) recently agreed to settle a lawsuit related to the acquisition of
Autonomy, a specialized provider of unstructured data analytics and
data management software, which was purchased for a premium price
of $11.1 billion.
According to the litigation, the attorneys on behalf of the
shareholders (namely Cotchett, Pitre & McCarthy, LLP, and
Robbins Geller Rudman & Dowd LLP) alleged that H-P's board
members including H-P chief, Meg Whitman was well aware of the
accounting frauds and that they did not examine Autonomy's
financial statements well before signing the deal.
Per the settlement, all claims against H-P's directors including
CEO Meg Whitman, arising out of the Autonomy acquisition will be
dismissed. The settlement of the civil lawsuit was filed in the
United States District Court by H-P's shareholders.
The accounting irregularities related to the acquisition of
U.K-based business software maker Autonomy Corp had the 73-year old
tech giant recording a huge impairment charge of $8.8 billion in
its fourth quarter 2012 results. The bulk of the charge (roughly
$5.0 billion) was to nullify the improper accounting practices
relating to Autonomy's financials prior to the acquisition.
The lawsuit was filed, following the announcement, in Nov 2012.
H-P alleged that the disclosure of certain accounting
misappropriations in Autonomy's financials has made the buyout more
However, all these allegations have been denied by Autonomy
founder Mike Lynch. H-P's much-hyped Autonomy acquisition was
marred by several lawsuits by investors who claimed that they were
misled by the above-mentioned irregularities.
Over the years, H-P has made many strategic acquisitions but
some of those failed to live up to their respective purchase
considerations and add value to the tech giant. The acquisitions of
Electronic Data Systems Corp. (in 2008) and Palm Inc. (in 2010) are
cases in point.
Although, the Autonomy acquisition has put the company into a
financial mess, it furthers H-P's strategic goal of focusing on the
software business. We consider this a positive because it is likely
to achieve its long-term profitability. Despite the slowdown in
overall revenues, the Software segment has remained a bright spot
in the past few quarters.
Autonomy no doubt helped, though its exact contribution remains
unknown. We believe that successful efforts to transform Autonomy
into a Software revenue driver would boost Meg Whitman's stand as a
CEO and would eventually bring back investor trust.
However, macroeconomic challenges and tepid IT spending remain
near-term concerns. Competition from
) should also not be discounted.
Currently, H-P has a Zacks Rank #3 (Hold). Investors can also
), which has a Zacks Rank #2 (Buy).
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