HP claims itā??s victim of fraud

NEW YORK — Hewlett-Packard Co. said on Tuesday that it's the victim of a $5-billion-plus fraud, claiming a British company it bought last year lied about its finances.

HP CEO Meg Whitman said executives at Autonomy Corporation PLC willfully boosted the company's figures through various accounting tricks, which convinced HP to pay $9.7 billion for the company in October 2011.

Autonomy's former CEO said HP's allegations are false.

HP is now taking an $8.8 billion charge to align the accounting value of Autonomy with its real value. More than $5 billion of that charge is due to the false accounting, HP said.

The revelation is another blow for HP, which is struggling to reinvent itself as PC and printer sales shrink. The company's stock hit a 10-year low in morning trading.

Acquiring Autonomy was part of an attempt by HP to strengthen its portfolio of high-value products and services for corporations and government agencies. The deal was approved by Whitman's predecessor, Leo Apotheker, but closed three weeks into Whitman's tenure as chief executive. Whitman was a member of HP's board of directors when Apotheker initiated the Autonomy purchase.

Among the tricks used at Autonomy, Whitman said: The company had been booking the sale of computers as software revenue claiming the cost of making the machines as a marketing expense. Revenue from long-term contracts was booked up front, instead of over time.

Once HP bought the company, Autonomy's reported results quickly declined. Autonomy CEO Mike Lynch continued to run the company as part of HP, but Whitman forced him out on May 23 because it was not living up to expectations.

The case has been referred to the U.S. Securities and Exchange Commission and the UK's Serious Fraud Office, she said. The company will also try to recoup some of the cash it paid for Autonomy through lawsuits.

Whitman said she still views Autonomy as a growth engine for HP software, albeit a weaker one than initially thought.

HP's stock dipped $1.51, or 11.4 percent, to $11.79. Just after the market's open, the stock hit $11.35, its lowest level since 2002.