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Meg Whitman Says HP Was Defrauded By Autonomy; HP Stock Plunges 237

Posted by timothy
from the damn-english-ravines dept.
McGruber writes "CNBC is reporting that Meg Whitman claims HP was defrauded in its purchase of Autonomy. 'We believed there is a willful effort on the part of certain members of Autonomy management to mislead shareholders when Autonomy was a publicly traded company, and to mislead potential buyers including HP,' Whitman said. 'We stand by the forensic review that we've seen,' she added. I wish her the same level of success I had when I filed an eBay claim." Also covered at SlashBI, which names the write-down damage: $8.8 billion.
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Meg Whitman Says HP Was Defrauded By Autonomy; HP Stock Plunges

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  • Meg, Carly (Score:5, Insightful)

    by tekrat (242117) on Tuesday November 20, 2012 @01:18PM (#42043413) Homepage Journal

    This is a love letter...

    Please don't run any other companies into the groud. Please stop whatever you're doing and go home, and avoid public life as a CEO, or politician. You've both proven you don't know jack.
    The world would be better off without either of you.

    Thanks;
    The rest of the planet.

  • Red herring (Score:5, Insightful)

    by Runesabre (732910) on Tuesday November 20, 2012 @01:20PM (#42043451) Homepage

    I find it hard to believe that the management of HP failed to uncover fraud of this magnitude during their evaluation in the purchase of Autonomy. What this really means is management failed to do their due diligence in evaluating Autonomy and now need to to distract from poor financial performance due to a lack of competence at the executive level.

  • Wait a second... (Score:5, Insightful)

    by fuzzyfuzzyfungus (1223518) on Tuesday November 20, 2012 @01:25PM (#42043513) Journal

    So, an 8.8 billion write-down on an 11.2 billion purchase and they are only alleging that "serious improprieties", rather than something like "epic, the-whole-boardroom-is-going-to-federal-country-club-for-maybe-five-years-or-so, fraud"?

    Either corporate PR drivel is unusually polite, or white collar crime is absurdly superior on a risk/reward basis compared to little people crime...

  • Re:Red herring (Score:5, Insightful)

    by Anonymous Coward on Tuesday November 20, 2012 @01:38PM (#42043723)

    I think it's clear that the HP management needs a massive pay rise while everyone else in HP needs to take a pay cut and work longer hours to cover this loss!

  • by SirGarlon (845873) on Tuesday November 20, 2012 @01:38PM (#42043731)
    Hiring the male equivalent -- an abusive, spoiled, narcissistic dick -- to lead your company is also a horrible idea, but companies do it all the time. And fail. It's not about gender, it's about being an asshat.
  • Re:Red herring (Score:5, Insightful)

    by AwesomeMcgee (2437070) on Tuesday November 20, 2012 @01:57PM (#42044029)
    Actually it's their fiduciary responsibility to their shareholders to do their due diligence. They just lost a ton of *other* peoples money due to negligence.

    To fulfill your obligatory car analogy: It's like you not locking someone elses car doors and the thing getting stolen. Yes, you *are* responsible to that person now as you acted with negligence, this doesn't disavow the thief but responsibility to the car's owner is squarely on you not the thief.
  • Re:Red herring (Score:5, Insightful)

    by Patch86 (1465427) on Tuesday November 20, 2012 @02:03PM (#42044137)

    Autonomy was a successful money-making business. When HP bought it, there wasn't a soul alive who couldn't see that they were paying an extremely generous price. Take the following article on the BBC at the time:
    http://www.bbc.co.uk/news/business-14582489 [bbc.co.uk]

    HP paid 64% above the publicly-traded market price for the company. On the markets hearing the news, HP shares ended the trading day 7.6% down, making them the worst faller in the Dow Jones Industrial Average that day.

    Maybe the management at Autonomy were telling porkies to convince HP to pay that much- but why the hell would HP swallow it? If everybody else could see it was mad, why couldn't they?

  • Re:Red herring (Score:5, Insightful)

    by garyebickford (222422) <gar37bic.gmail@com> on Tuesday November 20, 2012 @02:15PM (#42044283)

    Good luck with that. There are numerous cases in recent history where large companies have managed to hide their problems prior to a merger, or prior to going completely bust. It can be very, very difficult to figure out the details of how big complex companies are put together - even for the company's own accountants. It can be analogized to the halting problem, or the shortest route problem. A big company's internal transactions constitute a huge dependency graph with an almost unlimited opportunity for cycles within the graph, and then there are all the external transactions - which ones are truly 'external'?

