusted profit of $1.14 per share, albeit on higher revenue of $30.44 billion.

The real story coming out of H-P's report was news of accounting irregularities at its Autonomy software division. The company acquired Autonomy back in 2011 in one of then-CEO Mark Hurd's final moves with the firm. H-P commented, "HP recorded a non-cash charge for the impairment of goodwill and intangible assets within its Software segment of approximately $8.8 billion in the fourth quarter of its 2012 fiscal year. The majority of this impairment charge is linked to serious accounting improprieties, disclosure failures and outright misrepresentations at Autonomy Corporation plc that occurred prior to HP's acquisition of Autonomy and the associated impact of those improprieties, failures and misrepresentations on the expected future financial performance of the Autonomy business over the long-term. The balance of the impairment charge is linked to the recent trading value of HP stock. There will be no cash impact associated with the impairment charge."

Hewlett-Packard shares fell $1.30, or -10%, in premarket trading Tuesday.

The Bottom Line
Shares of Hewlett-Packard ( HPQ ) have a 3.98% dividend yield, based on last night's closing stock price of $13.30. The stock has technical support in the $10.00-$11.50 price area. If the shares can firm up, we see overhead resistance around the $15-$17 price levels.

Hewlett-Packard Company ( HPQ ) is not recommended at this time, holding a DARS™ Rating of 2.8 out of 5 stars.

Be sure to visit our complete recommended list of the Best Dividend Stocks , as well as a detailed explanation of our ratings system here .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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