    For example, a company like Best Buy may have over one thousand subsidiaries, nested three to four levels deep, in over 100 countries. None of those countries require the level of accounting rigor of the US, especially since Sarbanes-Oxley (the so-called 'Enron law' - case in point). Now try to analyze millions of transactions large and small between the various subsidiaries and to/from outside entities, and determine which of those transactions is part of a complex money laundering process, and which ones are part of some accountant's method for skimming money off the top. In fact, with a company that big and complex, the odds are that several of the accountants or executives in smaller subsidiaries are, in fact, skimming - perhaps by 'selling' goods to a dummy company that never happens to pay its bills. Now separate those actions from some larger process that the parent company has set up to avoid visibility of losses.

    It can happen by accident as well, without any intent to do evil. I know of a at least one IPO that was cancelled when a company doing the required due diligence before going public discovered to their dismay that while they thought they were going gangbusters, they were in fact insolvent (hint: growth is expensive). So instead of IPO, bankruptcy followed.

    There are zillions of other ways to use 'creative' accounting methods to hide problems - companies often don't know until it's too late. It's a mistake to consider a large corporation as a monolithic entity. One group of large companies that I work with literally don't know who their customers are - they are the product of dozens of mergers over decades, and have never integrated the accounting systems together - I won't go into why that is but there are good reasons, which are related to risk, cost and disruption.

    tl;dr: the complexity of companies can be arbitrarily large; finding problems may be impossible with the limited data available prior to merger.

  • by Sarten-X (1102295) on Tuesday November 20, 2012 @02:20PM (#42044347) Homepage
    Or losing $8.8 billion isn't that big of a deal to a company with revenues of $127 billion. A proportional loss to a middle-class family ($50,000 income) would be about $3,500. To use the obligatory car analogy, it's like buying a car that turns out to be a cleverly-concealed rusted-out lemon. Serious improprieties, and someone clearly screwed up badly, but it's not a company-risking mistake.
  • Re:Meg, Carly (Score:5, Insightful)

    by jeffmeden (135043) on Tuesday November 20, 2012 @02:22PM (#42044365) Homepage Journal

    PayPal will take every opportunity to steal your money.

    And this is different from other financial institutions... how?

    The difference is that "other financial institutions" are regulated as such, and there are fairly significant consequences to stealing money (of course that doesn't mean it won't happen). The process of regulating banks through several boom, exploit, bust cycles has taught the regulators a LOT about what to watch out for. Paypal, on the other hand, just steals indiscriminately and has no regulation at all to answer to. Oh yeah, and they are the "de facto currency" of many businesses, meaning that to participate in the free market it is very difficult to avoid PayPal.

  • Re:Meg, Carly (Score:5, Insightful)

    by Ryanrule (1657199) on Tuesday November 20, 2012 @02:42PM (#42044675)

    A dead parrot could have run ebay just as well. They were alone in a huge growth market.

  • Re:Meg, Carly (Score:2, Insightful)

    by Anonymous Coward on Tuesday November 20, 2012 @02:50PM (#42044799)

    I have used PayPal as the payment processor on my website for years. I run an honest service, I resolve any purchase disputes quickly. I am as ethical in my transactions as I know how to be. I have never, ever, had any problem with PayPal, or access to my money. In fact, they recently upgraded my account standing with them so that in the event of any customer dispute, funds in my account are no longer held by them, because I have demonstrated that I am a trustworthy user of their services. Zero problems with PayPal.

    Just saying... sometimes the problem isn't with them... sometimes it's a problem with what people try to get away with when using their services.

  • by HornWumpus (783565) on Tuesday November 20, 2012 @03:26PM (#42045337)

    I'm looking forward to Agilent buying back the HP name from a bankruptcy court.

    Then again the court may wind up paying someone to take the brand over. They are approaching Packard-Bell in brand value.

  • Re:Red herring (Score:4, Insightful)

    by greg1104 (461138) <gsmith@gregsmith.com> on Tuesday November 20, 2012 @04:46PM (#42046313) Homepage

    Why should they go to jail? Honestly, there are people who fuck up entire countries and their partners, and not only get away with it, but actually get applauded at the end of their terms.

    Yes, all of those people should be in jail too. The fact that a large swath of our government and corporate officers are corrupt and criminally negligent, and that's considered fine by many of the ignorant masses who believe what the news tell them, is one of the largest structural problems in the world right now.

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